The Philippine president is determined to forge closer ties with China — but at what cost?
BY GREG RUSHFORD
OCTOBER 17, 2016
Since he took office on June 30, Philippine President Rodrigo Roa Duterte — also known as “Duterte Harry” — has earned international notoriety for a harsh anti-drug campaign that has led to the extrajudicial killings of more than 3,600 alleged traffickers around the country. The crackdown has alarmed the European Union, the United Nations, and the United States. At one point Duterte called Barack Obama “a son of a whore,” later telling the U.S. president “to go to hell” after Washington dared to criticize the murders. Sooner or later, Duterte has vowed, he will “break up with America,” the Philippines’ longstanding treaty ally and security guarantor.
There’s one international power that doesn’t seem particularly bothered by Duterte’s excesses. “The Chinese side fully understands and firmly supports the Duterte administration’s policy that [prioritizes] the fight against drug crimes,” said Chinese Ambassador to the Philippines Zhao Jianhua in a speech last month. He went on to express his satisfaction at the “friendly interactions’ between the two countries since the new president began his term, predicting that the sun “will shine beautifully on the new chapter of bilateral relations.”
If anything, the ambassador may have understated the matter. This week Duterte is set to meet Chinese President Xi Jinping in Beijing, where the two are planning to sign a range of high-level bilateral agreements that will dramatically boost trade and investment between the two countries. Nor is their new friendship restricted to business. The visit comes just days after Duterte declared an end to joint Philippine-American naval patrols in the strategically sensitive waters of the South China Sea, where China has been steadily expanding its presence despite rival claims by Manila and other countries. The 65-year alliance between the U.S. and the Philippines has never looked so fragile.The 65-year alliance between the U.S. and the Philippines has never looked so fragile.
So why the shift in policy? On one level, Duterte’s desire to seek friendship with the Chinese reflects a willingness to appease Beijing’s aggressive stance in the disputed waters. Chinese Coast Guard warships armed with machine guns and water cannons have harassed Philippine fishermen, preventing them from earning their livelihoods in their traditional fishing grounds in the South China Sea (90 percent of which China claims as its own). Chinese dredges have been deployed well within the Philippines’ 200-nautical-mile exclusive economic zone, where they have destroyed irreplaceable coral reefs to build airstrips and naval bases aimed at enhancing Chinese offensive power. China has also forcibly prevented Filipinos from developing valuable oil, gas, and mineral resources that they’ll need in the coming years to power their electricity grid. “I will not go to war” over such matters, Duterte has declared.
On July 12, just short of two weeks into Duterte’s presidential term, an international tribunal in The Hague ruled that China has been acting in violation of Beijing’s sworn obligations under international maritime law. The litigation was brought in 2013 by Duterte’s predecessor, Benigno Aquino Jr., who sought to use the rule of law to rally international opinion to pressure the Chinese to respect Philippine sovereignty. Now Duterte appears to be signaling that he’s willing to overlook the tribunal’s findings if China is willing to do a deal.
There are various explanations for Duterte’s eagerness to seek a compromise. Some of those who know the president well suggest that the pivot is rooted in the left-of-center ideology he has professed in his past, which left him with a residual suspicion of the West (and Americans in particular). Duterte openly admires one of his former college professors, Jose Maria Sison — the founder of the Communist Party of the Philippines and its armed wing, the New People’s Army. Others point out that Duterte, who has several times threatened to declare martial law, has praised authoritarian leaders like former Philippine strongman Ferdinand Marcos. And besides China’s President Xi, Russia’s Vladimir Putin has been wooing the Philippine president with suggestions of cheap financing for Russian attack helicopters.
Meanwhile, Duterte and his foreign secretary, Perfecto Yasay, have been courting the support of business elites who favor closer relations with Beijing. In his career as a lawyer, Yasay represented the interests of Chinese-Filipino tycoons who have good connections in Beijing. Yasay, who brought no foreign policy experience to his position, has also been careful to speak respectfully of the Chinese — while telling an audience of Washington, D.C. insiders that Filipinos no longer want to be America’s “little brown brothers.”Filipinos no longer want to be America’s “little brown brothers.”
Among Yasay’s prominent clients has been Lucio Tan, one of the country’s richest men, who Duterte has said was one of the first to urge him to seek the presidency. While little-known outside Asia, billionaire Tan — who was born in China’s Fujian province and is considered on the mainland to be a “patriotic” Chinese — is one of the most controversial figures in Philippine political circles. He was one of the original so-called “Marcos cronies,” who became rich thanks to the tax breaks and other government subsidies granted in the 1970s by Ferdinand Marcos.
After Marcos was deposed in 1986, a series of successive Philippine prosecutors sought unsuccessfully to recover Tan’s allegedly ill-gained wealth. Today, he is chairman of Philippine Airlines, the country’s flagship carrier, and has extensive holdings in banking, mining, tobacco, beer, hotels and property development. He’s also made some major investments in China, which have clearly earned him the goodwill of Beijing. When Chinese presidents come to Manila, they always stay in one of Tan’s hotels.
Though there’s no evidence that Duterte is financially beholden to Tan — the president says he turned down the tycoon’s offer of cash and the use of aircraft during the campaign — they share a strong interest in closer ties with the Chinese. During his campaign, Duterte received an especially warm welcome from the Federation of Filipino-Chinese Chambers of Commerce and Industry, of which Tan is an honorary chairman. Along with the Chinese ambassador, Tan was one of the first prominent visitors Duterte received after his election victory.
