Cablegate: Ministry of Trade Conveys Oral Points On Pntr Deal Re:

VZCZCXRO9408
RR RUEHHM
DE RUEHHI #2538/01 2771213
ZNR UUUUU ZZH
R 041213Z OCT 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 3590
INFO RUEHHM/AMCONSUL HO CHI MINH 1912
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGV/USMISSION GENEVA 1128
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 002538

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STATE FOR S, E, EAP/MLS AND EB/TPP/BTA/ANA
STATE PASS USTR DAVID BISBEE AND JONATHAN MCHALE
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR OASIA

SENSITIVE BUT UNCLASSIFIED
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E.O. 12958: N/A
TAGS: ECON ETRD WTRO VM
SUBJECT: Ministry of Trade Conveys Oral Points on PNTR Deal re:
Textiles

REF: HANOI 02513

SENSITIVE - DO NOT POST ON INTERNET

1. (SBU) Summary: On October 4, the Vice Minister of Trade Luong
Van Tu called in the CDA to convey orally the contents of a draft
letter from Minister of Trade Tuyen to Secretary Gutierrez and USTR
Schwab protesting the "mechanism" on textiles and apparel outlined
in their letter to Senators Dole and Graham. In the letter, the MOT
argues that first, the mechanism in practice discriminates against
Vietnam in violation of WTO rules; second, it creates uncertainty
for importers of Vietnamese textiles/apparel, effectively inducing
them to observe a voluntary quota system in some respects worse than
a formal one; and third, it deprives Vietnam of its "only direct
benefit from WTO accession" and breaks the delicate balance of
concessions in the bilateral agreement. The letter urges USTR to
withdraw the mechanism and remove the discriminatory treatment of
Vietnam. Vice Minister Tu confirmed that the letter had not been
sent and would not be sent until the Ministry had heard from the
U.S. side. End Summary.

2. (SBU) On October 4, Vice Minister of Trade Luong Van Tu called in
the CDA to convey orally the contents of a letter to Commerce
Secretary Gutierrez and USTR Schwab concerning the "arrangement"

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between USTR and Senators Dole and Graham on Vietnamese textile
imports to the United States. Earlier, Minister of Trade Tuyen had
convoked the CDA on September 29 to express Vietnam's initial
concerns, saying that Vietnam had prepared a letter of protest
(reftel). Since that meeting, we have been providing points
clarifying the U.S. position. There have also been exchanges
telephone between USTR and the GVN. In these exchanges, we advised
against Vietnam initiating an exchange of formal letters.

2. (SBU) Tu opened the October 4 meeting in a serious but low key
manner. He referred to the rapid development of the U.S.-Vietnamese
bilateral relationship over the past few years and expressed his
personal regard for his colleagues in USTR. He said that Minister
Tuyen, in consideration of the U.S. side's request to be informed in
advance of the contents of any proposed formal letter, had asked him
to hold the meeting with the CDA. He then read a draft letter from
Minister Tuyen to Commerce Secretary Gutierrez and USTR Schwab.

3. (SBU) Summary of letter:

Allow me to share our concerns regarding your letter to Senators
Dole and Graham. Thank you for the good will and cooperation from
the United States during the WTO negotiations and thank you for your
efforts to smooth the way for a favorable vote on PNTR. However,
the contents of your letter (to Senator's Dole and Graham) raise
deep concerns.

First, the mechanism proposed in practice discriminates against
Vietnamese exports and as such is counter to WTO's
non-discrimination principles.

Second, the mechanism causes uncertainty for U.S. importers of
Vietnamese textiles and apparel and will force them to voluntarily
restrain imports, in effect creating a voluntary quota system that
is in some respects worse than a formal quota system, since no one
knows what amount of textiles/apparel is safe to export. The lack
of consultation is regrettable.

Third, the only direct benefit to Vietnam from WTO and PNTR is the
ability to export textiles/apparel to the United States without
quota restrictions. Vietnam does not want to join WTO only to see
voluntary quotas continue. However, in deference to U.S. concerns,
Vietnam agreed to a special mechanism for textiles and apparel in
the bilateral market access agreement. This mechanism and other
concessions, represents a balance of concessions. Tuyen personally
believes that the additional mechanism breaks this balance.

(Tuyen) urges Secretary Gutierrez and USTR Schwab to withdraw the
mechanism and to do all they can to delete its discriminatory
provisions. He looks forward to a positive response.

End summary of letter.

4. (SBU) The CDA assured the Vice Minister that he would promptly
convey his points and the contents of the draft letter to Washington

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and thanked him for sharing the letter and seeking comment. Tu
assured him that the letter had not been sent and would not be sent
until MOT heard from Washington. The CDA reiterated the letter from
Secretary Gutierrez and USTR Schwab to Senators Dole and Graham did

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not create a new "mechanism." He noted that USTR is working with
U.S. apparel importers to address concerns. Tu thanked the CDA and
repeated three points: the Ministry would not send the letter until
it received feedback from the U.S. side; Vietnam does not want a new
mechanism; and he and Minister Tuyen understood that USTR is
"working hard." He closed saying that he looked forward to a
positive response from the United States.
ALOISI

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