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### Viewing cable 03HANOI489, Vietnam: First Round of Bilateral Textile Talks

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
03HANOI489 | 2003-02-28 09:05 | 2011-08-25 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Hanoi

`

    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 000489

    SIPDIS

    SENSITIVE

    STATE FOR EAP/BCLTV AND EB/TPP/ABT/BTT BOYNTON
    STATE ALSO PASS USTR HUNTSMAN/SPOONER/MILLER/CLATANOFF
    USDOC FOR 6500 AND 4430/MAC/AP/OPB/VLC/HPPHO
    USDOC ALSO PASS OTEXA LEONARD/FOOTE/MARTELLO
    CUSTOMS FOR RICHARD CRICHTON
    LABOR FOR ANA VALDES

    E.O. 12958: N/A
    TAGS: ETRD EINV KTEX VM LABOR
    SUBJECT: Vietnam:  First Round of Bilateral Textile Talks

    SENSITIVE BUT UNCLASSIFIED PROTECT ACCORDINGLY

    ¶1. (SBU) Summary and Introduction:  USTR Special Textile
    Negotiator David Spooner led a 10 person USG delegation to
    Hanoi to begin negotiation of a bilateral textile agreement.
    The negotiations, originally scheduled to take place
    February 19-21, were shortened by half because weather
    conditions in Washington delayed the departure of most
    members of the U.S. delegation by two days.  After a brief
    review of the three draft agreements tabled by the U.S. (a
    textile agreement, visa arrangement, and a market access
    agreement for U.S. textiles/apparel), the Vietnamese argued
    against inclusion of a labor provision within the textile
    agreement and against negotiation of a market access
    agreement at this time.  The GVN was not able to provide the
    U.S. side with a counter proposal on quota categories and
    levels prior to the delegation's departure.  While the GVN
    did agree to a second round of negotiations in Washington in
    March or April, they were unable to agree to set a specific
    date during the talks.  On February 24, econoff met with MOT
    officials from both the America's Desk and the Import-Export
    Office to strongly reiterated the US delegation's request
    for a GVN proposal for specific dates for the next round of
    negotiations and for a counter offer on quota levels.  On
    February 28, MOT's Import-Export office proposed the week of
    April 7-12 for the next round in Washington and informed
    Embassy that they would not be able to provide a counter
    offer on quotas at this time as they are currently
    collecting comments from business community but would
    provide it to the Embassy "as soon as they can."  End
    Summary and introduction.

    U.S. Delegation Opening Remarks
    -------------------------------

    ¶2. (SBU) In its opening remarks the U.S. delegation
    encouraged the GVN to look at textile negotiations as a
    normal part of the process of building a trade relationship
    with the U.S. While the U.S. is in the process of
    integrating quotas under the Agreement on Textiles and
    Clothing (ATC), for now they still exist, even for WTO
    member countries.  The U.S. has textile agreements with
    every major Asian supplier, some of who are WTO members.
    The U.S.- Vietnam Bilateral Trade Agreement (BTA), which
    came into effect in December 2001, has been successful in
    integrating Vietnam into the world economy and boosting
    Vietnam's textile and apparel exports to the U.S. by almost
    1600 percent.  Vietnam has become a top twenty supplier to
    the U.S. in some categories and a top ten supplier
    (capturing 5 percent or more of the market) in others.  The
    U.S. delegation  congratulated Vietnam on it success, but
    noted that it is that success that necessitated holding
    textile negotiations now.  Ultimately the need for
    negotiations should not be a surprise to the GVN, the U.S.
    delegation argued, as the issue was discussed many times
    both during BTA negotiations and after the BTA came into
    effect. The U.S. delegation highlighted the importance of
    these talks to the USG, emphasized the U.S. had waited
    almost a year after the BTA to request negotiations, and
    reminded the GVN that it is in both sides' interest to
    conclude the negotiations quickly.

    GVN Opening Remarks
    -------------------

    ¶3. (SBU) The GVN acknowledged the positive impact the BTA
    has had on both indirect and direct trade between the U.S.
    and Vietnam and noted that there are now 700 U.S. companies
    doing business in Vietnam in a wide range of sectors.  The
    GVN reminded the U.S. side that Vietnam had extended MFN
    treatment to U.S. imports two years before the BTA took
    effect and was ahead of schedule in implementing some of its
    BTA commitments on services. The best way to continue
    encouraging bilateral trade is to continue Vietnam's quota
    free period, the GVN argued.  Vietnamese textile/apparel
    exports to the U.S. were only significant in the last half
    of 2002, the GVN argued, and even then volume was modest
    (about 1.6 percent of U.S. textile and apparel imports).
    Under the BTA, the U.S. and Vietnam agreed to eliminate
    trade barriers consistent with WTO rules.  Textile quotas
    should be considered a type of trade barrier, the GVN
    argued.