In his eagerness to establish close economic ties with Beijing, Duterte has also said he is looking to revive various Chinese-Philippine joint ventures that were envisioned a decade ago during the presidency of Gloria Arroyo. The most notable project on Arroyo’s watch involved a $329 million telecommunications contract with China’s state-owned ZTE Corp. But Arroyo’s hopes to forge closer economic ties with China were derailed by various allegations of pay-offs that involved ZTE, Arroyo herself, and members of her entourage. Authorities in Manila recently dropped graft charges against Arroyo and her former colleagues, and her four-year house arrest has been lifted. Duterte has insisted that he had nothing to do with those decisions, though he had publicly offered to pardon Arroyo, in any case.
While no corruption allegations have surfaced in the new Duterte administration, the concerns about the adverse consequences of doing business with China remain. As Philippine professor Aileen Baviera has observed, the ZTE deal “was an example of how Chinese wealth … can undermine already weak institutions and government norms in a recipient country.”
While some members of the Manila elite worry that Duterte’s campaign of extrajudicial killings threatens to corrode the hard-won rule of law, Filipino-Chinese businessmen are among the most vocal defenders of the president’s drug war.Filipino-Chinese businessmen are among the most vocal defenders of the president’s drug war. And a tycoon from mainland China, Huang Rulun, who first acquired his wealth while living in the Philippines, has pleased Duterte by volunteering to pay for a new internment camp for thousands of drug users who have surrendered to police rather than fall victim to the slaughter.
While Duterte is currently riding high in public opinion polls, signs of a backlash are already starting to emerge. A notable indicator came last week when respected elder statesman and ex-President Fidel Ramos — whom Duterte has said would be a special envoy to China — publically expressed deep concerns about where the new Philippine leader is headed. Ramos lamented that “Team Philippines” is losing, “and losing badly.” Also last week, Supreme Court Justice Antonio Carpio even felt it necessary to remind Duterte that to surrender Philippine sovereign rights would be an “impeachable offense.”
Indeed, if Duterte continues on his current course — downplaying the legally binding decision of the Hague tribunal and watering down his own country’s territorial claims — his honeymoon with voters could end quickly. The Philippines remains one of the most pro-American countries in the world; in one recent survey, a whopping 92 percent of the population held positive attitudes towards the U.S. And some of the most pro-American Filipinos are to be found in the military, which looks to the American security relationship to counter Chinese bullying — which might help to explain why Duterte has been busily showering top officers with favors and cash.
By Greg Rushford
Last week marked some memorable history being made — and some key dates perhaps fraught with deeper historical significance than either Philippine President Rodrigo Roa Duterte or China’s Xi Jinping would care to be reminded of.
On Oct. 17, Xinhua reported that the president of the Philippines — then enroute for an official state visit to China — had admitted he would not fight for his country. “There is no sense in going to war” to recover Philippine territory that Chinese forces have seized in the South China Sea, Rodrigo Roa Duterte had declared. “There is no sense fighting over a body of water.” Also on Oct. 17, Duterte told Hong Kong’s Phoenix Television that he wanted to hold war games with China — and no longer with the Philippines’ longstanding treaty ally, the United States. “I have given enough time for the Americans to play with the Filipino soldiers,” he said.
On Oct. 20, speaking in the Great Hall of the People, Duterte delivered on what he had promised would be the “defining moment of my presidency,” sticking the knife into the Americans. “In this venue, your honors, in this venue, I announce my separation from the United States.” Duterte went on to say this: “I’ve realigned myself in your ideological flow and maybe I will also go to Russia to talk to [President Vladimir] Putin and tell him that there are three of us against the world — China, Philippines and Russia.” America, he added, “has lost.”
Also on Oct. 20, a triumphant-looking President Xi delivered his part of the bilateral bargain. In return for the Philippine president’s willingness to look the other way regarding Chinese naval- and air bases in the South China Sea, Beijing would start delivering more than $13.5 billion of soft loans and an array Chinese-controlled joint development projects to fill Duterte’s begging bowl.
Professor Erwin Tiongson of Georgetown University’s Walsh School of Foreign Service and a man with a keen historical eye, helps put last week’s chronology in a fitting context. October 20, as Duterte was venting his scorn for Americans in Beijing, marks the 72nd anniversary of Gen. Douglas MacArthur’s landing in Leyte. Five months later, a future President Rodrigo Roa Duterte would be born into freedom — on the island of Leyte.
The historical record is silent — and Duterte himself has not responded to a written invitation to clarify it — on how his parents, Vicente Duterte and Soledad Roa Duterte, might have celebrated when the Americans freed them from foreign aggression. We don’t know (yet) whether Vicente and Soledad were among the brave Filipino patriots who harassed Japanese forces on Leyte and passed valuable intelligence on to the U.S. Sixth Army — or whether they, like others, were collaborators. But we know what to call the son, who has admitted he is eager to look the other way in the face of foreign aggression, in return for money.
Also on Oct. 20, while Duterte was venting his spleen against Americans in the Great Hall of the People, the U.S. Embassy in Manila dispatched Col. Kevin Wolfla to Leyte. The decorated U.S. Army attaché spoke to an audience in the town of Palo that had gathered to mark the 1945 Leyte Gulf landing. “Our relationship with the Philippines is broad and our alliance is one of our most enduring and important relationships in the Asia-Pacific region,” Col. Wolfla (rightly) noted. “It is a cornerstone of stability for over 70 years.”
