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Cablegate: Agricultural Access Is Enough to Sway Vietnam in Trade Deal

VZCZCXRO2829
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #1162 2840429
ZNR UUUUU ZZH
P 100429Z OCT 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8591
INFO RUEHHM/AMCONSUL HO CHI MINH 5200
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS HANOI 001162

SENSITIVE
SIPDIS

STATE FOR EAP/MLS MBROWN
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
USTR FOR DBISBEE

E.O. 12958: N/A
TAGS: ETRD ECON VM
SUBJECT: AGRICULTURAL ACCESS IS ENOUGH TO SWAY VIETNAM IN TRADE DEAL
WITH JAPAN

REF: Hanoi 871 ("Vietnam Not Rushing Trade Deals")

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 and Japan broke an impasse in their free
trade negotiations, with Japan yielding on some of Vietnam's demands
for preferential market access for its agricultural products. In
exchange, Vietnam dropped its efforts to free up Japanese
restrictions on labor movement. The two sides hope to finalize and
sign a deal before the end of 2008. Japan is Vietnam's second
largest market after the United States. End summary.

3. (U) Vietnam and Japan's 19-month negotiations on an Economic
Partnership Agreement (EPA) finally yielded fruit after the ninth
round held from September 17 to 19 in Hanoi, with Japan agreeing to
allow preferential access to Vietnamese agricultural products.
Vietnam's Ministry of Industry and Trade (MOIT) announced on
September 29 that it expected to finalize the EPA, a
Vietnam-specific complementary agreement to Japan's Free Trade
Agreement with ASEAN, before the end of the year.

COMPREHENSIVE AGREEMENT ON GOODS INCLUDES AG PRODUCTS
--------------------------------------------- -

4. (SBU) According to a briefing provided to post by the Japanese
Embassy in Hanoi and discussion with MOIT officials, the EPA will
cover 92% of all bilateral trade, with Japan offering preferential
duty treatment on 95% of Vietnamese goods and Vietnam offering 88%
during the ten year period following implementation, and Vietnam
expanding coverage up to 93% over a 16 year period. Among Vietnam's
covered exports are agricultural products such as durians, corn and
spinach, seafood, wood and industrial products. Excluded goods
include rice, grains, sugar, dairy products, beef, plywood and
squid. Japan also will obtain preferential treatment on
agricultural products of its own, such as apples, pears and oranges,
and wood and industrial products, including auto parts.

JAPAN NOT BUDGING ON LABOR MARKET LIBERALIZATION
---------------------------------

5. (SBU) Although Japan committed to revisiting Vietnamese demands
for freer labor market access in the future, especially for health
care workers, it assumed no specific commitments to do so. Thus,
existing immigration regulations will remain unchanged for the
foreseeable future while Vietnam and Japan will continue discussing
liberalizing existing restrictions. Both sides committed to
"enhance the transparency of procedures" for the short-term movement
of business persons.

VOWING PROGRESS ON OTHER AREAS
------------------------------

6. (SBU) The two sides also vowed to improve "the predictability,
consistency and transparency of customs procedures," intellectual
property rights protection and enforcement, competition policies,
the "exchange of information and closer collaboration in the area of
standards." Japan and Vietnam will also establish "consultation
mechanisms" to discuss issues on sanitary and phytosanitary
measures, trade in services, and private sector participation aimed
at improving the business climate.

7. (SBU) Some additional issues must be resolved, but the two sides
expect to conclude and sign a deal before the end of the year. The
details of the EPA will be released closer to the signing date,
according to Japanese Embassy officials. Japan is Vietnam's third
largest trade partner, behind China and the United States, and its
second largest market, after the United States. Two way trade in
2007 was $12.24 billion, with a slight surplus in Japan's favor.


MICHALAK

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