By Greg Rushford
Next Tuesday, July 18, will be another big day for the Center for Strategic and International Studies, which has been one of Washington’s most prestigious think tanks for more than a half century. The Seventh Annual CSIS South China Sea Conference, as have its previous incarnations dating to 2011, will once again draw public attention to Chinese assertiveness in the South China Sea. Speakers with impressive national security credentials will be flown in from Singapore, Vietnam, the Philippines, and elsewhere in Asia. They will be joined by leading American authorities from such respected institutions as the U.S. Naval War College and its Center for Naval Warfare Studies. Sen. Cory Gardner, a Republican from Colorado who chairs the Foreign Relations Committee’s Asian panel, will kick off the day with a speech on “Renewing American Leadership in the Asia-Pacific.”
So who has been generously paying for conferences aimed at encouraging the importance of renewing American leadership in Asia? CSIS President and CEO John Hamre has been ducking the question for the past six years. Last July, for instance, CSIS informed the public that its sixth annual South China Sea conference had been “made possible by general support to CSIS.”
That’s not only too vague to convey real meaning, but a flat-out “misrepresentation,” according to a source who prefers to remain anonymous. To substantiate that charge, the source has provided me internal “Confidential” CSIS documents that show exactly where the money has been coming from.
The memoranda, e-mails, and other records reveal that Hamre has had a secret angel — in Hanoi.
And the angel has had an important say in who has been invited to the annual CSIS maritime conferences, and who hasn’t. CSIS’s secret benefactor is an arm of Vietnam’s Ministry of Foreign Affairs. The unit, called the Diplomatic Academy of Vietnam, reports to Foreign Minister Pham Binh Minh and the Communist Party, according to it’s official website. Pham Binh Minh, currently Vietnam’s deputy prime minister, is a senior Party member who has served as foreign minister since 2011.
Since 2012, Vietnam’s government has given CSIS more than $450,000 to hold the annual South China Sea conferences. Over the years, CSIS has added another $55,000 from the think tank’s internal accounts, the sources of which are not identified in the documents I have been shown. CSIS chief Hamre declined to respond to persistent requests for his comment.
Questions about transparency
This is not the first time that questions have been raised in the press about CSIS and shadowy contributions from foreign sources. On September 7, 2014, for instance, the New York Times published an article headlined “Foreign Powers Buy Influence at Think Tanks.” Reporters Eric Lipton, Brooke Williams and Nicholas Confessore tracked millions of dollars from foreign governments that have been flowing into influential Washington think tanks, including CSIS, in recent years. The murky money “has set off troubling questions about intellectual freedom,” they noted, citing instances of scholars whose opinions seemed to be unduly influenced by financial considerations.
In response to the inquiries from the Times, CSIS agreed to release a list of more than a dozen foreign government donors including Japan, Sweden and Turkey. But the disclosure from CSIS chief Hamre was semi-transparent at best. CSIS “declined to disclose details of its contracts with those nations or actual donation amounts,” the newspaper reported.
Currently, the CSIS website discloses eleven foreign governmental donors. The United Arab Emirates, for instance, has contributed “$500,000 and up,” for unspecified “regional studies.” Saudi Arabia and Turkey have chipped somewhere between $100,000 – $499,999,” again unspecified. And donations between $5,000 – $99,999 have come from five other governments including Kazakhstan and Germany. No contributions are now listed from the government of Vietnam.
Hanoi’s Hidden Hand
That some Vietnamese money has been given to CSIS, however, is noted elsewhere on the CSIS site — tucked away under gifts received from 48 foundations, non-governmental organizations, and “Nonprofit Donors.” The Diplomatic Academy of Vietnam is listed as having donated at least $5,000 to CSIS, but not more than $99,999. What the DAV is, or what the money was intended for, other than the usual unspecified “regional studies,” is not disclosed.
There is nothing anywhere on the CSIS site to indicate that the DAV is an official arm of Vietnam’s Ministry of Foreign Affairs. Nothing to suggest that the Diplomatic Academy of Vietnam advises the foreign minister “in the formulation, planning and implementation of the foreign policy of the State,” as it notes on its own website. To glean that DAV also participates in “academic exchanges” with research institutions, inside Vietnam and overseas, one has to go to the DAV website, where CSIS is not mentioned.
