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.
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?
U.S. Secretary of State John Kerry arrives in Hanoi this Thursday for a two-day visit. Expect much talk of how the United States and Vietnam have been developing closer security and economic ties — and how Vietnam’s praiseworthy “progress” in improving its human-rights record is making this possible. Hopefully, Vietnam’s feared Ministry of Public Security will be on better behavior this week than back in May. Then, Kerry’s top human-rights advisor, Tom Malinowski, held what he characterized as “productive” meetings in Hanoi with senior Vietnamese officials. On May 11, two days after Malinowski’s visit, thugs wielding metal pipes bloodied a courageous Vietnamese political dissident named Anh Chi. Malinowski deplored the incident, while still insisting that Vietnam has been making commendable “progress” on human rights.
Kerry’s Aug. 6-8 trip comes on the heels of a successful visit to Washington last month by Nguyen Phu Trong, the general secretary of the Communist Party. Trong had a “productive” meeting with President Barack Obama in the Oval Office on July 7, after which the two leaders issued a joint “vision” statement that said each country recognized the importance of protecting human rights. The next day, Trong made a major speech at an influential U.S. think tank, the Center for Strategic and International Studies (better known by its acronym, CSIS). “Protecting and promoting human rights is the main objective of our development,” Trong declared. “We want to ensure, promote and protect the rights of all people in Vietnam.”
Well, maybe not all. Once again, a familiar pattern emerged: Shortly before Trong’s speech before a CSIS audience of mainly well-connected Washington insiders, there was another ugly incident behind the scenes. The incident illustrates what’s really going on when American and Vietnamese officials praise Vietnam’s “demonstrable” human-rights progress. Moreover, the CSIS embarrassment offers a glimpse into how the Communist Party has been quietly buying influence to advance its foreign policy agenda in Washington — a sophisticated lobby campaign that appears to be working. Hanoi, it appears, has learned that in Washington, money talks.
But that’s getting ahead of this story, which begins with Trong’s July 8 historic speech — the first-ever such appearance for a senior Communist Party leader — at CSIS’ gleaming modern headquarters a few blocks from the White House. As the secretary general was preparing to speak about his deep interest in protecting human rights, Vietnamese security officials were quietly demonstrating otherwise, even on American soil. It seems that Hanoi’s intelligence operatives had a file on one of the invited CSIS guests — like Anh Chi, another enemy of the state.
Persona Non Grata
When Dr. Binh T. Nguyen, a prominent Vietnamese-born physician (and an American citizen) showed up to hear the secretary general’s speech, she was informed that she was persona non grata.
Binh, an invited guest, cleared CSIS security at the entrance, as she had on several previous occasions. But when she went upstairs to join the audience, a CSIS senior fellow was waiting. Murray Hiebert, accompanied by a CSIS security guard, insisted that Binh leave the premises. An obviously uncomfortable Hiebert explained that he was so sorry, but the communist security operatives simply would not permit Binh to hear Trong’s speech. The apologetic Hiebert told Dr. Binh that he had tried his best to reason with the Vietnamese security officials, but to no avail. They were not interested in negotiating, and were adamant that Binh would not be allowed to hear Trong’s speech, Hiebert related.
Hiebert apologized sincerely to Binh, admitting that it was wrong for CSIS to have given into the pressure. Ejecting her had ruined the event for him, Hiebert told the doctor. I spoke with Binh twice, for nearly an hour, going over the facts carefully, in great detail. Subsequently I was able to substantiate that the doctor’s account was the same as how Hiebert explained the incident to one of his colleagues at CSIS, Benjamin Contreras, the program director for CSIS’ Southeast Studies section.
Dr. Binh told me that Hiebert was characteristically polite. Still, it was intimidating that he had a guard with him to make sure she left the premises, the doctor added. Binh said she does not seek publicity, and looked forward to being invited to future CSIS events. She asked not to be quoted directly in this article.