The Philippines News Agency reported that Leyte Gov. Dominico Petilla “repeatedly thanked the US for its role in the Philippines’ liberation and massive assistance of the US government after super typhoon Yolanda.” The governor’s mother, Palo Mayor Remedios Petilla, “assured that US officials will always be invited in future Leyte Gulf Landing celebrations,” the news report added.
Seventy two years after the landing that set the stage for the largest naval battle in history — and the liberation of the Philippines, Filipinos still mark the date with a MacArthur Landing Memorial National Park. And it turns out that President Duterte has a most personal reason to remember American sacrifices for his country. But for reasons that have yet to be explained, Rodrigo Duterte’s historical memories are shorter.
Duterte was born on Leyte on March 28, 1945. While his mother was giving birth, Japanese forces sunk an American submarine, the USS Trigger, which had been patrolling in Japanese waters. Eighty-nine Americans under the command of CDR David Rickart Connole lost their lives that day. The Trigger had already sunk “at least fifteen enemy vessels for a total of more than 85,000 tons of shipping,” according to the United States Navy Submarine Force Library and Museum, in Groton, Connecticut. Motor Machinist’s Mate First Class Constantine Guinness, one of the Trigger’s intrepid men, had captured the Trigger’s spirit with a poem: “I’m the Galloping Ghost of the Japanese Coast.”
The names of the Trigger’s crew are also remembered in the missing-in-action memorial in the USS Bowfin Submarine Museum and Park, in Honolulu, Hawaii. Duterte’s foreign secretary, Perfecto Yasay — who has also been busy expressing his disdain for Americans these days — was living in Hawaii with his family when his old friend Duterte tapped him for the Department of Foreign Affairs. As I reported in a column published on ForeignPolicy.com on Oct. 17, Yasay has professional ties to Filipino-Chinese tycoons with high-level connections in Beijing.
Duterte has not responded to questions as to whether he has ever been to the American Cemetery in Manila. Tucked away on 152 peaceful green acres, the cemetery honors the memories of the 16,632 Americans and 570 brave Filipinos who are buried there — and whose lives will be eternally marked by their sacrifices to free the Philippines from foreign occupation. There is also a chapel and a memorial honoring 36,285 Americans, Filipinos and other members of the allied armed forces who were killed in action — including the eighty-nine Americans from the Trigger who died the day Duterte’s mother gave birth.
There are other dates worth contemplation as the Duterte presidency continues down its anti-American path. But one stands out.
On September 9, 1945, Japanese forces surrendered in China. President Xi Jinping and other senior members of the Politburo like to pretend that China’s armed forces threw out the Japanese. The chest thumpers in today’s Beijing are loath to acknowledge that Americans, Australians, British, New Zealanders, Canadians and others also had their hands in that victory, to understate the matter considerably.
The missing date in the chronology is the time that China helped another country secure its liberty, at the cost of considerable Chinese lives. That’s because such a historical event has yet to happen.
America’s Philippines Blunder
Failing U.S. trade policy exacerbates Manila’s doubts of Washington’s security promises.
By GREG RUSHFORD
July 28, 2016 12:46 p.m. ET
U.S. Secretary of State John Kerry on Wednesday discussed the “full range” of economic and security issues with Rodrigo Duterte, the Philippines’ newly elected president. The visit comes in the wake of The Hague’s July 12 ruling that Chinese actions in the South China Sea violate Philippine rights.
Mr. Kerry’s diplomatic mission was to assure Mr. Duterte that Manila can count on Washington’s mutual-defense promises. But there are also Mr. Duterte’s doubts that the U.S. can support the Philippine trade and economy.
When Mr. Duterte was sworn in to office on June 30, U.S. Trade Representative Michael Froman announced a new trade policy that upends important economic growth plans in the Philippines. It threatens to wipe out an estimated $100 million annual boost to Philippine exports of travel goods such as luxury handbags, wallets and backpacks. It also complicates Philippine investment aspirations to create some 75,000 travel-goods-related jobs in the next five years.
At first glance, Mr. Froman’s announcement gives no hint of the economic controversy it has sparked. He says that President Obama wants to make “a powerful contribution to lifting people out of poverty and supporting growth in some of the poorest countries in the world, while also reducing costs to American consumers and businesses.” The policy benefits 43 least-developed beneficiary countries, such as Cambodia and Haiti, and 38 African nations. Pursuant to the U.S. Generalized System of Preferences (GSP) program, these countries will no longer have to pay stiff tariffs of up to 20% on handbags, wallets and other travel goods exported to the U.S.
The U.S. decision to give preferential treatment to the industry’s small players, while blindsiding the most competitive producers, is perplexing. Cambodia, for instance, holds a modest 0.4% of the U.S. market, producing mostly backpacks. Africa’s total travel-goods exports to the U.S. amount to roughly one hundredth of one percent market share. As a result, the policy gives just two countries—China and Vietnam—a combined 90% share of the $5 billion U.S. travel-goods market.
It is unlikely that preferential treatment will prompt least-developed countries to boost their exports. Even with 15 years of duty-free access to U.S. clothing markets under the African Growth and Opportunity Act, 40 African countries combined to export less than 1%, or $1 billion, of garments each year to the U.S. The Philippines alone exceeds Africa in clothing exports by more than $100 million.
Diplomats from other countries and industry giants in the U.S., such as Coach, Columbia Sportswear and Kate Spade, have written to Mr. Froman asking for an explanation. On Wednesday 14 members of U.S. Congress, including 10 from the powerful Ways and Means Committee that has jurisdiction over trade, also issued a strong letter to the U.S. trade chief. But Mr. Froman has yet to offer any economic rationale for the decision, nor is there any evidence on the public record to support it.