    ¶4. (SBU) The GVN highlighted its status as a developing
    country and downplayed the size of its textile industry,
    noting that it is not as well developed as China's or
    Pakistan's industry and that, while the growth rate of
    Vietnam's textile exports in 2002 was high, the absolute
    value of textile exports to the U.S. is modest compared to
    ASEAN countries and the rest of the world.  For example,
    Cambodian textile exports to the U.S. in 2002 were worth
    more than USD one billion; Vietnam has not reached that
    level yet, the GVN asserted.  The GVN also argued that
    Vietnam's textile exports are not damaging the U.S. domestic
    industry or U.S. trade partners in the Western hemisphere.
    Although in 2002 the U.S. textile industry declined
    slightly, the GVN argued, Vietnam's exports were a shift
    from other countries such as China (which already accounts
    for about 20 percent of global textile exports).

    ¶5. (SBU) The GVN also argued that Vietnamese textile exports
    have also benefited both the U.S. and its trade partners.
    In 2002 Vietnam imported about USD 32 million worth of U.S.
    cotton (almost a third of Vietnam's total cotton imports).
    Additionally, U.S. trade partners like Taiwan and Korea have
    invested in Vietnam's textile industry in Vietnam.

    U.S. Tables Draft Agreements
    ----------------------------

    ¶6. (SBU) On the first day of talks, the U.S. delegation
    tabled three draft agreements for the GVN to review:  1) a
    textile and textile product agreement; 2) an agreement on
    market access for textiles and textile products (accompanied
    by a proposed tariff schedule for U.S. textile exports to
    Vietnam); and 3) a visa arrangement for textiles and textile
    products.   The U.S. side tabled proposed quota categories
    and levels (Annex B of the main textile agreement) during
    the second day of talks.

    Labor provision
    -------------------

    ¶7. (SBU) Section 15 (A, B and C) of the draft textile
    agreement discusses the protection of worker rights.  The
    U.S. delegation explained that this draft labor provision
    broadly encompasses three labor-related negotiating
    objectives contained in the Trade Act of 2002 including:  1)
    promoting respect for worker rights and the rights of
    children consistent with the core labor standards of the
    ILO; 2) seeking provisions in trade agreements under which
    parties will strive to ensure they do not weaken provisions
    in domestic laws in order to encourage trade; and 3)
    promoting ratification and full compliance with ILO
    Convention 182 on the Worst Forms of Child Labor.  Every
    textile agreement the U.S. has entered into since passage of
    the Trade Act has included a labor clause, as do U.S. trade
    preference programs.

    ¶8. (SBU) The U.S. side went on to note that the draft labor
    provision specifically reaffirms Vietnam's commitment to the
    ILO declaration and highlights U.S.-Vietnam cooperation
    under the 2000 USDOL-Ministry of Labor, Invalids and Social
    Affairs (MOLISA) MOU on labor cooperation.  The provision
    does not create new mechanisms or monitoring systems,
    require new factory visits or link quota levels to DOL
    reporting on the labor situation in Vietnam.  The provision
    utilizes the mechanisms established in the MOU giving USDOL
    and MOLISA an opportunity to meet and report on the steps
    the GVN is taking.  The U.S. delegation emphasized that the
    labor provision is intended to be a positive reaffirmation
    of Vietnam's commitment to labor rights and an opportunity
    to demonstrate further cooperation on this important issue.

    ¶9. (SBU) The GVN delegation argued strongly for removal of
    the labor provision from the textile agreement.  The GVN
    highlighted its cooperative efforts with both the ILO (which
    opened a representative office in Hanoi on February 17) and
    the USG, calling the DOL-MOLISA MOU on labor "the most
    important agreement on labor cooperation between the U.S.
    and Vietnam."  The GVN argued that any additional bilateral
    cooperation activities should be done in the context of the
    MOU and thus there is no need for another agreement on
    labor.  Other countries that have signed trade agreements
    containing a labor provision do not also have such an MOU,
    the Vietnamese delegation added.  The labor clause in the
    Cambodian agreement is an exceptional case and Vietnam does
    not want to be the "second exceptional case".