The Canadian-born Hiebert, 66, is a soft-spoken former journalist with the Far Eastern Economic Review and the Wall Street Journal. He is perhaps the last person one would expect would get caught up in a dubious human-rights episode. In 1999, Hiebert, then the Review’s Kuala Lumpur bureau chief, was jailed for writing an article that raised disturbing questions about the integrity of Malaysian courts. Even though his report was accurate, Hiebert was convicted of “scandalizing” the judiciary, and spent a month in a Malaysian jail.
At CSIS, Hiebert has spoken out against human rights practices in Thailand and Malaysia. Hiebert notes that he approved several recent blogs written for CSIS by respected Vietnam watchers that have been critical of Vietnamese human-rights practices, including curbs on the media. But at the same time, Hiebert seems to have become careful not to cause too much offense to authorities in Hanoi. He co-authored a 2014 study, for example, that treated Vietnam’s human-rights practices rather gently, while not being entirely forthcoming about the fact that the Vietnamese government had paid for it (more on that later in this article).
CSIS Gives Its Side of the Story
Hiebert declined to be interviewed, but he did answer some (but far from all) questions that were submitted in writing — until a CSIS public-relations spokesman sent me an e-mail saying that he had advised Hiebert to cut off the communications.
Hiebert’s written responses did not directly dispute Dr. Binh’s account about what happened. But he attempted to minimize the incident, not mentioning the main human-rights point: how he had been pressured by the Vietnamese security officials to escort Binh from the building, and that did so, knowing that it was wrong for CSIS to give into such pressure.
The CSIS spokesman, H. Andrew Schwartz, first claimed that “Murray’s side of the story is quite different from what you have recounted.” But Schwartz had no further response after being informed that Dr. Binh’s account was, word-for-word, the same as Hiebert had related to his CSIS colleague, Benjamin Contreras. (Schwartz was formerly a spokesman for the American Israel Public Affairs Committee, known for its hard-nosed dealings with inquiring reporters. Before that, Schwartz was a producer for Fox News.)
While acknowledging that Dr. Binh had indeed been an invited guest, Hiebert seemed to brush off the incident as a sort-of bureaucratic snafu. “No one makes decisions about who attends events at CSIS but CSIS,” Hiebert wrote. “Dr. Binh was not on the initial RSVP list…CSIS made a mistake by allowing her to RSVP late to the event when the registration process had already been closed.” But Binh should have been allowed to attend, Hiebert agreed.
Enemies of the State
A public-record search shows why the Communist Party would have a file on Binh. She is chief of the thoracic radiology section at the Walter Reed Army Medical Center, and has received awards for her professional accomplishments. Being affiliated with one of the most respected medical institutions in the world, of course, wouldn’t send up any red flags in Hanoi. But what Binh does away from the office definitely would.
On her private time, Binh has worked on human rights issues in Asia with high-profile organizations including Human Rights Watch and Amnesty International. She has testified before the United States Commission on International Religious Freedom, among other respected panels. She serves on the Virginia Asian Advisory Board, which advises the governor “on ways to improve economic and cultural links between the Commonwealth and Asian nations, with a focus on the areas of commerce and trade.”
And on July 1, Binh joined several other respected human-rights champions who were invited to the White House. There, Binh and her colleagues gave advice to the National Security Council on how President Obama might want to handle human rights when Secretary General Trong came to the Oval Office on July 7.
Also, during the Obama-Trong White House meeting, Binh may well have been photographed by communist officials across Pennsylvania Avenue in Lafayette Park, where she joined several hundred Vietnamese-Americans who peaceably protested Vietnam’s lack of democracy.
Vietnam’s ambassador to the United States, Pham Quang Vinh, did not respond to an e-mail asking if he would care to join Hiebert by apologizing to Dr. Binh. It didn’t take much digging to understand why.
