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Cablegate: Vietnam: Second Annual Bta Joint Committee

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 06 HANOI 000688

SIPDIS

SENSITIVE

STATE FOR E, EB AND EAP/BCLTV
STATE ALSO PASS USTR HUNTSMAN/BRYAN
STATE ALSO PASS USAID FOR ANE/DEL MCCLUSKY
USDOC FOR 4430/MAC/AP/OPB/VLC/HPPHO
USDOC PASS USPTO FOR NESS
USDA FOR FAS/ITP/SHEIKH AND HUYNH
BANGKOK ALSO FOR CUSTOMS ATTACHE

E.O. 12958: N/A
TAGS: ETRD EINV ECON KIPR KTEX PREL VM
SUBJECT: Vietnam: Second Annual BTA Joint Committee


1. (U) SENSITIVE BUT UNCLASSIFIED -- PLEASE PROTECT
ACCORDINGLY.

2. (SBU) Summary and Introduction: DUSTR Jon Huntsman led
the U.S. delegation and Vice Minister of Trade Luong Van Tu
headed the GVN side at the plenary session of the second
annual meeting of the Bilateral Trade Agreement (BTA) Joint
Committee in Hanoi March 10. Expert level sessions led by
Elena Bryan, USTR Senior Director for Southeast Asia and the
Pacific, and Nguyen Thu Do, Deputy Director, Office of the
Government for the GVN were held March 4-5. Other USG
participants in the Joint Committee meetings included
Ambassador, EconCouns, USPTO, DOC, US Customs, and Emboffs.
The GVN participants included representatives from the
Ministries of Finance, Planning and Investment, Trade,
Fisheries, Culture and Information and Justice. The U.S.
side emphasized that it had fully implemented all of its BTA
obligations upon entry-into-force of the agreement. The
GVN, while acknowledging shortcomings in implementing some
obligations, pointed out it has made significant progress in
implementing its BTA obligations and frequently cited its
ongoing cooperation with USG technical assistance providers.
The U.S. side focused on issues related to GVN
implementation of BTA commitments on transparency,
intellectual property rights (IPR), market access for
services, investment, and trade in goods. The GVN focused
on issues related to business facilitation, trademark
applications, anti-dumping, textiles and sanitary and phyto-
sanitary (SPS) measures. This cable summarizes the Joint
Committee's review of BTA implementation chapter by chapter.
END SUMMARY.

Chapter I: Trade in Goods
--------------------------

3. (SBU) SPS: The GVN delegation noted the continued
interest in working with USG technical assistance providers
to learn how to implement the SPS provisions in the BTA.
The GVN also expressed an interest in discussing a bilateral
protocol on SPS. The U.S. delegation noted that SPS is an
important area both in terms of BTA implementation as well
as WTO accession.

4. (SBU) CUSTOMS VALUATION: The U.S. side emphasized that
customs valuation is a key BTA obligation and strongly urged
the GVN to begin working now to have all the necessary
legislation (including implementing legislation) in place to
begin applying transaction value by the end of 2003. The
GVN stated it would start to implement this obligation
toward the end of 2003, but admitted it did not know how
long it would take to implement. The GVN also said it had
instructed Vietnam's Customs authority to be prepared to
meet this obligation and asserted that the GVN would be
ready to begin using transaction value by the end of 2003,
as obligated under the BTA.

5. (SBU) TARIFFS: The U.S. delegation raised concerns about
a lack of transparency regarding tariff rates. The lack of
an applied tariff schedule creates uncertainty for U.S.
traders and many have complained to the USG that Vietnam's
tariff rates change with little or no notice. The GVN
responded that it is policy to provide 30 days notice of
tariff rate changes (excluding petroleum tariffs), but noted
that problems with customs classification and inspections
have made it difficult to ensure that 30 days notice is
always given. The GVN also advised the best way to
determine a specific tariff rate in Vietnam is to check with
customs officials at the port of entry. The GVN added that
whenever tariff rates are changed, the GVN publishes the new
rates in newspapers and an official digest. The U.S. side
responded that the GVN needs to be more transparent about
tariff rates and advised the GVN to put the applied rates on
a website traders could refer to easily.

