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Cablegate: Some Commitments Are Harder Than Others -- Prodding Vietnam

VZCZCXRO9220
RR RUEHHM
DE RUEHHI #1583/01 2481344
ZNR UUUUU ZZH
R 051344Z SEP 07 ZDK
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 6264
INFO RUEHHM/AMCONSUL HO CHI MINH 3637
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 001583

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS and EEB/OIPE
STATE PASS TO USTR DAVID BISBEE

E.O. 12958: N/A
TAGS: ECON ETRD KIPR VM
SUBJECT: SOME COMMITMENTS ARE HARDER THAN OTHERS -- PRODDING VIETNAM
ON WTO IMPLEMENTATION

REF: A) HANOI 1212
B) HANOI 310
C) 06 HANOI 2602

HANOI 00001583 001.3 OF 002


(U) This cable is sensitive but unclassified. Not for Internet.

1. (SBU) SUMMARY. Vietnam, widely praised for its progressive and
aggressive approach toward opening its markets, is finding that
fulfilling some of its WTO commitments may be harder than it
thought. Entrenched local interests, poor coordination, and an
overly-complex bureaucratic process can all block much-needed
reform. Recently published regulations impose new restrictions on
foreign importers, forcing them to disband their de facto
distribution networks and choose a single nationwide distributor.
An eight month-overdue IPR criminal regulation is nowhere in sight,
and the GVN now tells us that it will come next year at the
earliest. State-sponsored piracy of U.S. broadcast content
continues unchecked, in blatant violation of Vietnam's trade
commitments. Mission Vietnam continues to encourage all levels of
the GVN to hold to the spirit and letter of its WTO obligations,
warning that these lapses could erode the country's hard-won
reputation as a reliable trading partner. END SUMMARY.

BLINDSIDING IMPORTERS WITH A MARKET BARRIER
-------------------------------------------

2. (U) There was an audible groan from the business and diplomatic
communities when Vietnam finally issued long-awaited regulations in
pursuance of its WTO trading rights commitments on July 17 of this
year. Ministry of Trade "Circular 9" (akin to an Executive Order)
limits foreign importers to a single local distributor. (Note: The
hierarchies of legal instruments in Vietnam are as follows: laws,
which must be enacted by the National Assembly; Decrees, which are
issued by the Prime Minister; and Circulars, which are issued by the
relevant ministries to provide detailed guidance to implement the
higher-level documents.)

3. (U) Circular 9 is clearly inconsistent with Vietnam's WTO
commitments; in the Working Party Report Vietnam pledged that
importers "would be free to select a distributor or distributors of
their choice" and that Vietnam "would not apply any restrictions on
the choice of the distributor or distributors". Since 100% foreign
owned distributors are not allowed to operate in Vietnam until
1/2009, the new regulations could stifle competition. Foreign
importers are concerned that their market penetration will be
limited if they are forced to rely on a single nationwide
distributor. Some sectors, like chemicals, do not even have a
reliable local distribution network, let alone a distributor capable
of nation-wide business activities.

4. (SBU) Embassy Hanoi and Congen HCMC have met with U.S. importers,
local AmCham representatives and the diplomatic community to discuss
a strategy to urge Vietnam to resolve this WTO inconsistency.
Emboffs also met with the drafters of Circular 9 at the Ministry of
Industry and Trade (MOIT) on August 12 and again on August 30 to
raise our concerns. Working together with USTR, Mission submitted a
list of 13 questions to the MOIT asking how it intends to reconcile
the new restrictions with its WTO obligations, in preparations for
an exhaustive review of Vietnam's recent trading right regulations
during the second week of September.

FROM A BAD CIRCULAR TO A MISSING CIRCULAR
-----------------------------------------

5. (U) Vietnam's Supreme Court (SPC) has yet to criminalize
commercial-scale copyright and trademark infringement, eight months
after it should have enacted a circular doing so. Ultimately,
Vietnam must revise its criminal code to cover the scope of
copyright and trademark infringement included in its WTO
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
obligations, but this will take time. The GVN committed to U.S.
negotiators during the WTO accession process that it would issue a
circular by the time of accession to criminalize commercial-scale
copyright and trademark infringement until the GVN can make the
necessary revisions to its criminal code.