On May 24, Amb. Vinh had appeared on a CSIS panel moderated by Hiebert. Vinh was visibly upset when he was questioned by a former political prisoner, Cu Huy Ha Vu. Ha Vu made a short statement criticizing Vietnam’s human rights record, asking when Vietnam would stop its practice of incarcerating citizens whose only crimes were to criticize the Communist Party. The angry diplomat retorted that Vietnam has no political prisoners — avoiding eye contact with Vu. (Asserting that Vietnam has no political prisoners is like claiming that there is no cheese in Paris.)
Vu told me that he was not invited to the July 8 CSIS event with General Secretary Trong. Hiebert declined to explain, but it’s easy to surmise that the Communist Party chief had made it clear he would brook no awkward questions.
Vu is no ordinary political prisoner. He is one of Vietnam’s most prominent pro-democracy advocates today — especially because of his family’s elite revolutionary background. Vu’s father, the poet Cu Huy Can, was close to Ho Chi Minh during the Vietnam War, and served in Vietnam’s first national assembly. The well-educated Vu also earned his doctorate in law from the University of Paris.
Vu became an enemy of the state when he started challenging senior Communist Party officials for their lack of accountability. He even filed lawsuits against Prime Minister Nguyen Tan Dung on several occasions in 2009 and 2010, charging Dung with complicity in abuses of the environment, and for banning Vietnamese citizens from pressing complaints against the national government. Vu was imprisoned after being convicted in a 2011 show trial. His “crimes” included criticizing the Communist Party in interviews with the Voice of America and Radio Free Asia.
Vu was released from prison last year, and exiled to the United States, where he continues to advocate peaceably for the Communist Party to enact democratic reforms. While he was not on the invitation list to hear Secretary General Trong proclaim his deep interest in protecting human rights at CSIS’s July 8 event, Vu has been welcomed at the White House.
On July 1, Vu joined Dr. Binh and several other pro-democracy advocates who were invited to brief the National Security Council ahead of Trong’s visit. Imagine what Vietnamese intelligence officers thought, if they spotted press accounts of that White House meeting.
Also present in the White House that day were two U.S.-based leaders of the Viet Tan, Angelina Huynh and Hoang Tu Duy. Viet Tan — shorthand for the Vietnam Reform Party — is particularly feared in Hanoi because of its skills in using social media to reach its followers inside Vietnam. The organization is also known for its peaceable advocacy of democracy for Vietnam. The Communist Party considers the Viet Tan to be a “terrorist” organization. The Vietnamese government has admitted that it has imprisoned citizen journalist/bloggers for the “crime” of being associated with the group.
A Lobby Plan Comes Together
While the U.S. government respects the Viet Tan’s legitimacy, Hiebert ducked the issue. Asked repeatedly whether he agreed with Hanoi that the Viet Tan is a terrorist group, Hiebert did not respond. That’s about when CSIS spokesman Andrew Schwartz cut off the communications, asserting that “Hiebert has answered all of your questions.”
Why would a respected CSIS political analyst avoid direct questions concerning Vietnam’s human rights record? The suspicion arises that it has something to do with money.
Hanoi has been paying $30,000-a-month to the Podesta Group, a high-powered lobby firm with close ties to major U.S. political figures. David Adams, who has been working on Vietnam’s behalf for the Podesta Group, was Hillary Clinton’s chief of legislative affairs when she served as President Obama’s first secretary of state.
Adams would be valuable to Hanoi because he has an insider’s knowledge to sell: he knows firsthand how U.S. officials at the State Department and the Pentagon tend to think about Vietnamese issues.
For instance, when Adams was with Clinton on Foggy Bottom, David Shear was the U.S. ambassador to Hanoi. Shear is now an assistant secretary of Defense, where he is helping shape U.S. military policies regarding Asia — including the issue of how to respond to Vietnam’s request for U.S. sales of lethal weapons that Hanoi wants to help fend off Chinese intimidation in the South China Sea. (Shear, when he was the U.S. ambassador, routinely assured Vietnamese-American audiences that before Vietnam would be allowed to join the Trans-Pacific Partnership trade deal, Hanoi must make “demonstrable progress” on human rights. He never explained what that might mean.
