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Cablegate: Vietnam Denies U.S. Mfn Duty Reductions

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

UNCLAS SECTION 01 OF 02 HANOI 000696

SIPDIS

SENSITIVE

STATE PLEASE PASS TO USTR EBRYAN
STATE ALSO FOR E, EB AND EAP/BCLTV
USDOC FOR 6500 AND 4431/MAC/AP/OPB/VLC/HPPHO
USDA FOR FAS/ITP/SHEIKH
GENEVA FOR USTR

E.O. 12958: N/A
TAGS: ETRD EAGR ECON VM BTA
SUBJECT: Vietnam denies U.S. MFN Duty Reductions

Sensitive but Unclassified -- Please protect accordingly.

1. (U) Summary: In February, in connection with a recently
amended bilateral agreement with the EU, Vietnam reduced
import duties on wines and motorcycles from the European
Union. In contravention of the U.S.-Vietnam Bilateral Trade
Agreement, these lower duties have not been extended to U.S.
products on an MFN basis. GVN officials state that the GVN
is reviewing internally the applicability of MFN to certain
types of bilateral agreements, including "textile"
agreements. End summary.

2. (U) On February 12, the Ministry of Finance issued
Decision No. 17/2004/QD-BTC reducing duties on imports of
European wines from 100 to 80 percent and duties on imports
of European motorcycles from 100 percent to 70 percent.
This Decision codified two of Vietnam's commitments in the
February 15 amendment to the Agreement on Trade in Textiles
and Clothing and Other Market Opening Measures between
Vietnam and the European Union (EU). (Note: The Agreement
was originally initialed in December 1992 and has been
amended several times. End note.) Despite Vietnam's MFN
arrangements with more than 60 countries, the GVN is not/not
currently applying Decision 17 duty reductions to imports
from any other country, including the U.S. Article one of
the U.S. Vietnam Bilateral Trade Agreement (BTA) guarantees
the U.S. MFN. The only exceptions listed in the BTA are
advantages accorded to third countries involved in customs
unions, free trade areas and frontier traffic with Vietnam.

3. (U) Econoff raised the issue with Mr. Ha Huy Tuan, Deputy
Director on the International Relations Department at the
Ministry of Finance (MOF) on March 3. Econoff expressed
concern that the GVN is ignoring its MFN obligations, a
fundamental principle in the BTA and that U.S. exports are
being disadvantaged by the GVN's inaction. Tuan responded
that the GVN is discussing the application of MFN internally
and trying to determine whether or not it applies to special
agreements like the "textile agreement" between Vietnam and
the EU. Tuan then advised Econoff to raise the issue with
the Ministry of Trade (MOT), noting that while MOF is
responsible for levying duties, the MOT has the lead on
issues related to MFN. Tuan promised to convey U.S.
concerns up to the Vice Minister of Finance.

4. (SBU) Econoff subsequently raised the issue with Nguyen
Hong Dzuong, Deputy Director General, Trade Policy
Department for Europe and America at the MOT, who reiterated
MOF's response that the GVN is currently internally debating
application of the MFN principle and whether or not it
applies to "textile agreements" (and anything contained in
these agreements.) Dzuong explained that on one side, there
are officials who see this as a very clear-cut issue. If
you look at the BTA for example, there are no exceptions for
wine (or other products) from MFN and so U.S. wines should
automatically benefit from the reduction in duties applied
to European wines. Hardliners, on the other hand, reject
this argument. They take the view that textile agreements
are an exception and thus the reductions on duties applied
to EU wines are exempt from MFN treatment. The hardliners
are "uncomfortable" with the concept of MFN, Dzuong added.

5. (SBU) Australian diplomats have also raised the MFN issue
at both the MOF and MOT, without securing MFN treatment for
Australian imports. (Note: Australia has had MFN since
1990. End note.) A MOF official told an Australian
diplomat that Australia would have better luck if it framed
its arguments regarding MFN in the context of WTO accession
negotiations with Vietnam, rather than in the context of a
specific issue, such as wine.

6. (SBU) In an effort to broaden the discussion within MOT,
Econ/C requested an appointment with Tran Quoc Khanh,
Director General of the Multilateral Trade Policy
Department. Khanh responded that he would not be available
this week.

7. (SBU) Comment: The GVN does not appear to understand the
ramifications of denying MFN to its major trading partners,
even as it looks to move forward with WTO accession.
Embassy will continue to push strongly the GVN to meet its
obligations on this fundamental issue. We recommend that a
discussion of MFN be placed on the agenda of the next
meeting of the BTA Joint Committee.
BURGHARDT

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