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Cablegate: A/S Spooner Addresses Gvn Concerns On Apparel Monitoring

VZCZCXRO8204
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #0407/01 1001028
ZNR UUUUU ZZH
R 091028Z APR 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 7571
INFO RUEHHM/AMCONSUL HO CHI MINH 4551
RUEHBJ/AMEMBASSY BEIJING 7097
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 000407

SIPDIS
( C O R R E C T E D C O P Y - ADDED CAPTIONS)

SENSITIVE
SIPDIS

USTR FOR BISBEE
USDOC FOR ITA/IA SPOONER AND SU

E.O. 12958: N/A
TAGS: KTEX ECON EIND ETRD ETTC VM
SUBJECT: A/S SPOONER ADDRESSES GVN CONCERNS ON APPAREL MONITORING
AND NON-MARKET ECONOMY STATUS

REF: (A) 07 Hanoi 1731 ("Vietnam Frets Over Anti-Dumping");

(B) 07 Hanoi 772 (Commerce Addresses Apparel Concerns)

HANOI 00000407 001.4 OF 002


1. (SBU) Summary: Following a three-day technical exchange on trade
remedies with the Vietnamese government (GVN), Import Administration
Assistant Secretary David Spooner met with senior Ministry of
Industry and Trade (MOIT) officials on April 3 to discuss the
Department of Commerce's Import Monitoring Program (IMP) on apparel
exports and Vietnam's designation as a non-market economy.
Separately, MOIT officials told A/S Spooner that following Vietnam's
"significant" economic reform and market liberalization efforts,
they hoped that the United States would soon recognize the country
as a market economy. The two sides agreed to explore further the
establishment of a working group to exchange data and informally
discuss where Vietnam stands vis-a-vis U.S. requirements for
recognition as a market economy. End Summary.

FRUITFUL EXCHANGE
-----------------

2. (SBU) At Vietnam's request, Department of Commerce (DOC)
Assistant Secretary for Import Administration David Spooner and
three other Commerce officials participated in a March 31 - April 2
technical exchange with MOIT officials on U.S. anti-dumping and
anti-subsidy laws. During the exchange, Vietnamese officials were
particularly interested in U.S. countervailing duty policies, which
A/S Spooner thought could stem from their interest in ensuring that
current Vietnamese practices, including subsidies to certain regions
of Vietnam, are fully compliant with Vietnam's WTO obligations.

3. (U) Throughout the three-day seminar, the MOIT officials lauded
the transparency in U.S. trade remedy proceedings, noting that they
hope to build similar measures into their practices, particularly
given the increased attention on this issue by the Prime Minister
and senior GVN officials. Both sides agreed that the exchange
helped increase understanding of how the two countries approach
trade remedies. Vietnam Competition Administration Department
(VCAD) officials expressed their gratitude for the exchange as they
work to formulate Vietnam's anti-dumping and countervailing duties
policies.

VIETNAM'S EFFORTS TO AVOID AN APPAREL DUMPING CASE
--------------------------------------------- -----

4. (U) In an April 3 meeting, MOIT Vice Minister Bui Xuan Khu
outlined Vietnam's efforts to address U.S. anti-dumping concerns:
the GVN has worked closely with the Vietnam Chamber of Commerce and
Industry (VCCI) and Customs authorities from both countries to
monitor the prices and contract adherence of Vietnamese exports;
Vietnam established a mobile investigation unit, which visits
exporters to ensure they are complying with their contract
obligations; and, the GVN has strictly forbidden any trans-shipments
of garments. In addition to this, he added that the Vietnam Textile
and Apparel Association (VITAS) (whose Chairman, Le Quoc An,
participated in the meeting) cooperated with AmCham members to avoid
significant increases in export volumes or decreases in export
prices. Because of these efforts, he continued, Vietnam's export
prices were comparable to prices from other garment exporters like
India, particularly in the categories covered by the monitoring
mechanism. Vice Minister Khu hoped that the IMP analysis would
reach a similar conclusion.