The Podesta Group and Amb. Vinh declined comment on the Vietnamese foreign policy agenda they have been advancing. But it doesn’t take much digging to discover the three top priorities: Hanoi wants the U.S. arms embargo lifted. The Vietnamese also want to convince Obama and Congress that they have indeed been making enough “demonstrable progress” on human rights to join the Trans-Pacific Partnership trade deal. And they have been lobbying for Obama to visit Vietnam, hopefully by the end of 2015.
Is it a coincidence that Hanoi’s agenda is generally shared by CSIS? The Podesta Group’s website boasts of its ability to help controversial clients boost their credibility. “We recruit allies from left-and right-leaning think tanks…to validate our clients’ messages and build an echo chamber of support,” Podesta boasts. It’s far from an unusual practice in today’s Washington lobbying scene.
Hiebert insists that he is unaware that the Podesta Group has been lobbying for the Vietnamese government. But Hiebert knew enough to invite someone from the Podesta Group to hear Trong speak on July 8; he says that CSIS does not disclose its invitation list.
(Hidden) Money Talks
Nor is CSIS completely transparent about where it gets its financing. CSIS is one of 150-plus think tanks around the world that are rated by an impressive non-profit named Transpacific on their willingness to disclose — or not — where they get their money. The well-regarded Transparify, based in Tibilisi, Georgia, is part of the Open Society Foundations that were founded by George Soros. In 2014, Transparify gave CSIS poor marks, awarding it One Star, near the opaque bottom of a Five-Star transparency scale. This year, CSIS earned Three Stars from Transparify — neither fully opaque nor transparent, but at least moving in the right direction.
The CSIS website now lists donors on a general range. It discloses that the Vietnamese government gave CSIS somewhere between $50,000 and $500,000 in 2014. But the site does not disclose what the money was intended for.
Hiebert co-authored a major 2014 CSIS study of U.S.-Vietnamese relations: “A New Era in U.S.-Vietnam Relations. So who might have paid for that?
Readers couldn’t tell from the study’s acknowledgments. “We would like to acknowledge the thoughtful and generous support and counsel received from the Embassy of the Socialist Republic of Vietnam in Washington, D.C., the U.S. Embassy in Hanoi, and the U.S. Consulate in Ho Chi Minh City.” But who, exactly, paid for it?
Hiebert — after being asked twice — confessed that the Vietnamese government paid for the study. He said that there was no U.S. government funding for that study.
CSIS spokesman Andrew Schwartz insisted that it is “mean-spirited” to suggest that anyone who read the acknowledgment would not have known that it was “clearly” the Vietnamese who paid for A New Era. “[I]f you decide to write that CSIS didn’t acknowledge the support of the government of Vietnam, you will be in error,” Schwartz declared. CSIS always discloses the sources of funding for its studies, the CSIS media analyst declared.
Mostly always, might be more apt. A recent CSIS study focusing on human rights in countries like Russia, Venezuela and Ethiopia was forthright about where the money came from: “This report is made possible by the generous support of the Oak Foundation” it discloses. And still another CSIS study on U.S.-Japan relations discloses that the money came from Japan’s Sasakawa Peace Foundation. The contrast with the misleading acknowledgment to Hiebert’s New Era study is about as clear as it gets.
In that study Hiebert criticizes U.S. congressional human-rights champions for being an ineffectual name-and-shame crowd. He further criticized many Vietnamese-American pro-democracy advocates for being out of touch with realities in today’s Vietnam.
But when it came to Vietnam’s human-rights record, Hiebert seemed to pull his punches. There is no mention of Hanoi’s non-compliance with the International Covenant on Civil and Political Rights, which Vietnam is a signatory to. There is no mention of the provisions of Vietnam’s penal code that criminalize free speech and assembly — and criticizing the Communist Party. Instead, the study basically acknowledges the obvious: that human rights is the most difficult issue between the U.S. and Vietnamese governments. Instead of suggesting that Vietnam could help improve its credibility by modernizing its offensive penal code, Hiebert merely recommended more meetings between the U.S. government and Vietnam’s Ministry of Public Security.