Developing countries with larger market shares of the travel-goods industry, such as India, Indonesia, Pakistan, the Philippines, Sri Lanka and Thailand, must now reconsider their plans to expand their investments. Major U.S. players such as Coach and Michael Kors, which looked to U.S. trade officials to provide financial incentives to shift production away from China, will now put those investment plans on hold. China is thus poised to keep its 85% share of the U.S. travel-goods market.
Vietnam, as a communist country, is not eligible for the GSP preferences. But in the Trans-Pacific Partnership trade deal, the U.S. agreed to give the Vietnamese—who now hold a 5% market share—the same duty-free treatment withheld from GSP-eligible countries. Pakistan’s Prime Minister Nawaz Sharif thought he had received assurances directly from President Obama last year that U.S. trade officials understood the “importance” of increasing enhanced market access for Pakistan’s GSP-covered exports. Diplomats I have spoken to chafe at the unfairness.
Viewed through the Philippine lens, the failure to connect economic cooperation with the security aspect of Obama’s pivot to Asia is glaring. Cambodia, apparently thanks to financial inducements from Beijing, has been the spoiler whenever the Philippines has sought solidarity from its partners in the Association of Southeast Asian Nations in standing up to China in the South China Sea.
Asked repeatedly for his side of the story, Mr. Froman asserted through a spokesman that “travel goods are a product particularly well-suited to be produced in least-developed countries.” He declined to explain further.
While the broader security relationship will survive, it is worth noting that in international economic diplomacy, like in personal relationships, unnecessary smaller slights erode trust. With the Chinese watching on the sidelines and eager to buy their way out of their South China Sea mess, this is not a wise time to rub the volatile new Philippine leader the wrong way.
Mr. Rushford edits an online journal that specializes in international economic diplomacy.
by Greg Rushford
If war is too important to be left to the generals, as Georges Clemenceau famously said, it is unwise to leave important international economic decisions to technicians who fail to connect them to broader U.S. national security priorities. This story concerns one such decision that was announced by U.S. Trade Representative Michael Froman on June 30. It immediately became the subject of heated controversy in Washington’s international trade circles.
It’s not difficult to see why.
Froman — characteristically — crafted his decision in excessive secrecy. An exhaustive research of the available public record turns up no economic evidence to support it. Pressed hard to defend it, Froman has been unable to point to any serious economic rationale. The intended beneficiaries, mainly in Sub-Saharan Africa, are not positioned to take advantage of it.
Meanwhile, important U.S. trading partners across Southeast Asia and the Indian Subcontinent that could benefit — from the Philippines, Thailand, and Indonesia to Pakistan, Sri Lanka and India —instead will be hurt. Diplomats from 14 of the affected countries just yesterday sent a strong letter to Froman bluntly expressing their “disappointment” concerning U.S. economic discrimination against them. The signatories included Brazil, Tunisia, Moldova, Thailand, Philippines, Indonesia, Pakistan, Sri Lanka, India, and Paraguay. Privately, diplomats I’ve spoken with express their frustrations with the inequities of U.S. trade policies in, well, much stronger language.
The unusually strong criticisms would surprise a casual reader of Froman’s June 30 press release. On the surface, at least, it appeared to be a shining example of American generosity aimed at helping the world’s least-developed countries. The Obama White House, declared Froman, wanted to make “a powerful contribution to lifting people out of poverty and supporting growth in some of the poorest countries in the world, while also reducing costs to American consumers and businesses.”
But will it? More than two weeks of weeks of intensive independent research — including repeated efforts to obtain Froman’s side of the story — suggests otherwise.
Let’s take it from the top:
The intended beneficiaries are African countries like Ethiopia, Rwanda, Ghana, Lesotho and Kenya, and also impoverished Cambodia and Haiti. They will be given preferential access to the $5 billion U.S. market for travel goods: think suitcases, handbags, wallets, and backpacks. No longer will their exports of 28 lines of handbags and such face U.S. tariffs that range from 4.5 percent to a stiff 20 percent. (Last year, Congress authorized adding travel goods to developing countries eligible to participate in the Generalized System of Preferences program, and for the 40 member countries of the African Growth and Opportunity Act.)
The entire American travel goods industry was blindsided. To understate the matter, the executives who actually make the investment decisions were not thrilled that federal officials with scant business experience would think that they knew more than the CEOs about where their future travel-goods investments should be directed. Outraged, the American Apparel & Footwear Association, the Outdoor Industry Association, the Sports & Fitness Industry Association, and the Travel Goods Association, have been demanding that Froman explain his decision, so far without success.
Comparing the June 30 Froman press release with the realities of the $5 billion U.S. travel-goods market sheds light on the emotions the U.S. trade negotiator has unleashed.
First, Froman’s determination does not appear to make anything close to a truly “powerful contribution to lifting people out of poverty,” and does not seem to be supported. Most of the intended beneficiaries, alas, have precious few travel goods to export, so the US preferences won’t help them much.
At least Cambodia, with 0.4 percent of the US market, does have a small-but-vibrant travel-goods industry, apparently mainly involving backpacks, that stands to benefit. So the Cambodians are poised to be winners. Still, Cambodia’s ambassador to the United States, Chum Bunrong, signed the July 18 letter from 14 countries expressing concerns about the discriminatory treatment. Cambodia had sought the GSP preferences, but had not lobbied to exclude other deserving countries.