    ¶10. (SBU) The GVN repeatedly stated that it sees labor and
    textiles as two very distinct issues and noted that the WTO
    does not link the two issues.  The delegation also pointed
    out that while a textile agreement is a short-term issue,
    labor rights will be addressed over the long run. In
    addition, contracts between Vietnamese exporters and U.S.
    importers already include provisions to ensure full
    compliance with labor standards.  The GVN also pointed out
    that in the context of the anti-dumping case against
    Vietnamese frozen fish fillets, they believe that the USDOC
    noted that Vietnam had already taken steps on labor
    consistent with international labor principles.

    Market access
    -----------------

    ¶11. (SBU) The U.S. also provided the GVN the draft text of
    an agreement relating to market access for textiles and
    textile products (and an annex containing proposed tariff
    rates). The U.S. delegation emphasized that such agreements
    are very important to the U.S. domestic textile industry and
    have become a standard feature in U.S. textile agreements.
    The USG believes it is imperative to include this as part of
    the textile negotiations with Vietnam because the BTA does
    not include commitments on market access for U.S. textiles,
    although the U.S. has granted Vietnam MFN rates.

    ¶12. (SBU) The U.S. delegation explained that many concepts
    in the draft market access agreement are the same as those
    used in WTO accession negotiations.  The U.S. proposed this
    agreement for several reasons:  1) to establish tariff
    bindings for Vietnamese imports of textiles and related
    products from the U.S.; 2) to obtain a commitment from the
    GVN that if it offers rates lower than its bound rates to
    another trade partner, it will also offer these lower rates
    to the U.S.; and 3) to discipline Vietnam's use of non-
    tariff measures that would impede access of U.S. textiles to
    Vietnam's market.  The U.S. delegation pointed out that the
    proposed tariff rates are drawn from tariff rates Vietnam
    has offered other trade partners.

    ¶13. (SBU) The GVN strongly opposed negotiating a market
    access agreement alongside textile negotiations, repeatedly
    suggested such negotiations should be done in the context of
    Vietnam's WTO accession negotiations and yet affirmed its
    willingness to negotiate market access "anywhere and
    anytime." If the main objective of a textile agreement is to
    protect the U.S. domestic textile industry, then why
    negotiate market access in this context, the GVN asked.  The
    U.S. hasn't done this with other countries.  The textile
    agreements the U.S. has negotiated with 7 or 8 non WTO-
    member countries (most of which have a higher level of
    economic development) do not include market access
    commitments, the GVN complained.  In addition, the National
    Assembly establishes Vietnam's tariff schedule and the
    legislature must approve any changes to it.

    ¶14. (SBU) Noting reports that the GVN has just concluded
    negotiations with the EU to revise the two sides' textile
    agreement, the U.S. delegation asked the GVN to confirm if
    the revised agreement contained tariff bindings and if the
    GVN would provide the USG with a copy of the agreement.  The
    GVN responded that it had taken 5 to 6 rounds of
    negotiations to reach agreement with the EU, stated the
    agreement had not yet been submitted to either government,
    and noted there was not yet an official text.  The GVN
    acknowledged that the amended agreement did contain some
    tariff reductions, but noted that these had been given in
    exchange for Vietnam receiving GSP benefits from the EU.
    The U.S. has not offered GSP to Vietnam, the GVN added.

    Quota levels
    --------------

    ¶15. (SBU) The U.S. delegation submitted a draft Annex B
    containing proposed quota levels for 41 textile and apparel
    categories as well as suggested growth rates.  The U.S. side
    explained that the quota levels proposed for 2003 were based
    upon the latest trade statistics available - the twelve-
    month period ending in November 2002 - plus a 5 or 10
    percent increase depending on the category.  The U.S.
    delegation emphasized that this proposal was an opening
    offer and invited the GVN to make a counter offer.  The GVN
    responded that they need time to examine the U.S. proposal
    and noted only that the GVN would prefer to use trade
    statistics from the last six months of 2002, as that was
    more indicative of the growth in the sector due to the BTA.

    Visa Arrangement
    ----------------

    ¶16. (SBU) The draft Visa Arrangement agreement tabled by the
    U.S. delegation would establish a visa system to be used by
    the GVN to track and manage its quota.  The U.S. side noted
    that visa arrangements and customs cooperation are common
    elements in U.S. textile agreements.  The GVN delegation
    asked for more time to review the visa arrangement proposal
    and note the ongoing cooperation between Vietnamese and U.S.
    Customs.  The GVN suggested arrangements dealing with
    customs procedures should be handled in the context of a
    bilateral agreement on customs cooperation.