Hiebert vehemently denied that he softened his tone because of who paid for that study.
Meanwhile, Hanoi’s lobby agenda seems to be working. The U.S. government and Congress are leaning toward allowing Vietnam to purchase the lethal arms it seeks. There is little talk in the Trans-Pacific Partnership trade deal about Vietnam’s first making “demonstrable progress” on the core human-rights issues involving the freedoms of speech, assembly, religion — and the offending provisions of the penal code that mock the international rights covenants that Hanoi has signed. (The precise details of the TPP deal, which has not been finalized, remain classified.)
President Obama has said he would like to accept Secretary General Trong’s invitation to visit Vietnam, although the president has not yet set a date. Hiebert pointed out in our exchange of e-mails that he has recommended that when Obama does fly to Vietnam, he speak forcefully on human rights.
A skeptic might observe that this is what Assistant Secretary of State Tom Malinowski, Secretary John Kerry, and so many other U.S. officials have done — so many times, over so many years, to such little avail.
(The conclusion of a two-part series)
Note to readers: Yesterday, in an article headlined “Fed Up,” I reported that many members of the World Trade Organization have reached the end of their patience with a handful of members — India, and a few African and Latin Americans who love to nurture their grudges against the “rich” countries. Frustrations that such countries have poisoned the WTO’s negotiation atmosphere have been gradually building since the WTO was launched in 1995. The tipping point came in July, when India’s new prime minister, Narendra Modi, vetoed the only successful multilateral trade negotiation the WTO has ever conducted.
As the future viability of this vital international trade rule-making institution is now on the line, it’s important to take a closer look at how the present fight started, and why. Today’s report offers more details on: where Modi is coming from, exactly what he wants, and who his sympathizers are. While India claims to speak for the world’s poor, that certainly is not the view of an increasing number of developing countries around the world. India’s trade distorting agriculture subsidies have caused food riots in parts of Asia, Africa, and Latin America. These days, complaints of the harm that India is inflicting upon other poor countries are surfacing again, particularly in Rwanda and other African countries. Concluding, the report highlights how leading WTO member countries plan to move on, with or without the cooperation of India and the other laggard countries.
So where is Modi coming from?
Modi, proudly, is a hardline Hindu right-winger, an economic nationalist who boasts of a 56-inch chest. He is a tough guy, a man who loves a brawl. His top political aide is dodging a prosecution for various murders. Modi himself has denied (unconvincingly) his role in the killings of some 2,000 Muslims in organized riots in his home state of Gujarat, back in 2002.
And in the past week, Modi has rather exuberantly been raining mortars and machine-gun fire across a populated India-Pakistan border area of Kashmir. The fighting, which has broken a tenuous truce reached in 2003, has so far killed nearly 20 civilians and displaced nearly 20,000 civilians, according to news reports. “The prime minister’s office has instructed us to ensure that Pakistan suffers deep and heavy losses,” a senior Indian Home Ministry official has told Reuters reporters Rupam Jain Nair and Mehreen Zara-Malik. Modi himself has boasted that “it is the enemy that is screaming.” Kashmir, with the possible exception of the Korean DMZ, is perhaps the world’s most dangerous border. A border where Hot Heads on both sides brandish their nuclear weapons.
Some of the other opinions that Modi brandishes are less scary, but well, unusual. Speaking to the United Nations General Assembly in New York on Sept. 27, Modi called for an “International Yoga Day.” He asserted that “yoga,” “spiritualism” and clean living could contribute to a better global environment. “By changing our lifestyle and creating consciousness, it can help us deal with climate change,” he explained to the diplomatic dignitaries. Meanwhile, back in New Delhi, the clean-living prime minister has authorized “hundreds of projects” to clear pristine forests, making way for mega power plants and other industrial projects that previous Indian governments had rejected on environmental grounds, Tommy Wilkes has reported for Reuters.