The official connections between CSIS officials and the Vietnamese government, according to the documentation I have been shown, date to April 25, 2012. That’s the day the first memorandum of understanding between CSIS and a Vietnamese diplomat was inked. Ernest Bower signed on behalf of CSIS as the think tank’s senior adviser and director of its Southeast Asia Program. Since 2011, Bower has also been the president and CEO of the BowerGroupAsia, an international consulting firm that has offices in Vietnam and other Asian countries.
Tung Nguyen Vu, who in 2012 was the deputy chief of mission of the Vietnamese embassy in Washington, signed on behalf of DAV. Hanoi contributed $129,236 to hold the second CSIS conference that July. CSIS added another $20,000.
Diplomat Tung — who is also referred to as Nguyen Vu Tung — is now a senior official with DAV; he appeared on a panel at the 2016 CSIS South China Sea conference, held last July 12. And at next Tuesday’s seventh CSIS event, Dang Cam Tu, the deputy director of the DAV’s Institute for Strategic Studies, will appear on a panel moderated by CSIS senior adviser Murray Hiebert.
Hiebert is also a senior adviser to the BowerGroupAsia. His work as a private business consultant does not appear on his CSIS bio, nor does he does not disclose his corporate affiliations in his public CSIS appearances. Hiebert has declined to explain his dual roles, and CSIS chief Hamre and the think tank’s board of directors have also remained silent.
In 2015 Hiebert admitted that a CSIS study on U.S.-Vietnam relations he had co-authored had been paid for by the Vietnamese government — a fact that the published study had not disclosed. Hiebert has drawn previous attention for his unwillingness to offer critical analysis of Vietnam’s tarnished human-rights record. He once even summoned a security guard escort a prominent Vietnamese-American pro-democracy advocate from the CSIS premises, after being pressured to do so by Vietnamese security officials. (For further details, see How Hanoi Buys Influence in Washington, D.C., and Obama’s Vietnam ‘Legacy’ Trip: A Reality Check, on www.rushfordreport.com.)
These days Vietnam’s chief paymaster to CSIS is Tran Truong Thuy. Thuy is a veteran DAV official who has been involved with the annual CSIS maritime conferences since the first one in 2011. On July 11, 2016, Thuy signed the confidential CSIS memo of understanding which set the budget for last year’s conference. He was then wearing another hat: director of the Foundation for East Sea Studies.
FESS describes itself on its website as a non-profit that DAV and senior Vietnamese diplomats launched in 2014. FESS and the DAV share the same address in Hanoi. FESS’s mission is basically to explain to domestic and international audiences the Vietnamese government’s positions on its maritime disputes with China. The short explanation of the bureaucratic arrangements: the Ministry of Foreign Affairs — and ultimately the Communist Party — calls the shots for both DAV and FESS.
Last year’s CSIS conference budget was typical of its predecessors. The Vietnamese agreed to pay $94,935 of the total costs of $104,935. CSIS’s Asia Maritime Transparency Initiative chipped in the other $10,000. The money was to be used to pay for CSIS staffers’ time spent on the event, travel and hotel costs from various Asian locations for invited speakers, and other conference costs such as those associated with meals and printing documents. CSIS agreed, as it had in previous years, to send all of the receipts to Hanoi.
While the contractual arrangements with Hanoi specified that both CSIS and the Vietnamese would “together draft the agenda and the list of participants,” CSIS also asserted its rights to full editorial independence and its “total discretion and final decision-making authority.”
Those rights were put to the test in the days before last year’s conference, which was held on July 12, 2016. That same day, an international tribunal in The Hague issued a ruling that determined that China has been acting in violation of its international legal obligations by destroying coral reefs to build weaponized artificial islands in waters with the Philippines’ exclusive economic zone — putting both Manila and Hanoi in range of Chinese jet bombers.
