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Cablegate: Corrected Copy: Some Commitments Are Harder Than Others --

VZCZCXRO3544
RR RUEHHM
DE RUEHHI #1616/01 2541338
ZNR UUUUU ZZH
R 111338Z SEP 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 6308
INFO RUEHHM/AMCONSUL HO CHI MINH 3659
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 001616

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS and EEB/OIPE
STATE PASS TO USTR DAVID BISBEE

E.O. 12958: N/A
TAGS: ECON ETRD KIPR VM
SUBJECT: CORRECTED COPY: SOME COMMITMENTS ARE HARDER THAN OTHERS --
PRODDING VIETNAM ON WTO IMPLEMENTATION

REF: A) HANOI 1212

B) HANOI 310
C) 06 HANOI 2602

(U) This cable is sensitive but unclassified. Not for Internet.
This cable is a retransmission of Hanoi 1583, please disregard that
copy.

1. (SBU) SUMMARY. Vietnam, widely praised for its progressive and
aggressive approach toward opening its markets, is finding that
fulfilling some of its WTO commitments may be harder than it
thought. Recently published regulations impose new restrictions on
foreign importers, potentially forcing them to disband their
distribution networks and choose a single nationwide distributor.
An eight month-overdue IPR criminal regulation is nowhere in sight,
and the GVN now tells us that it will come next year at the
earliest. State-sponsored piracy of U.S. broadcast content
continues unchecked, despite Vietnam's trade commitments in its
Working Party Report. Mission Vietnam continues to take every
opportunity to press all levels of the GVN to its WTO obligations,
warning that these lapses could erode the country's hard-won
reputation as a reliable trading partner. END SUMMARY.

BLINDSIDING IMPORTERS WITH A MARKET BARRIER
-------------------------------------------

2. (U) There was an audible groan from the business and diplomatic
communities when Vietnam finally issued long-awaited regulations in
pursuance of its WTO trading rights commitments on July 17 of this
year. Among other things, the Trade Ministry's "Circular 9" (akin
to an Executive Order) forces foreign importers to reduce their
distribution networks and rely instead on a single local
distributor. Foreign importers are concerned that their market
penetration will be limited if they are forced to rely on a single
nationwide distributor. Some sectors, like chemicals, do not even
have a reliable local distribution network, let alone a distributor
capable of nation-wide business activities. Foreign-owned
distributors are not allowed to operate in Vietnam until 1/2009.

3. (U) The restriction on distributorships could be inconsistent
with Vietnam's WTO commitments since in the Working Party Report
Vietnam pledged that importers "would be free to select a
distributor or distributors of their choice" and that Vietnam "would
not apply any restrictions on the choice of the distributor or
distributors". (Note: The hierarchies of legal instruments in
Vietnam are as follows: laws, which must be enacted by the National
Assembly; Decrees, which are issued by the Prime Minister; and
Circulars, which are issued by the relevant ministries to provide
detailed guidance to implement the higher-level documents. End
note.)

4. (SBU) Embassy Hanoi and Congen HCMC have met with U.S. importers,
local AmCham representatives and the diplomatic community to discuss
a strategy to urge Vietnam to clarify the meaning and intent of this
restriction as well as its scope. Emboffs also met with the
drafters of Circular 9 at the Ministry of Industry and Trade (MOIT)
on August 12 and again on August 30 to raise our concerns. Working
together with USTR, Mission submitted a list of 13 questions to the
MOIT asking it to clearly explain how the existing implementing
guidance fulfills Vietnam's WTO obligations, in preparations for an
exhaustive review of Vietnam's recent trading right regulations
during the third week of September.

FROM A BAD CIRCULAR TO A MISSING CIRCULAR
-----------------------------------------

5. (U) During bilateral WTO accession talks, the GVN promised that
it would issue a circular criminalizing commercial-scale copyright
infringement prior to WTO accession and then follow up later with a
change in its criminal code to bring it into alignment with its WTO
Trade Related Aspects of Intellectual Property (TRIPS) obligations.
Eight months after WTO accession, the circular has yet to be issued
despite repeated and extensive USG lobbying that even included USTR
providing suggested language on multiple occasions (Refs A and B).