Modi held the WTO’s trade-facilitation package hostage to India’s demands to be allowed — permanently — to violate existing WTO restrictions on the subsidies it is allowed to dole out to uncompetitive Indian subsistence farmers. Adding to the indignity: previous Indian governments had agreed to those WTO rules in the 1980s. And the Indian government that Modi replaced in May had duly signed onto the Bali Package last December. As U.S. Trade Representative Michael Froman said last week, India has now “reneged” on its signed obligations.
Moreover, Modi’s demands have left WTO diplomats scratching their heads, wondering what he might have been smoking.
Since obtaining independence from Great Britain in 1947, India’s leaders have never figured out how to feed their people. In the name of “food security,” Indian governments have been buying food from the country’s farmers, paying above-market prices. The grains are then stockpiled. Perhaps half of the mountains of grain rot away, or are eaten by rats. Much of the rest is siphoned off by corrupt (politically connected) operators for sale on the black market.
What doesn’t rot or is not stolen is then doled out to feed India’s infamously malnourished urban population — especially when elections loom, which in India is often.
Perhaps because politics trumps economics, Indian politicians — no matter which party is in power — have been increasing the subsidies, making bigger stockpiles. And they have been demanding permission from the WTO to keep jacking up the subsidies as much as they want, even higher than the allowable limits that Indian governments have pledged to honor.
In Bali last December, the Indian negotiators won a generous four-year “peace clause.” That gave New Delhi four years to go ahead and violate existing WTO limitations by increasing agriculture subsidies, without fear of being held legally accountable. As the purpose of the WTO’s trade negotiations is to reduce trade barriers, not allow additional protectionism, this was arguably overly generous.
Yet the four-year grace period still wasn’t enough for Modi, when he came into office in May. He demanded that India be given the “permanent” right to break the existing rules — and right away, by the end of this year, thank you. Many diplomats, in many ways, have told the new Indian leader that this would never happen. Undeterred, Modi, somewhat joyously, brought down the Bali Package, thus shaking the foundations of trust that the WTO must have to remain viable.
At least, the ploy has generally played well at home. Indian officials have launched a whispering campaign, some of which has made its way into various Indian news accounts, falsely accusing the WTO’s top leadership of favoring the rich countries.
Claiming the Moral High Ground
Modi, like all of his predecessors dating to Jawaharlal Nehru (who ran India from 1947 to 1964, useful information for readers who are crossword puzzle addicts), has claimed that he holds the high moral ground. We are simply demanding the rights to feed our own poor, and we are the champion the world’s poor, so goes the refrain.
India is the world’s largest exporter of (subsidized) rice. The subsidies distort food markets in other countries by driving down prices. That’s bad enough in normal years for farmers in African and other nations who have to compete with the cheap Indian rice. Of course, the Europeans and Americans aren’t exactly innocents in such matters. But at least they have long ago moved away from stockpiling surpluses that cause real damage in world markets, preferring to pay their farmers cash subsidies that are considered less trade-distorting.
But India seems stuck on stockpiling and other protectionist schemes that cause real harm to trading partners. Remember the 2008 food riots in Haiti, Cameroon, Senegal and other countries? Global rice prices had skyrocketed after India put a damper on supplies by slapping on export controls during the previous year’s election season. Not only has no Indian politician ever apologized for the damage those export controls inflicted — after coming to power this May, Modi quickly imposed new price controls on onions and potatoes.
More recently, Rwanda’s trade minister, Francois Kanimba, explained to Shawn Donnan, the world trade editor of the Financial Times, how India’s present agriculture subsidies are hurting his country’s farmers. Rice and sugar from India had been reaching Rwanda “at such low prices [that] you are left wondering if these are really global market prices, simply explained by the competitiveness of the Indian economy,” Kanimba said. Donnan noted that the same concerns are being expressed in Nigeria, Benin, and other African food importers. This is “why the solution India is seeking at the WTO, which celebrates its 20th birthday in January, is unlikely to be palatable to many of its members,” Donnan concluded.