Meanwhile, the Africans, the major intended beneficiaries, simply aren’t important players in the travel-goods industry. They aren’t positioned to become such anytime in the foreseeable future. All of Africa’s travel-goods exports to the United States amount to a roughly one hundredth of one percent market share.
There is (happily) some foreign investor interest in developing the African travel-goods industry, involving as much Chinese as U.S. and European multinationals. But (unhappily) not much. Stiff U.S. tariffs aren’t the main problems — clogged ports, bad roads, red tape, and too many other economic inefficiencies to list in one line are far more important obstacles to viable African trade expansion.
The Africans also have been slow to take advantage of the generous trade-facilitation financial assistance pursuant to the World Trade Organization’s so-called Bali Package aimed at smoothing the flow of goods across presently difficult borders. The WTO inked its trade-facilitation deal when ministers met on the famous Indonesian resort island in December 2013. To date, only eleven African WTO members have ratified it. One struggles to find a sense of economic urgency.
Moreover, making backpacks, for instance, with all their zippers and complex components, is far more difficult than making T-shirts. Yet even with 15 years of duty-free access to the U.S. clothing market under the African Growth and Opportunity Act, all of Africa’s apparel exports to the U.S. still only amount to about $1 billion annually. That’s less than one percent of the U.S. clothing market.
The Philippines, one of the smaller exporters of garments to the United States, exports about $1.1 billion worth of clothing to the U.S. annually. That’s roughly $100 million more than the yearly garment exports from all of the Africa countries combined. And Bangladesh’s US clothing exports are more than five times Africa’s total.
The Africans get duty-free treatment for their garment exports pursuant to the African Growth and Opportunity Act. But the Philippines, Cambodia, Bangladesh, and the rest of the world’s rag trade face stiff U.S. clothing tariffs. Those tariffs mainly hover in the 12- 16 percent range, but can shoot sharply higher. The unavoidable economic bottom line: African countries that struggle just to make shirts and trousers, even with the existing AGOA duty-free preferences, are not poised to attract major investments in travel goods.
Consider further the June 30 Froman press release’s boast of “reducing costs” for American consumers and businesses by slashing tariffs on travel goods for Africa. Driving up costs by upending multi-million dollar investment plans of major players in the industry — like Coach, Michael Kors, Under Armour, Columbia Sportswear, and Kate Spade — is more like it.
That’s because such stalwarts of the American travel-goods industry have been planning to enhance their investments in the countries which are poised to take advantage of them, mainly the Philippines, Thailand, Indonesia, Sri Lanka, Pakistan and India. The U.S. industry leaders have been aiming to shift production to such developing countries away from China, which holds an estimated 85 percent of the U.S. market. But now, that production will mostly remain in China — ironically making the Chinese the biggest winners of the U.S. trade representative’s decision.
Vietnam holds another 5 percent of the American travel-goods market. As a communist country, the Vietnamese are not eligible to participate in the American GSP preference program. But Froman has agreed in the Trans-Pacific Partnership trade deal to give Vietnam the same duty-free treatment for the same 28 tariff lines of travel goods. Put another way, U.S. trade policy has been shaped to carve out at least 90 percent of the American travel-goods market to two communist countries: China and Vietnam.
Meanwhile, the losers in Southeast Asia and the Indian Subcontinent will just twist in the proverbial wind. Froman’s June 30 announcement did not flat-out deny such developing countries the GSP duty-free preferences. Rather, the U.S. trade chief has said he is merely “deferring” their petitions into an indefinite future before deciding whether they deserve them. The government-induced market uncertainty, of course, is a nightmare scenario for any investor whose plans are thrown into limbo.
Do the math: Froman and President Obama will leave their offices in six months. It takes perhaps 18 months after an investment decision is made to get a travel-goods factory up-and-running. So assuming that such an investment plan were to be made this week, we’re looking at early 2018 before, say, a travel-goods operation would be established in, say, Rwanda. Then it would take another several years before export data would be generated. U.S. trade officials might be able, sometime after the 2020 presidential election, to start a lengthy review process. Imagine how the CEO of a major U.S. multinational would feel about that.
And imagine how poor women in places like the Philippines — a country of 100 million people, some 25 million of whom are suffering in poverty — might feel about the June 30 U.S. trade action that put equally deserving African workers’ interests ahead of theirs, should someone ask their opinions. (To their credit, the Africans did not ask that workers in other poor countries be excluded from the US travel-goods decision.)
Ironically, on June 30, as Froman was releasing his press release in Washington, the Philippines was swearing in a new president. Rodrigo Duterte has not been shy about the fact that over the years he has developed a certain attitude toward perceived American high-handedness.
President Duterte comes from the southern Philippine island of Mindanao. He and some of his key economic and security advisors have seen this sort of discriminatory behavior from Washington before. For years, Washington officials have refused to consider slashing high U.S. tariffs that would boost the economic prospects of (mostly Muslim) workers in Mindanao’s canned tuna industry. This is another example of how U.S. economic policies can be disconnected from important diplomatic priorities to win trust in the Islamic world.
And more recently, U.S. trade chief Froman has even turned a deaf ear on Philippine requests that garment workers in typhoon-ravaged areas be given duty-free treatment for their clothing exports to the United States. While this might be a largely symbolic gesture in the grand scheme of things, America would be highly praised for showing such generosity. Instead, on the very day he was sworn into office, President Duterte was greeted by still another example of American ungenerous economic thinking.
