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Cablegate: U.S. And Vietnam Agree to Open Skies Cargo Regime

VZCZCXRO6132
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #1186/01 2910636
ZNR UUUUU ZZH
R 170636Z OCT 08 ZFR
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 8628
INFO RUEHHM/AMCONSUL HO CHI MINH 5225
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGP/AMEMBASSY SINGAPORE 2663
RUEHKO/AMEMBASSY TOKYO 5924

UNCLAS SECTION 01 OF 02 HANOI 001186

////ZFR ZFR ZFR CANCEL THIS CABLE IN ITS ENTIRETY, CABLE WILL BE ZFR///
///RETRANSMITED UNDER NEW MRN ZFR ZFR ZFR////////////////////////////


SENSITIVE
SIPDIS

STATE FOR EAP/MLS AND EEB/TRA
STATE FOR EEB/TRA TERRI ROBL AND VIKI LIMAYE-DAVIS
SINGAPORE FOR FAA MARY WALSH
USTR FOR DBISBEE
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO

E.O. 12958: N/A
TAGS: ECON EAIR EIND EINV ETRD VM
SUBJECT: U.S. AND VIETNAM AGREE TO OPEN SKIES CARGO REGIME

REF: HANOI 1113

HANOI 00001186 001.4 OF 002


(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED (SBU). NOT FOR
INTERNET DISTRIBUTION.

1. (U) Summary: The United States and Vietnam agreed to an Open
Skies regime for all-cargo services on October 7 following two days
of talks in Hanoi. The two sides renewed the 2003 Air Transport
Agreement for three years and agreed to eliminate designation and
frequency restrictions on passenger routes contained in the old
agreement. The main impediment to a full Open Skies Treaty was
again the GVN's unwillingness to grant U.S. carriers fifth freedom
passenger rights over Japan. The GVN agreed to meet within two
years to work toward further liberalization, including a possible
exchange of fifth freedom passenger rights. End summary.

VIETNAM AGREES TO OPEN SKIES ALL-CARGO REGIME
---------------------------------------------

2. (U) The United States and Vietnam agreed to a new Open Skies
regime for all-cargo services following two days of talks in Hanoi,
October 6-7 2008. The Vietnamese side agreed quickly in the
negotiations to these new rights, noting the benefits they would
bring to trade and investment in Vietnam. The cargo arrangement,
which incorporates seventh freedom rights, provides increased
flexibility for U.S. cargo carriers such as FedEx Express and UPS,
which currently operate in Vietnam, including the right to move
goods between Vietnam and third countries. The agreement does not
permit intermodal cargo surface transport across Vietnam's border,
although the GVN's Ministry of Transport indicated that it may lift
that restriction after further consideration.

3. (SBU) Lai Xuan Thanh, the Deputy Director General of the Civil
Aviation Administration of Vietnam (CAAV), who led the Vietnamese
side at the talks, pressed the U.S. to introduce new language into
the agreement that would have restricted U.S. cargo carriers from
obtaining basing rights (the locating of aircraft on a long-term
basis) at Hanoi's Noi Bai and Ho Chi Minh City's (HCMC) Ton Son Nhat
International Airports. Thanh, moreover, sought the introduction of
a provision specifying central Vietnam's Chu Lai International
Airport as the only airfield in Vietnam where U.S. cargo carriers
could obtain basing rights. (Note: The GVN is spending $700
million to transform Chu Lai Airport into an air cargo transport hub
as part of a greater economic development plan for central Vietnam.
End note).

4. (SBU) The U.S. side, however, protested that new restrictions on
cargo basing would revoke rights already held by the USG under the
previous agreement. The GVN ultimately agreed to exclude new
language from the agreement and to leave cargo-basing decisions to
relevant airport authorities in Hanoi and HCMC. The U.S. side,
meanwhile, agreed to include a provision in the Memorandum of
Conversation noting Vietnam's interest in developing the Chu Lai
airport.

PASSENGER FIFTHS STILL A PROBLEM
--------------------------------

5. (SBU) The negotiation discussions on liberalizing passenger
services were problematic. Although Vietnam agreed to eliminate
designation and frequency restrictions on passenger routes contained
in the old agreement, the main impediment to full liberalization was
once again the GVN's unwillingness to grant U.S. carriers fifth
freedom passenger rights over Japan. (Comment: U.S. carriers say
that fifth freedom rights are essential to open commercially viable
new service to Vietnam. The failure to conclude an agreement on
fifths means that new U.S. passenger service to Vietnam is unlikely
in the short-term, including flights by Northwest Airlines, which
had hoped to expand its route network by initiating service on the
underserved Tokyo-HCMC route. For now, United Airlines remains the
only U.S. carrier to offer direct service from the United States to
Vietnam. End Comment).

6. (SBU) Explaining the GVN's unwillingness to exchange fifth
freedom rights with the USG, Thanh explained that Vietnam had tried
but failed to secure fifths from the Government of Japan (GOJ)
during bilateral aviation talks in May 2007 and noted that such
rights were necessary for Vietnam to offer direct services to the
U.S. A negotiator from the U.S. Department of Transportation (DOT),
however, pointed to evidence on the website of the GOJ's Ministry of
Land, Infrastructure, Transport and Tourism (MLIT) indicating that
Japan, in fact, did offer Vietnam limited fifth freedom traffic
rights at the 2007 talks.

HANOI 00001186 002.4 OF 002

7. (SBU) Thanh denied this, arguing that the 2007 agreement merely
gave Vietnam's carriers the right to make technical stops in Japan
(i.e., refuel without taking on passengers). The DOT representative
responded that Vietnam's carriers likely had technical landing
rights established under the existing Japan-Vietnam bilateral
aviation agreement. Privately, members of the U.S. negotiating team
speculated that Vietnam either refused the fifth freedom rights
offered by Japan or asked Japan to defer the rights for several
years until Vietnam Airlines was prepared to begin flights on its
long-planned HCMC-Osaka-Los Angeles (LAX) route.

8. (U) Thanh concluded that while Vietnam recognized the economic
benefits that expanded passenger services would bring, the GVN
needed to provide for "minimal equality" of opportunity for Vietnam
Airlines and a "balance of interests" between the passenger carriers
of both sides. The two sides agreed to meet again within two years
to work toward further liberalization, including a possible exchange
of fifth freedom passenger rights.

MICHALAK

1

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