5. (SBU) A/S Spooner responded by thanking the Vice Minister, MOIT,
VITAS and Vietnamese exporters for their cooperation so far with the
apparel monitoring program and for the GVN's anti-fraud efforts. He
assured Vietnam that the DOC would provide a courtesy notification
of the results of the analysis between now and the end of April,
when the report on the second six months of import data is due.
Stressing that it is premature to offer a definitive conclusion, the
Assistant Secretary commented that, generally, the data appears to
show that prices of Vietnam exports are comparable to exports from
other countries like India, Pakistan, Bangladesh and the
Philippines. This will be the penultimate report under the
monitoring program, with one more analysis due before the end of
2008.

VIETNAM HOPING FOR A CHANGE IN ITS NME DESIGNATION
--------------------------------------------- -----

6. (U) In a separate meeting, VCAD Director General Bach Van Mung
told A/S Spooner that Vietnam has undertaken "significant" economic
reforms and market liberalization efforts, and therefore hopes that
the United States, the EU and others will soon recognize it as a
market economy for purposes of trade remedy proceedings. In a
roundtable with officials from various MOIT departments, Mr. Mung
sought clarification from A/S Spooner on U.S. legal statutes and
procedures for determining whether a country has transitioned to a
market economy.

HANOI 00000407 002.4 OF 002

7. (U) A/S Spooner agreed that much has changed in Vietnam since
2002 when Commerce, the sole U.S. agency authorized to conduct these
reviews, concluded that Vietnam should be treated as a non-market
economy (NME). He then provided a brief overview of the six
criteria Commerce uses to evaluate an economy, highlighting that the
2002 review identified particular weaknesses in the categories of
currency convertibility and government control over the allocation
of resources and the price and output decisions of enterprises.
Under the final, "catch-all" criteria, A/S Spooner explained that
the DOC looks at factors such as membership in multilateral
organizations, the rule of law and corruption. He underscored that
DOC examines all six criteria together, and that no single one is
determinative. In many cases, he said, the most difficult obstacle
for countries is demonstrating that it has not only passed legal
reforms, but is actively implementing them.

8. (SBU) The Assistant Secretary stressed that a formal review of a
country's economic status must occur in the context of a trade
remedy case (a statutory requirement for reasons of transparency),
but suggested that it would be helpful for the two sides to hold
informal discussions to examine where Vietnam stands vis-a-vis U.S.
legal criteria. He pointed to the U.S.- China Structural Issues
Working Group as an example, noting that an exchange of information
between our governments could help to prepare an informed analysis
by Commerce officials for when Vietnam has the opportunity to
request a formal review as part of a trade remedy case.

9. (U) Director General Mung welcomed the idea of an informal
exchange via formation of a working group. He noted that Vietnam
has much to report, including reforms undertaken in preparation for
its 2007 accession to the WTO, efforts to increase currency
convertibility and Vietnam's openness to foreign direct investment.
The two sides agreed to work closely in the near future to explore
possible mechanisms and terms of reference for such a group. A/S
Spooner's Chief of Staff reported that she provided Vietnam's
Embassy in Washington with the decision memoranda for Commerce's
recent decisions to grant Russia and the Ukraine market economy
status and would follow up by providing those reports to VCAD.

VCAD APPRECIATES THE HELP
-------------------------

10. (U) VCAD Director Mung concluded by thanking Assistant Secretary
Spooner and his Commerce colleagues, USAID and the STAR Vietnam
program for their capacity building and training programs. VCAD,
with a young, inexperienced staff of less than 50, is responsible
for enforcing Vietnam's Competition Law, overseeing consumer
protection policies, mergers and acquisitions, and now trade
remedies. DG Mung said he looks forward to continuing cooperation
with Commerce's Import Administration on the issue of trade
remedies, as this is a new issue for Vietnam and his staff.

COMMENT
-------

11. (SBU) The tone and atmosphere of A/S Spooner's GVN meetings was
open, cordial and cooperative. The Vice Minister and other MOIT
officials were noticeably less defensive than in prior meetings
(Reftels) when discussing the IMP, perhaps due to growing comfort
with administration of the monitoring program. In any case, the GVN
seems to have shifted its focus from the monitoring program to
removing the non-market economy designation. It is unclear whether
VCAD requested the technical exchange because it intends to pursue
trade remedy cases against other countries, or whether their role
will be solely as an internal monitor to ensure that Vietnam remains
consistent with its international obligations, including on removal
of subsidies.

12. (U) A/S Spooner has cleared this cable.

MICHALAK

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