Chapter II: Intellectual Property Rights
----------------------------------------

6. (SBU) LEGISLATION: The GVN noted it had passed and
amended various IP-related legislation in 2002 including
legislation related to copyright royalties, plant variety
registration, copyright for architectural works, layout
designs and integrated circuits. In addition, the GVN
described activities it had undertaken to increase public
and official awareness of IPR issues including training,
seminars, and workshops.

7. (SBU) ENFORCEMENT: The U.S. delegation emphasized that
IPR is a very important issue to the U.S. and the USG places
a lot of emphasis on effective enforcement. IP enforcement
is also critical not only to attracting and retaining
investment, but also to facilitating development of IT, arts
and other sectors. The U.S. side asserted that Vietnam
should have the capacity for strong enforcement of IPR given
that the GVN is already very effective at keeping
"culturally offensive" items out of stores. The U.S. side
noted that raids on stores selling pirated Microsoft goods
in 2002 were a good start, but these raids also clearly
demonstrated weaknesses in Vietnamese enforcement tactics as
only a few stores were targeted, not all materials were
confiscated, and the stores quickly re-opened and resumed
selling pirated goods. The U.S. delegation also highlighted
that in other countries IPR crime is often linked to illicit
trafficking of drugs and weapons. Thus, as other countries
in the region improve their legislation and enforcement
activities, Vietnam may find these criminals moving to
Vietnam because they believe it is relatively easier to
function there. The U.S. delegation also noted that other
countries have found it useful to form a committee composed
of representatives of the various ministries responsible for
IP enforcement to oversee enforcement efforts.
8. (SBU) TRADEMARK REGISTRATION IN THE U.S.: The U.S.
delegation briefed the GVN on the procedures for registering
trademarks in the U.S., including providing information on
the procedures for dealing with competing applications for
the same trademark. The U.S. side offered to organize a
video teleconference for GVN officials with the U.S. Patent
and Trademark Office as well as training on how to access
and use the USPTO website. The GVN asked questions about
"cyber-squatting" and the costs associated with registering
a trademark in the U.S.

Chapter III: Services
---------------------

9. (SBU) FINANCIAL SERVICES: The U.S. side noted that the
GVN has not fulfilled a BTA obligation (Annex G, Part 6,
item E) to allow U.S. bank branches to accept deposits from
Vietnamese "natural persons" in a ratio of 100 percent of
paid-in-capital. The GVN responded that it would raise the
issue with the State Bank.

10. (SBU) DECREE ON LAWYERS: The GVN informed the U.S. side
that the GVN expects to submit the draft Decree on Lawyers
to the National Assembly in June 2003. The U.S. noted our
concern that the last draft provided had included a non-BTA
compliant provision that would prohibit Vietnamese lawyers
hired by a foreign law firms from arguing cases in court,
thus in effect disenfranchising Vietnamese lawyers who work
for foreigners. The GVN informed the U.S. that, in response
to concerns raised by the U.S. and foreign lawyers, this
earlier provision had in fact been removed from the final
draft. In addition, the GVN, in cooperation with U.S.
technical assistance providers, has been providing training
and information to legal officers in Hanoi as well as in the
provinces.

Chapter IV: Investment
----------------------

11. (SBU) IMPROVEMENTS TO INVESTMENT REGIME: The GVN cited
numerous changes it has made to fulfill its obligations
under the Investment chapter of the BTA. These included:
phasing out regulations on foreign exchange 5 years earlier
than required; authorizing land use rights for credit
institution joint ventures three years earlier than
required; taking steps toward unifying dual pricing for
water, electricity and transportation; and allowing 100
percent U.S.-owned insurance companies to operate. (Note:
only one U.S. insurance company has been granted a license
to operate, three other applications from U.S. firms are
pending approval.) The GVN also noted that a new decree
allowing foreign joint ventures to be joint stock companies
would be promulgated soon. The GVN said that it planned to
unify foreign and domestic investment laws. In the interim,
the GVN had submitted amendments to Decree 24 (guidelines on
permissible foreign investment) to address shortcomings in
current foreign investment law, although, the GVN admitted,
the changes in Decree 24 are not "fully satisfactory" to
meet BTA obligations (e.g. do not address board of directors
and exchange of shares issues).