The Philippine travel-goods industry had been looking to create an additional $100 million in annual exports to the United States — that’s $500 million in five years, involving some 75,000 new jobs. Now U.S. Trade Representative Froman has put those aspirations on indefinite hold.
The Philippines is also one of America’s closest treaty allies, and sits astride sea lanes in the South China Sea that are of vital importance to global commerce. But the Chinese have an agenda that would put Beijing in charge of Philippine waters.
On July 12, Beijing’s claims to economic domination in the South China Sea were branded illegal by a well-crafted international tribunal’s ruling in The Hague. But while seriously embarrassed, the Chinese have other cards to play. They are infamous for their special brand of economic diplomacy (suitcases full of money).
China’s top leaders have made it no secret that they will try to offer financial inducements to the new Duterte administration. Meanwhile, the US travel-goods announcement has given Filipinos another reason to doubt America’s trustworthiness as an economic partner. Sometimes in international economic diplomacy, as in personal life, it’s the smaller slights that do the most to fray relationships.
Pakistan, although hardly a trusted ally like the Philippines, is nevertheless another country that is important in the U.S. national security equation. Now the Pakistanis must wonder how truthful President Obama was to their prime minister, Nawaz Sharif, when Sharif visited the White House last year.
On October 22, 2015, Sharif and Obama issued a joint statement that took note of the “importance” of increased “market access’ for Pakistan in the GSP preferences program. “President Obama indicated that the United States will help Pakistan create conditions for accelerated trade and investment-driven growth,” the statement noted. Now, Froman’s June 30 decision to defer Pakistani hopes for duty-free treatment regarding travel goods raises more questions about American sincerity.
Not everyone is unhappy with the U.S. trade representative. Stephen Lande, the president of a respected Washington consulting firm, Manchester Trade, has had many years of experience with Africa. “I am happy” that Froman decided to give African countries preferences on travel goods, Lande says. “Because that’s what AGOA is all about.”
Lande says that he hopes that Froman’s decision will encourage CEOs in the travel-goods industry to put more money into Africa. Countries in Southeast Asia like the Philippines could acquire the same GSP benefits by joining an expanded TPP trade pact, Lande adds.
Froman, meanwhile, is hunkered down. He refused to allow the U.S. trade officials who worked on the case to explain an economic rationale for his June 30 announcement. He wouldn’t even say which office handled the paperwork (apparently the economic-policy shop run by Assistant U.S. Trade Representative Edward Gresser). The organization chart at the Office of the U.S. Trade Representative — who reports to whom, and on what — is considered classified information.
When I pressed, Froman finally asserted through a spokesman, Trevor Kincaid, that “travel goods are a product particularly well-suited to be produced in least-developed countries.”
Will that be the last word? Stay tuned.
By Greg Rushford
Monday, May 23, Washington, D.C. —Air Force One touched down yesterday evening in Hanoi. The White House and influential Washington think-tank scholars are spinning President Barack Obama’s three-day Vietnam visit as a “legacy” moment, validating the president’s “pivot” to Asia. Expect much warm talk of how America is forging ever-closer economic- and security ties with a modernizing Vietnam. Expect the usual heartwarming television images of happy people —including peasants toiling in lush rice fields, wearing their iconic conical hats.
Don’t expect any admissions from Vietnamese Communist leaders of the suffering they continue to inflict upon some of their country’s best citizens. As former prisoner of conscience Cu Huy Ha Vu rightly notes, today’s Vietnam is “a kleptocracy.” Intrepid pro-democracy advocates stand in the way.
Courageous men like Dang Xuan Dieu, Ho Duc Hoa, and Tran Vu Anh Binh, three of Vietnam’s 100-plus current political prisoners. They languish behind bars, while some Washington insiders have averted their eyes.
Some of those insiders are Southeast Asian analysts who work inside the gleaming $100 million headquarters of the Center for Strategic and International Studies, just a few minutes from the White House — and who have undisclosed sidelines as business consultants. They know that to speak forthrightly on Vietnam’s shameful human rights record would threaten their easy access to senior communist officials. Their corporate benefactors who depend upon that political access to win lucrative business contracts in Vietnam could lose the big bucks.
Moreover, Vietnam’s ambassador to the United States has a team of $30,000-a-month Washington lobbyists on his payroll. Their assignment is basically not to let awkward questions about political prisoners interfere with enhanced U.S.-Vietnamese commercial- and security ties, especially the sale of lethal weapons to fend off Chinese maritime intimidation.
One wonders what Dieu, Hoa, and Binh, locked away in their cells, would have to say — if they were free to speak.
Dieu, a devout Catholic citizen journalist, has been imprisoned since 2011. He committed the “crime” of exercising free speech. Dieu has been living “in hell” — beaten, humiliated, and treated like a “slave” for refusing to wear a uniform with the word “criminal” — his brother has told Radio Free Asia. Hoa, also a blogger whose crime was his free speech, has been incarcerated since 2011. Binh, a songwriter, lost his liberty in 2012. His crime was writing music that offended the Communist Party. While Binh’s term is scheduled to end next year, Dieu and Hoa could languish behind bars until 2024.
All three men are associated with the Viet Tan, a U.S.-based political party that is highly effective in using the social media to advocate democratic freedoms of speech and assembly. The Viet Tan reaches a wide audience, both inside Vietnam and in the Vietnamese diaspora. For its skilled high-tech advocacy, the Hanoi’s feared Ministry of Public Security brands Viet Tan as a “terrorist” organization.