6. (SBU) Despite repeated and extensive USG lobbying, the SPC has
failed to act on Vietnam's commitment. USTR has provided specific
draft language to include in the circular on multiple occasions, and
the Embassy and USTR have pushed both the SPC and the Ministry of
Trade (now MOIT) to live up to Vietnam's TRIPS obligations (REF A
and B). Furthermore, in a recent conversation with Embassy
officers, the SPC drafters said that they are unable to reconcile
the TRIPS language with domestic laws, and reported that we "must
likely wait until 2008, when the SPC begins to re-draft the criminal
code."


HANOI 00001583 002 OF 002


7. (SBU) Coordination on WTO compliance issues are clearly a
challenge for the GVN, as evidenced by the SPC's about-face from its
discussions with USTR's intellectual property expert during the
Annual BTA Review in June (REF A). Mission has stressed to the MOIT
negotiators who made the commitment that SPC's suggestion to wait
until next year is unacceptable.

UNCHECKED SIGNAL PIRACY
------------------------

8. (SBU) In a blatant example of the GVN's unwillingness (or
inability) to stop Vietnamese enterprises from violating its
international trade commitments on IPR protection, the Television
Technology Investment and Development Company (VTC) continues to
pirate international broadcast content, including multiple
U.S.-owned channels, and illegally distribute pirated content to an
estimated 1.5 million customers. VTC's actions are all the more
egregious because it is a state-owned company, under the control of
the Ministry of Information and Communications.

9. (SBU) The Embassy, USTR and the broadcast industry have mounted a
multi-year campaign to compel the GVN to stop VTC from pirating
content. While these efforts have at times yielded temporary
results (VTC removed most U.S.-owned content from its lineup shortly
following the June BTA Review), VTC has resumed its illicit
activities. Ambassador Marine raised this with numerous ministers
and other GVN authorities over the past several years, as have
industry leaders. In recent months, cease and desist letters issued
by several U.S. companies have led to VTC removing those channels
from its broadcast package. At the latest check, however, VTC is
still illegally distributing two U.S.-owned channels.

NEXT STEPS
----------

10. (SBU) Trade agreement compliance issues feature prominently in
recently arrived Ambassador Michalak's initial consultations with
Vietnam's leaders. The annual BTA review and the newly-formed TIFA
Joint Council will both present excellent opportunities to focus
attention on these issues. Post will also continue to raise the
criminal circular and signal piracy in our input into the annual
Special 301 Review, a tool which has provided some traction with GVN
authorities over the past several years.

COMMENT: IS A PATTERN EMERGING?
-------------------------------

11. (SBU) Although there is little evidence of a concerted agenda to
skirt WTO obligations, it is clear that these cases are not the
result of carelessness or failure to anticipate the implications of
Vietnam's trading commitments. The MOIT drafters told Emboffs that
there was much interagency discussion on the distributor
restrictions and that former Minister Tuyen himself agreed to it.
Although many of our contacts suspect protectionism, the biggest
losers are the Vietnamese distributors. In the case of cable piracy,
the reasons are clearer. GVN officials themselves have admitted
that "powerful interests" are behind VTC -- hinting not-so-subtly at
influential corrupt officials

12. (SBU) The failure to criminalize commercial-scale IPR violations
appears more to be a case of the negotiators and drafters being
unable to get the necessary inter-ministerial "buy-in," although it
does not seem to be for lack of effort. Moreover, the GVN remains
willing to engage with the USG, and in many cases, U.S. industry
members on these issues. Continued and persistent dialogue with
appropriate GVN authorities should help us move closer to resolution
on these cases and prevent the development of a more widespread
pattern of Vietnam failing to meet its international obligations.

13. (U) This cable was coordinated with Congen HCMC.

MICHALAK

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