12. (SBU) FORD/GM AND AUTO TARIFFS: The U.S. side argued
that a draft Ministry of Finance decision to raise import
duties on auto parts and increase the special consumption
tax on domestically produced autos will make it difficult
for the 11 major auto manufacturers currently in Vietnam to
remain in the market. The U.S. delegation urged the GVN to
continue its dialogue with representatives of the auto
sector to find a way forward that works for both sides. It
emphasized that the outcome of the auto issue will be an
early example of how well the U.S.-Vietnam commercial
relationship will progress. The U.S. side also noted that
the MOF decision raises questions about the GVN's
"preservation of investor rights" and TRIMs obligations
under the BTA and could negatively impact Vietnam's WTO
accession. The GVN responded that it had consulted with the
auto producers and that it would be difficult to find a
solution that will satisfy all parties.

13. (SBU) MCCULLAGH/KRONG ANA: The U.S. side noted the case
where a U.S. company (McCullagh) had the approval of the
Ministry of Planning and Investment (MPI) to buy out its
local partner but was being obstructed by the provincial
government. The U.S. side thanked MPI for its efforts to
resolve this case over the past year and urged MPI to submit
the case to a higher authority for resolution. The U.S.
side noted that although the U.S. investor in this case had
lost faith in the provincial government, it had not yet lost
confidence in the ability of the central government to
resolve the case. The U.S. side also emphasized that the
central government bears full responsibility for ensuring
the BTA is implemented - even at the provincial level. The
GVN noted that the Prime Minister had just sent a dispatch
to the Dak Lak provincial authorities asking them to resolve
the issue.

14. (SBU) ENFORCEMENT OF ARBITRAL AWARDS/TYCO: The U.S.
side complemented the landmark decision of the Economic
Court in HCMC to enforce an arbitral award for a U.S.
company (Tyco) and noted that this action had been viewed
widely by the international community as a very important
event in Vietnam. However, the Supreme Court's subsequent
decision to overturn the Economic Court's decision may lead
U.S. investors to question whether or not they will be able
seek protection under the BTA and the New York Convention.
The U.S. side expressed hope that upon higher review of the
case, Tyco will be treated fairly and in a transparent
manner. The U.S. side also offered to provide additional
training for judicial officials on arbitration procedures.
The GVN said it would appoint staff to watch the case but
noted that, as in the U.S., judicial decisions are subject
to Vietnamese law and the GVN cannot override them.

15. (SBU) DECISION 718/TRIMS: The U.S. noted that at the
first BTA Joint Committee, we had raised the issue of the
December 2001 Decision 718 which increased the number of
sectors where foreign investments are subject to export
requirements and noted this decision contradicted BTA TRIMs
obligations. The U.S expressed its pleasure that no U.S.
firm had reported that the GVN had tried to apply this
decision, but noted it was still on the books without any
clarification that it did not apply to U.S. companies per
the BTA. The GVN agreed to provide clarification in writing
to the Embassy that the export requirements put in place in
December 2001 (under Decision 718) in sectors not explicitly
included in Vietnam's national treatment exceptions under
the BTA would not apply to U.S. companies.

Chapter V: Business Facilitation
---------------------------------

16. (SBU) VISAS: The GVN argued that since September 11,
2001 it has become more difficult for Vietnamese in general
and Vietnamese enterprises in particular to get visas to do
business in the U.S. While acknowledging U.S. security
concerns, the GVN emphasized that new visa procedures make
it difficult for Vietnamese enterprises to take advantage of
opportunities created by the BTA. The GVN specifically
cited long waiting periods, last-minute notifications and
vague reasons for refusal. The Vietnamese side noted that
its embassy in Washington was making efforts to facilitate
business travel to Vietnam and usually issued business visas
within 24-48 hours. The U.S. side agreed that this was a
serious issue, noted that the new rules applied to all
countries, not just Vietnam, said the Embassy facilitates
visa issuances in accordance with U.S. law and noted that
issuance of business visas in Hanoi and HCMC has actually
increased 35-40 percent in 2002. The U.S. side also noted
that in 2002 only 30 cases in HCMC and 27 cases in Hanoi
were seriously delayed because of the clearance process.