Binh, Hoa and Dieu were amongst a group of 17 political prisoners who have been represented by Stanford law professor Allen Weiner, a former high-powered U.S. State Department official. Weiner won a United Nations panel determination that his clients — all either Viet Tan members, supporters or friends — had been unjustly imprisoned. While 14 of Weiner’s clients have been released, that’s unfortunately not quite a happy ending. “Some of those who have been released, however, continue to suffer severe harassment and intimidation at the hands of the Vietnamese security services,” Weiner reports. “They continue to pay a heavy price.”
That’s the sort of glaring injustice that no credible analyst of today’s Vietnam would want to downplay. Meet CSIS Asia analyst Murray Hiebert — a man who doesn’t deny that Vietnam has human rights issues, yet is careful never to use clear language that would anger senior Vietnamese officials.
Nine months ago, I brought Allen Weiner’s brave clients to Hiebert’s attention, asking if perhaps this would be an opportunity to highlight the injustice by holding a public forum. The CSIS analyst brushed off the inquiry — at the time I had not realized that CSIS has never held such an event. He also declined to say whether he agreed with Hanoi’s characterization of the Viet Tan as a “terrorist” organization.
(The White House and State Department are better informed than CSIS. Not only do they respect the Viet Tan for its peaceable advocacy, but Obama’s national security officials have maintained close ties with the Viet Tan leadership. Radio Free Asia reported that on May 17 representatives of the Viet Tan, along with other respected Vietnamese pro-democracy advocates including Boat People SOS and Vietnam for Progress, were briefed on Obama’s upcoming Vietnam trip in the White House on May 17.)
A few weeks ago, Hiebert once again did not respond to a request to be interviewed on the imprisoned Viet Tan supporters. I then tried to register for a May 17 press briefing that Hiebert and two other CSIS scholars held on the Obama visit. I had hoped to ask about Binh, Hoa and Dieu. But CSIS spokesman Andrew Schwartz — who also had not responded to a recent e-mail inquiry — denied me admission, asserting that the event was “oversubscribed.”
While the briefing room was indeed rather crowded, even full, according to people who were present, Schwartz found room for Vietnam Television. VTV is a Hanoi-controlled media tool that the Communist Party finds useful for spreading the party line. These days, VTV’s best “scoop” has been in warning Vietnamese independent journalists — and specifically the Viet Tan — to stay away from linking corrupt communist officials to a Taiwanese steel mill that somehow obtained environmental clearance to discharge toxic wastes into the sea, which has resulted in a massive fish kill.
(At the May 17 CSIS briefing, a Television Vietnam correspondent asked if the next American president would continue Obama’s “pivot” to Asia — which at least drew laughter. It is perhaps also worth noting that while “journalists” from Vietnam Television are welcome to peddle their propaganda in the United States, authorities in Hanoi continue to jam Radio Free Asia’s Vietnamese language service. And while the BBC is free to broadcast its English-language programs in Vietnam, the BBC’s celebrated Vietnamese Language Service frequently has run into problems.)
As it turns out, CSIS has a history of making life uncomfortable for guests at the think tank’s public events who might pose awkward questions. On May 24, 2015, former political prisoner Ha Vu angered the Vietnamese ambassador to the U.S., Pham Quang Vinh, by asking how Vietnam justified persecuting its political prisoners. Vinh, visibly upset, retorted that Vietnam has no political prisoners — which was pretty rich, considering that at that moment, the ambassador was busy trying to avoid making eye contact with one of Vietnam’s most famous political prisoners.
Moreover, CSIS analyst Hiebert, who chaired the panel, did not challenge the ambassador’s absurd claim. (The CSIS event discussed a study on U.S.-Vietnamese relations that Hiebert had co-authored; that study had not disclosed that the Vietnamese government had secretly financed it, Hiebert subsequently admitted to me.
And last July, Hiebert went to extraordinary lengths to accommodate Vietnamese security officials when Communist Party Secretary General Nguyen Phu Trong spoke at CSIS. Hiebert summoned a guard, escorting Dr. Binh Nguyen, a prominent Vietnamese-American physician, from the premises. Hiebert apologized to Binh, who had been invited, but said that the communist security officials insisted that she be ejected (for details see: How Hanoi Buys Influence in Washington, D.C., www.rushfordreport.com).
Turns out that there are other reasons to doubt Hiebert’s independence. While his official CSIS bio does not disclose it, Hiebert is also a senior advisor to a prominent business consultancy, the Bower Group Asia.
Hiebert’s boss at CSIS, Ernie Bower, runs the Bower Group Asia. “Our clients include the world’s best global enterprises,” the BGA website proclaims. “We understand the nexus between politics and economics.” Bower has more than 60 employees in his Washington, D.C. headquarters and in 21 Asian countries (including Vietnam). Another CSIS analyst, Chris Johnson, is a BGA managing director for China. Like Hiebert, Johnson does not disclose his business affiliations on his CSIS website.
Bower, who formerly chaired the CSIS Southeast Studies chair, responded angrily last year when I asked him which was his real day job: CSIS or his business consultancy. He said he was “saddened” that I had suggested he appeared to have conflicts of interest. But perhaps aware that others might also wonder, Bower now identifies himself on the CSIS website as a “non-resident” advisor. The chair remains vacant. CSIS spokesman Schwartz and John Hamre, the think tank’s CEO and one of Washington’s most acclaimed fundraisers, have not responded to persistent inquiries to explain the apparent conflicts.
