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Cablegate: Vietnam Not Rushing Trade Deals

VZCZCXRO7426
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0871/01 2100815
ZNR UUUUU ZZH
P 280815Z JUL 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8195
INFO RUEHHM/AMCONSUL HO CHI MINH 4953
RUEHBS/USEU BRUSSELS
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 000871

SENSITIVE
SIPDIS

SINGAPORE FOR TREASURY
USTR FOR WEISEL AND BISBEE
COMMERCE FOR ITA/IMPORT ADMIN SPOONER AND SU
STATE FOR WHA/BSC FRIEDMAN

E.O. 12958: N/A
TAGS: ETRD EINV ECON KTDB VM
SUBJECT: VIETNAM NOT RUSHING TRADE DEALS

HANOI 00000871 001.2 OF 002


1. (U) This cable is Sensitive But Unclassified. For official use
only, not for dissemination outside USG channels or posting on the
internet.

2. (SBU) Summary: Vietnam has ongoing trade and investment
multilateral and bilateral negotiations with Australia and New
Zealand, the EU, Chile, Japan and Canada. Aside from the first one,
which has been in process longest, all others appear to be moving
slowly. Vietnam is taking a cautious approach, and many Government
(GVN) officials tell us that implementing its existing commitments
and pipelined investment well takes precedence over securing new
trade or investment deals. End summary.

JAPAN AND VIETNAM EPA: REACHING A DEAD END
------------------------------------------

3. (SBU) Japan and Vietnam announced negotiations on a free trade
"Economic Partnership Agreement" (EPA) in October 2006, and held the
first round in January 2007 amid high hopes for a quick conclusion.
Eight formal rounds and countless other informal discussions later,
the parties are nowhere near closing. The sticking points, our
colleagues on both sides tell us, are access to Japan's market for
Vietnamese agricultural products and labor. Vietnam is declining to
budge on either. Officials from the Japanese Embassy in Hanoi tell
us that the impasse is now "political" and that a breakthrough will
require "a political decision from Tokyo."

4. (U) Bilateral trade between Japan and Vietnam was $12.24 billion
in 2007, with a slight surplus of less than one million dollars in
Japan's favor, according to GVN figures. Japan is Vietnam's second
largest investor, with $16.7 billion in licensed (registered)
investment since 1988, of which $7.1 billion was licensed just in
the first six months of 2008. Actual (disbursed) cumulative
investment for Japan from 1988 to June 2008 is $4.73 billion, also
according to GVN numbers.

AUSTRALIA AND NZ CLOSE TO AN ASEAN FTA
--------------------------------------

5. (SBU) Australian and Kiwi diplomats in Hanoi tell us that they
are very close ("within a round or two") to finalizing a free trade
agreement with ASEAN. The New Zealand Embassy's top economic
officer told us that the parties have agreed already to do away with
duties on over 90 percent of goods and may even include recognition
of Vietnam as a market economy. Although Vietnam has not taken a
leading role in negotiations, Australian negotiators tell us that
they have been cooperative. "They haven't been too difficult," she
told us, "and in services they have been particularly good."

6. (U) Bilateral trade in 2007 between Australia and Vietnam was
$5.71 billion, according to the Australian Government, with
Vietnam's exports ($4.35 billion) making up the bulk of trade. New
Zealand enjoys a surplus with Vietnam, with $270 million in exports
and $135 million in imports from Vietnam in 2007, according to the
New Zealand Government. Australia has one billion dollars in
licensed investment in Vietnam since 1988 and New Zealand $70.4
million.

EU SEEKS TO CAST OFF LAGGARDS IN ITS ASEAN FTA
--------------------------------------------- -

7. (SBU) Negotiations between the EU and ASEAN have not moved much
since they were launched in May 2007. The EU Trade Counselor in
Hanoi tells us that negotiations have been hampered by lack of
leadership among the ASEAN countries and a general unwillingness
among its members to sidestep the laggards. He says that the EU is
now proposing splitting off some of the most forward-leaning
countries into working groups to see whether the talks can advance
more rapidly. Singapore, Brunei and Malaysia have made the short
list, he added, but Vietnam (which would be welcome into the group)
has yet to put its name forward.

8. (U) Two-way trade between the EU and Vietnam in 2007 was $12.7
billion. EU exports were $3.3 billion while Vietnamese exports to
the EU were $9.4 billion, according to the GVN. Holland and France
are the largest EU investors in Vietnam, with $2.6 and $2.31 billion
in licensed investment, respectively.

CANADA AND VIETNAM INVESTMENT AGREEMENT
---------------------------------------


HANOI 00000871 002.2 OF 002


9. (SBU) Canada and Vietnam held the inaugural round of their
Foreign Investment Promotion and Protection Agreement (FIPA)
negotiations in late February, 2008 in Hanoi. The Vietnamese side
(which is the same as the one that will conduct Bilateral Investment
Treaty (BIT) negotiations with the United States) has told us that
the FIPA should not be hard. "It has very low commitments, it's not
at all like your BIT," one of Vietnam's leading negotiators told us,
with a chuckle. Despite this, the Vietnamese were supposed to go to
Canada for the second round last June, but unexpectedly cancelled,
according to our Canadian counterparts in Hanoi.

10. (U) Two way trade between Canada and Vietnam in 2007
was $826 million, according to the GVN, with Vietnam's exports
amounting to $539 million and Canada's exports to Vietnam $287
million. In 2008, Canada has become one of Vietnam's leading
investors on the basis of a single real estate development licensed
for over $4.23 billion, bringing Canada's cumulative registered
investment total to $4.72 billion.

P4 AND VIETNAM
--------------

11. (SBU) A former Ministry of Trade and Investment (MOIT) official
in charge of APEC told us earlier this year that Singapore had
approached Vietnam to see whether it would be interested in joining
talks on investment and financial services involving the United
States and Chile, New Zealand and Brunei, the other P4 countries.
According to the MOIT official, Vietnam could not immediately
commit. "We have so much on our plates at the moment," she said.
Nonetheless, "It's a tempting offer," she admitted.

COMMENT
-------

12. (SBU) There is much talk in Hanoi that, a year after its entry
into the WTO, Vietnam is suffering from "negotiation fatigue."
Another factor that may affect Vietnam's interest in negotiations is
the current focus on surmounting macroeconomic challenges. "There
is definitely a climate of not doing anything more at all," an
Australian trade negotiator told us, summing up a commonly-held
feeling among foreign diplomats here. This may explain, perhaps,
why the Japanese are having such a hard time in closing, why the
Chileans still do not have anyone to negotiate with, or why the EU
may not be able to follow in the wake of the Australians and Kiwis.
This does not mean that Vietnam will stand aloof, and indeed GVN
officials stress they remain focused on implementing existing
commitments well, which is clearly a good thing. In addition, a
former GVN negotiator assures us that, EU-ASEAN gridlock
notwithstanding, Vietnam would jump at the chance to go bilateral
with the EU. In our assessment, what we are seeing is a Vietnam
that has become more discriminating in assessing the value of deals;
if the perceived benefit is sufficient, the GVN will engage.

MICHALAK

4

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