Chapter VI: Transparency
-------------------------

17. (SBU) REVISED LAW ON LAWS: The U.S. side noted that the
revised Law on the Promulgation of Legal Normative Documents
("Law on Laws") does not define official letters,
instructions or guidelines as legal normative documents and
asked whether the GVN planned to make these kinds of
documents public as required under the BTA's transparency
obligations. The GVN responded that although the revised
Law on Laws was the result of cooperation between the GVN
and Vietnamese and international legal experts, both U.S.
and Vietnamese experts were not yet satisfied with the law.
The GVN is working with the U.S. Support for Trade
AcceleRation (STAR) project to identify shortcomings in the
revised law and to introduce provincial-level versions of
the Law on Laws. The Vietnamese side noted that introducing
transparency is a "process" that takes time and needs to be
done step by step to ensure Vietnamese law is in compliance
with international practices.

18. (SBU) The U.S. side welcomed the positive steps taken on
transparency but advised the GVN that Vietnam's transparency
obligations were due upon entry-into-force of the BTA
(December 2001) and the USG expects BTA-level treatment to
apply to all U.S. firms and investors. The U.S. delegation
also noted that transparency is critical for attracting
foreign investment. Investors want to know what the rules
and regulations are and be sure that they will be
consistently applied. The GVN responded that there had been
changes to the way legislation is drafted. Draft
legislation is open for comment from the public and
enterprises before it is submitted to the National Assembly,
which also accepts additional comments on draft legislation.

Other Issues
------------

19. (SBU) "CATFISH": The GVN noted the "catfish" situation
has "gotten worse" since the first meeting of the BTA Joint
Committee in 2002. The Department of Commerce ruling that
Vietnam is a non-market economy (NME) is unfair and the
preliminary tariff rates (although some had been adjusted
down) are too high. The GVN cited several reasons why
Vietnamese frozen fish companies are not guilty of dumping
their product in the U.S. market: 1) Vietnamese enterprises
are too poor to dump their product; 2) Vietnamese fish
companies benefit from good technology and low production
costs; 3) the price of Vietnamese catfish in the U.S. market
is the same or higher than the price of Vietnamese catfish
in other markets; and 4) catfish producers do not receive
state subsidies. The GVN urged the DOC to take a fairer
approach to calculating the costs, particularly with respect
to 1) ensuring the DOC takes into account all stages
involved in the process of producing frozen fish fillets and
2) using the retail, not wholesale price when calculating
costs in the surrogate country. The GVN also raised
concerns about a potential dumping case against Vietnamese
exports of shrimp. The U.S. delegation noted its
willingness to listen to GVN concerns about the catfish case
but clarified that 1) this was not a BTA issue and 2)
dumping investigations follow an established legal process
and the GVN needs to continue to deal directly with ITA on
anti-dumping issues. Separately, the U.S. side explained
that recent dumping decisions in neighboring countries (e.g.
China/honey) could have an adverse impact on Vietnam if it
becomes a transshipment location and advised the GVN to
report any cases of suspected transshipment of goods (to
avoid anti-dumping charges against Vietnam) to Customs via
the Embassy in Hanoi.

20. (SBU) CHLORAMPHENICOL: The GVN raised concerns that the
U.S. (and EU) are using standards on levels of
Chloramphenicol in seafood as a "hidden excuse" to protect
the U.S. domestic seafood industry. The U.S. delegation
responded that this is a health and safety issue and the
U.S. does not use SPS procedures to hinder trade.

21. TEXTILES: The GVN asked that the USG reconsider
including extraneous issues such as labor in a bilateral
textile agreement. Bilateral discussion on labor issues
should be conducted in the context of the USDOL-Ministry of
Labor, Invalids and Social Affairs (MOLISA) bilateral MOU on
labor. The GVN also argued that textile quota levels should
be based on Vietnamese production capacity. The GVN noted
that it had already proposed to have the second round of
negotiations take place in the first half of April in
Washington and it was currently working on a counter-
proposal on quota levels. The U.S. side responded that
these textile negotiations are taking place against a
backdrop of economic difficulty for the U.S. textile
industry. In the last 15 months more than 50 textile
factories have closed in the U.S. and Vietnam's textile
exports have already surpassed other exporting countries in
the region, like Indonesia and the Philippines. The U.S.
side urged the GVN to provide a counter proposal to USTR
quickly. The U.S. side also noted that the proposed labor
language in the draft textile agreement is a positive
affirmation of Vietnam's commitment to progress on labor
issues and will reassure importers that Vietnamese factories
will respect minimum labor standards.