6. (U) Officials from the GVN organ responsible for preparing the
circular, the Supreme Court (SPC), has informed the Embassy that
they may not be able to take action until next year. SPC officials
claim that they are unable to reconcile the TRIPS language with
current domestic laws, and that they would prefer to enact the
criminalization of large-scale IPR infringements once the criminal
code can be redrafted -- a process that SPC will not begin until
2008.

7. (SBU) Coordination on WTO compliance issues are clearly a
challenge for the GVN, as evidenced by the SPC's recent position
which differs from its discussions with USTR's intellectual property

HANOI 00001616 002 OF 002


expert during the Annual BTA Review in June (REF A). Mission
continues to stress to the MOIT negotiators who made the commitment
that they need to remain engaged with the SPC's drafters to reach an
outcome that meets the obligations undertaken by Vietnam in its
accession to the WTO.

UNCHECKED SIGNAL PIRACY
------------------------

8. (SBU) In another, even clearer example of the GVN's unwillingness
(or inability) to stop local enterprises from violating Vietnam's
international IPR commitments, the Television Technology Investment
and Development Company (VTC) continues to pirate international
broadcast content, including one U.S.-owned channel, and illegally
distribute pirated content to an estimated 1.5 million customers.
VTC's actions are all the more egregious because it is a state-owned
company, under the control of the Ministry of Information and
Communications.

9. (SBU) The Embassy, USTR and the broadcast industry have mounted a
multi-year campaign to compel the GVN to stop VTC from pirating
content. While these efforts have at times yielded temporary
results (VTC removed most U.S.-owned content from its lineup shortly
following the June BTA Review), VTC has resumed its illicit
activities. Ambassador Marine raised this with numerous ministers
and other GVN authorities over the past several years, as have
industry leaders. In recent months, cease and desist letters issued
by several U.S. companies have led to VTC removing those channels
from its broadcast package. Although at the latest check, VTC was
still illegally distributing foreign channels, including the last
remaining U.S. channel, MTV. GVN officials told us on September 7
that had been removed from VTC's lineup, but industry contacts could
not immediately confirm this report.

NEXT STEPS
----------

10. (SBU) Trade agreement compliance issues have featured
prominently in Ambassador Michalak's initial consultations with
Vietnam's leaders. The annual BTA review and the newly-formed TIFA
Joint Council will both present additional opportunities to focus
attention on these issues. Post will also continue to raise the
criminal circular and signal piracy in our input into the annual
Special 301 Review, a tool which has provided some traction with GVN
authorities over the past several years.

COMMENT: IS A PATTERN EMERGING?
-------------------------------

11. (SBU) Although there is little evidence of a concerted agenda to
skirt WTO obligations, it is clear that these cases are not the
result of carelessness or failure to anticipate the implications of
Vietnam's trading commitments. The MOIT drafters told Emboffs that
there was much interagency discussion on the distributor
restrictions and that former Minister Tuyen himself agreed to them.
Although many of our contacts suspect protectionism, ironically the
biggest losers of the new restrictions are the Vietnamese
distributors. In the case of cable piracy, the reasons are clearer.
GVN officials themselves have admitted that "powerful interests" are
behind VTC -- hinting not-so-subtly at influential corrupt
officials.

12. (SBU) The failure to criminalize commercial-scale IPR violations
appears more to be a case of the negotiators and drafters being
unable to get the necessary inter-ministerial "buy-in," although it
does not seem to be for lack of effort. Moreover, the GVN remains
willing to engage with the USG, and in many cases, U.S. industry
members on these issues. Continued and persistent dialogue with
appropriate GVN authorities should help us move closer to resolution
on these cases and prevent the development of a more widespread
pattern of Vietnam failing to meet its international obligations.

13. (U) This cable was coordinated with Congen HCMC and USTR.

MICHALAK

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