The Paymasters’ Power Play
Given the likelihood of intense public interest in the wake of the tribunal’s ruling, CSIS staffers Murray Hiebert and Greg Poling asked China’s ambassador in Washington, Cui Tiankai, to speak at the conference. Considering the beating that Beijing would be taking that day in light of the legal ruling, Hiebert and Poling thought that was only fair, and said so in their e-mail correspondence.
Poling informed Thuy on July 7 that he had heard from the Chinese embassy, and that Cui was willing to speak.
Thuy hit the roof.
“Murray, we cannot agree with the way you handle the conference,” the Vietnamese diplomat informed Hiebert in one July 8, 2016 e-mail. “You invited Chinese Amb without consultation with us and now saying that you cannot disinvite him. Please understand that to create a forum for promoting Chinese propaganda is not our purpose.”
Hiebert shot back: “Our goal is not to create a form for Chinese propaganda, but to create a credible forum that shows China’s unacceptable behavior in the SCS [South China Sea]. Amb Cui won’t convince anyone that justice is on his side. Allowing him to speak will give our all day event and the event’s sharp criticism of China much more credibility without detracting from our message.”
Finally, after the flurry of e-mails with the CSIS staffers had reached an impasse, Thuy put his foot down. “Murray, not allowing Chinese Amb to deliver his speech is not only my personal opinion but a strict requirement from our ‘sponsors’ and I don’t have chance to convince them anymore.”
Faced with the implacable attitude of the men with the money in Hanoi, Hiebert and Poling crafted a compromise position. “Thuy, Amb. Cui will not speak at the SCS conference tomorrow,” Hiebert informed his Vietnamese benefactor on July 11. “Instead, he will speak later in the day after the conference has ended at the invitation of the China Power Program, which is not related to the SE Asia program that organized the conference.”
As Hiebert had promised Thuy, the July 12 conference that the Vietnamese government had paid for adjourned at 4:30 p.m. Fifteen minutes later, at 4:45 p.m., the Chinese ambassador delivered his remarks, which were live-streamed.
Enter Irony — and Moral- and Intellectual Failures
There is an irony to this story. CSIS has earned genuine respect in leading foreign-affairs circles for its success in focusing the American public’s attention on China’s misconduct in the South China Sea. The rub is the evasiveness concerning who was paying the bills. That has been compounded by the business affiliations of CSIS officials who were raising money from the Vietnamese government at the same time they were promoting private business dealings in Vietnam.
Readers will draw their own conclusions as to what the Vietnamese government has gotten for its money. During the years covered in this article, Vietnam’s agenda in Washington has had several key parts. Hanoi wanted to create a climate of opinion to foster a closer diplomatic and security relationship with the United States. CSIS analysts also wanted that. The Vietnamese wanted President Barack Obama to visit Vietnam, to help deepen the relationship. CSIS also advocated that trip. Hanoi wanted Washington to lift its ban on the sale of lethal arms to the communist regime. CSIS analysts shared that part of the agenda also. And Vietnam wanted American support for the Trans-Pacific Partnership trade deal. CSIS was on the same page.
To be sure, CSIS officials could plausibly argue that the agenda they have been pressing on behalf of better U.S.-Vietnamese relations was reasonable.
But there’s more to this story that raises troubling questions. Above everything else, the Vietnamese government has wanted foreign policy elites in Washington to avert their eyes on Hanoi’s gross violations of human rights. The Communist Party sees its very survival as dependent upon its continued ability to suppress even peaceable dissent. And as I have reported previously in How Hanoi Buys Influence and Obama’s Vietnam Legacy Trip, John Hamre, Ernie Bower, Murray Hiebert, and Greg Poling have been careful not to cause undo offense to the powers in Hanoi when awkward questions about political prisoners have arisen.
To refuse to speak out when courageous Vietnamese citizens are imprisoned merely for peaceable exercising their universal rights to free speech is surely a moral failure.
And there’s also an intellectual failure. Vietnam, a member of the United Nations, is a signatory to various international legal instruments that guarantee its citizens universal freedoms of speech and expression. Any analyst who criticizes China for flouting international law in the South China Sea surely is obligated to point out that Vietnam’s continuing persecution of some of its best citizens also is in violation of accepted UN international legal norms.
Except, perhaps, if there is money to be made by looking away.
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.
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.