22. (SBU) WTO ACCESSION: The U.S. side noted that
implementation of the BTA provides a solid foundation for
Vietnam's WTO accession. The pace of accession is up to the
GVN but the U.S. is willing to help in any way it can. The
U.S. side encouraged the GVN to work with WTO members and
respond quickly to questions.

23. (SBU) DISPUTE SETTLEMENT: The GVN suggested
establishing a subcommittee to handle dispute settlement as
bilateral issues arise. The U.S. side responded that
"dispute settlement" has a very specific legal meaning in
the WTO context that is not appropriate for bilateral
commercial disputes. In addition, aside from a provision
for arbitration of commercial disputes, the BTA does not
contain a dispute settlement mechanism. The U.S. side
noted, however, that it is always willing to discuss issues
of bilateral concern.

MINUTES
-------

24. (U) The following is the official text of the minutes of
the Joint Committee meeting.

Begin Text:

Joint Committee on Development of Economic and Trade
Relations Between Vietnam and the United States
Second Working Session Minutes

Hanoi, 4-10 March 2003

From 4-10 March 2003, the second working session of the
Joint Committee on Development of Economic and Trade
Relations between Vietnam and the United States was co-
chaired in Hanoi by Vice Minister of Trade of Vietnam Mr.
Luong Van Tu and Deputy United States Trade Representative
Mr. Jon Huntsman, Jr. A list of delegates and participants
who represent various ministries and agencies relating to
the implementation of the agreement is provided in the
attached annex.

The two sides reviewed the implementation process in the
year 2002 and discussed progress and challenges of
implementation and ways in which to address issues of mutual
concern. The U.S. side acknowledged Vietnam's efforts to
comply with BTA provisions and committed to further support
Vietnam in this process. The U.S. side urged Vietnam to
continue its efforts to meet the timetable for
implementation contained in the BTA.

The U.S. emphasized the importance of IPR enforcement. The
U.S. side was pleased to hear of Vietnam's determination to
enforce IPR and to learn of recent enforcement actions by
Vietnam to establish order in this area.

Vietnam expressed its desire to actively start discussions
towards a Sanitary and Phyto-sanitary trade protocol.

The two sides recognized the importance of BTA
implementation as a contribution to WTO accession. The U.S.
side reiterated its support for Vietnam's efforts to join
the WTO. The two sides looked forward to the WTO working
party meeting in May 2003 and bilateral discussions at that
time.

The two sides reviewed the status of bilateral textile
negotiations and expressed a desire to work together to meet
a mutually satisfactory result.

The Vietnamese side highlighted its concerns and
frustrations with the ongoing anti-dumping investigation
against Vietnam's exports of frozen fish fillets (tra and
basa) to the U.S. The U.S. side encouraged Vietnam to
continue working with the U.S. Department of Commerce's
Import Administration on this issue.

The two sides discussed a variety of issues of concern to
businesses in the two countries and agreed to consult on
such matters on a regular basis in order to facilitate and
strengthen the bilateral economic relationship. They agreed
to use all available channels of communication, including
through their embassies in both capitals, to accomplish
this.

The two sides appreciated the quality discussions of the
second working session, and strongly believed the U.S.-
Vietnam economic and trade relations will continue to be
strengthened on the basis of the BTA.

The two sides agreed that the third working session of the
U.S. Vietnam Joint Committee will be held in the United
States in 2004.

The U.S. side appreciated the hospitality and preparation
made by Vietnam toward a successful working session.

Signed in Hanoi, 10th MArch 2003.

For the Government of Vietnam
Luong Van Tu
Vice Minister of Trade

For the Government of the United States of America
Jon M. Huntsman, Jr
Deputy U.S. Trade Representative

End Text.
BURGHARDT

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