Here’s how the conflict works:
At CSIS Hiebert has advocated the TPP trade deal. The Bower Group is actively seeking TPP business.
Hiebert has strongly contended that the U.S. lethal arms embargo on Vietnam has outlived its usefulness, and should be lifted. Lockheed, which wants to sell Hanoi its P-3 Orion and C-130 Hercules surveillance planes, has a seat on Hiebert’s CSIS board. So does Boeing, which has been peddling its P-8 Poseidon military surveillance aircraft in Hanoi. Imagine how the giant defense contractors would feel if the money they dole out to CSIS would be used to shine a spotlight on issues involving corruption and human-rights abuses in Vietnam.
Coca-Cola, a Bower Group client, got into Laos a few years ago, thanks to Ernie Bower’s understanding of “the nexus” between business and politics. Coke also has a seat on the CSIS Southeast Asia board.
Chevron, another major CSIS benefactor, also has a representative on CSIS’s Southeast Asia board. Hiebert authored a November 2014 column for the Wall Street Journal defending Chevron in bitter litigation the oil giant had in Indonesia. In his column, Hiebert identified himself only as a CSIS analyst. Then Ernie Bower got busy on the Bower Group’s Facebook page, touting the Journal piece: “BGA’s Murray Hiebert provides much-needed analysis of the court case against Chevron in Indonesia” in the Wall Street Journal. [Full disclosure: I have been an occasional contributor to the Wall Street Journal’s Asian edition for more than two decades.]
In recent months, Hiebert has been quoted widely by major news outlets including CNN, Reuters, the Associated Press, Forbes, Politico, the Financial Times, the Washington Times, and the Voice of America — always only identified as a CSIS analyst. Readers would not know that Hiebert also works for a business consultancy. They would not know that corporations that fund Hiebert’s CSIS programs have serious financial interests at stake. One wire-service report that quoted Hiebert about Vietnam’s new top leadership was picked up by the New York Times in April. This gave Ernie Bower another opportunity to twitter to his clients about how “BGA Senior Advisor Murray Hiebert” had made the pages of the Times.
And earlier today, CNN quoted Hiebert’s approving views of enhanced U.S. weapons sales to Vietnam, identifying him only as a CSIS scholar. Viewers were not aware that this “scholar” is funded at CSIS by major U.S. defense contractors, and has taken money from the Vietnamese government for co-authoring a study that called for the lifting of the U.S. weapons embargo to that country. Nor would viewers know that Hiebert also works for the Bower Group, which also touts its interest in facilitating arms deals.
A little digging illustrates how Bower mixes his CSIS affiliations with business. In 2014, for example, Bower opened some important doors in Washington to a Manila wheeler-dealer named Antonio “Tony Boy” Cojuangco. Tony Boy also sits on CSIS’s Southeast Asia board. Bower brought him to town as the head of an “eminent persons” group — such flattery can go a long way in certain Asian circles.
CSIS arranged appointments for the Filipino eminences in the White House, the Export-Import Bank, on Capitol Hill and of course at CSIS headquarters, where they had a scheduled appointment with the think tank’s president, John Hamre. That was during the day. That night, the Bower Group hosted a lavish dinner for Tony Boy and his associates at the posh Jefferson Hotel. Bower, Hiebert, Chris Johnson, and other CSIS/Bower Group operatives were present. To judge from photos I’ve seen, it was a good night all around, lubricated by bottles of Pomerol. (Hamre has not responded to repeated requests to comment. On the CSIS website, the CSIS head asserts that some unnamed journalists who have questioned CSIS ethical practices have ignored evidence to the contrary that he has provided.)
Agents of Influence
Speaking of influence peddling, if one looks closely, the Washington lobbyists on that $30,000-a-month retainer from Vietnamese Ambassador Vinh unwittingly illustrate how the official spin surrounding the Obama visit to Vietnam doesn’t tell the whole story.
The most recent foreign agent’s disclosure form that the Podesta Group has filed with the U.S. Department of Justice lists some of what the firm did to earn its $180,000 for the last six months of 2015. One is left wondering exactly what the lobbyists did to earn their keep.
The lobbyists disclosed only seven meetings, mostly with congressional aides. The only elected representative who met with Podesta representatives was Matt Salmon, an Arizona Republican who is retiring from Congress at the end of this year.
Rep. Salmon had already met with Vietnamese Amb. Vinh earlier in the year and had been to Vietnam in May. The congressman already had supported an enhanced U.S.-Vietnam trade relationship.
Do the math: $180,000 for seven meetings. That’s about $25,000 a meeting, throwing in about 50 e-mails and five phone calls that the Podesta lobbying form mentions. David Adams, the Podesta lobbyist who has been working to facilitate the Obama visit to Vietnam this week, is a former close aide to Hillary Clinton when she was secretary of state. Asked what he had really done to each the money, Adams declined to comment.
This week, when the television screens show images of happy Vietnamese peasants with their conical hats, toiling in their rice paddies, think of David Adams. The average Vietnamese citizen would have to work 13 years to earn enough money to pay for just one $25,000 Podesta Group meeting with congressional aides.
From the days of French colonialism to the present Communist kleptocracy, the Vietnamese central government has always stolen from its poorest people.
Amb. Vinh’s lobbyist Adams proudly styles himself as a part-time “gentleman farmer” in Virginia’s wine country. Wonder what those Vietnamese peasants would say, if they knew that their stooped labor is helping subsidize such a lifestyle?