    Concluding Remarks and Next Steps
    ---------------------------------

    ¶17. (SBU) In concluding the negotiations, the GVN noted
    repeatedly that the drafts tabled by the U.S. were
    "complicated," and the GVN needed time for its specialists
    to discuss all of the documents in detail, including the
    quota categories and limits set forth in the draft annex B.
    The U.S. delegation responded forcefully that before the
    negotiations adjourn, the two sides needed to agree on dates
    for the next round of negotiations and the GVN needed to
    provide the U.S. with a counter offer on quota levels.
    Without these two things, the U.S. would face tremendous
    pressure to impose quotas unilaterally on Vietnam.  The GVN
    referred to the Minister of Trade's proposal that the next
    round take place between March 20 and April 20 (reported
    septel) but said the exact date would have to be determined
    after consideration of both side's schedules.

    ¶18. (SBU) On February 24, econoff met with MOT officials
    from both the America's Desk and the Import-Export Office to
    strongly reiterated the US delegation's request for a GVN
    proposal for specific dates for the next round of
    negotiations and for a counter offer on quota levels.
    Econoff emphasized that the GVN needed to provide this
    information by the end of the week of February 24-28.  On
    February 28, MOT's Import-Export office proposed the week of
    April 7-12 for the next round in Washington.  MOT also
    informed econoff that they would not be able to provide a
    counter offer on quotas at this time as they are currently
    collecting comments from business community and would
    provide it to the Embassy "as soon as they can."

    ¶19. (U) The following were the members of the U.S. textile
    delegation:

    David Spooner
    USTR Special Textile Negotiator and Head of Delegation

    Caroyl Miller
    USTR Deputy Textile Negotiator

    Katharine Mueller
    USTR Assistant General Counsel

    William Clatanoff
    Assistant USTR Representative for Labor

    James Leonard
    USDOC, Deputy Assistance Secretary, OTEXA
    Donald Foote
    USDOC, Director, Agreements Division, OTEXA

    Philip Martello
    USDOC, Director, Trade Data Division, OTEXA

    Richard Crichton
    U.S. Customs, International Trade Manager

    Robert Boynton
    State, Senior Textile Negotiation

    Ana Valdes
    USDOL, International Economist

    Jessica Adkins
    Economic Officer, U.S. Embassy Hanoi

    ¶20. (U) The following were the members of the GVN textile
    delegation:

    Le Van Dao
    Ministry of Trade (MOT), Deputy Director, Import-Export
    Dept, Head of Delegation

    Nguyen Hong Duong
    MOT, Deputy Director, Europe and Americas

    Nguyen Van Binh
    MOT, Deputy Director, Europe and Americas

    Le Van Thang
    MOT, Deputy Director, Export-Import Dept

    Luong Hoang Thai
    MOT, Head of WTO Division, Multilateral Trade Policy Dept

    Phan Thi Dieu Ha
    MOT, Head of Textile Division, Export-Import Dept.

    Duong Phuong Thao
    MOT, Expert, Europe and Americas

    Nguyen Duc Nhat
    MOT, Interpreter, Europe and Americas

    Nguyen Thi My Hanh
    MOT, Expert, Export-Import Dept

    Do Thu Huong
    MOT, Expert, Export-Import Dept

    Do Thuy Lan
    MOT, Expert, Export-Import Dept

    Cao Quoc Hung
    Ministry of Industry (MOI), Deputy Director, International
    Cooperation Dept

    Nguyen Hoang Phuong
    MOI, Principal Expert, International Cooperation Dept

    Nguyen Thi Man
    Ministry of Planning and Investment (MPI), Deputy Director,
    Commerce and Services Dept

    Nguyen Thuy Huong
    MPI, Expert, Investment Project Monitoring Dept

    Nguyen Tat Thanh
    Ministry of Foreign Affairs (MOFA), Deputy Director,
    Multilateral Economic Cooperation Dept

    Nguyen Huong Tra
    MOFA, Expert, Multilateral Economic Cooperation Dept

    Pham Phuong Anh
    MOFA, Expert, Americas Dept

    Nguyen Thu Do
    Office of the Government, Deputy Director, International
    Cooperation Dept

    Tuong Cong Sinh
    Customs, Manager, International Cooperation Dept

    Le Xuan Hue
    Customs, Expert, International Cooperation Dept

    Ha Huy Tuan
    Ministry of Finance (MOF), Deputy Director, International
    Cooperation Dept

    Bui Thanh Hai
    MOF, Expert, International Cooperation Dept

    Nguyen Manh Cuong
    MOLISA, Deputy Director, International Relations Dept

    ¶21. (U) USTR Spooner cleared this cable.
    BURGHARDT

`