India’s claims to speak for the world’s poor used to be accepted automatically in the Third World. Signs that that’s been changing surfaced at the WTO’s Bali meetings last December. At a press conference, India’s then top trade official, Anand Sharma, asserted that India was only seeking “food security” for poor people everywhere. Sharma was humiliated by a furious journalist from Benin, one of the world’s poorest countries. “You don’t speak for us,” the Benin journalist angrily shouted. Those of us who were in the room will never forget the emotions on display at that press conference. (For further details, see “India’s Bali Debacle,” which I authored for the Wall Street Journal Asia. The piece, along with two other investigative reports into India’s WTO stance in recent years, is posted on the Wall Street Journal section of www.rushfordreport.com.)
These days, Modi’s been enjoying his success in having placed himself on the WTO’s center stage, even though he is playing the role of a pariah. Modi knows he enjoys the tacit backing of envious fellow economic nationalists in places like Venezuela, Bolivia, Zimbabwe, Ecuador and Cuba. Such leaders love to nurture their grudges against the rich countries, seeing the WTO as a tool of the rich. President Jacob Zuma of South Africa runs with this crowd. These days, Zuma must be especially envious of Narendra Modi’s nerve.
Zuma is another economic nationalist who is skeptical that the WTO’s multilateral trade liberalizing negotiations will benefit South Africa. But he might be better advised to seek some sound economic advice as to why South Africa’s economy has been losing its dynamism.
Two very savvy Pretoria-based authorities on what used to be called “political economy” — Mzukisi Qobo of the University of Pretoria and Peter Draper, of Tutwa Consulting — recently succinctly explained Zuma’s attitude on economics in a May 27 article in South Africa’s Business Day. Under Zama’s economic guidance, South Africa’s economic growth has been on a steady decline, Qobo and Draper noted. Nor does Zuma seem to grasp the “gravity” of the economic challenges that are holding his country back, they added. “He also seems to have given up on leaving a great economic legacy, and instead prefers to manage a balancing act of contending factions within the African National Congress (ANC).”
Zuma’s trade minister, Rob Davies, is a member of the Politburo of South Africa’s Communist Party. That fact speaks well of Davies’ personal courage in having opposed apartheid in the days when to do so was to risk one’s life. But it doesn’t necessarily suggest that Davies’ economic credentials are sterling. Many African observers worry that South Africa, traditionally the most solid African economy that still regards itself as the “gateway” to the rest of Africa, will inevitably be left behind. Watch the East Africans — especially the emerging ties and improved infrastructure linking Rwanda, Tanzania, Uganda and Kenya — many African watchers say. Yes, these countries also have their own economic weaknesses. And in the WTO, the East Africans seem to be split on whether to speak out in favor of India, or against. Still, one has a growing sense that their future could be brighter than South Africa’s, depending upon how well they manage to integrate themselves into the global economy. At some point, the South Africans will likely kick themselves for their lack of economic foresight.
Zuma first worked earlier this year behind the scenes with the Addis Ababa-based African Union (an opaque organization which wasn’t even a participant in the Bali negotiations) to reopen the Bali deal. Conveniently, Zuma’s former wife now heads the AU. But Zuma and the AU came under intense pressure, mainly from Europeans and Americans, but also by dozens of other WTO member countries. They backed down during African Union meetings held in Malabo, Equatorial Guinea, in August. Since then the African Group of WTO members has basically been holding their tongues, trying to pretend that what India has done, hasn’t really happened. (For the background, see “Power Plays in the WTO,” www.rushfordreport.com, June 3, 2014). South African and African Union officials declined repeated requests for comment, as did a spokesman for the WTO’s Africa Group.
In sum, what the Africans started and India’s Modi finished was the tipping point. Leading circles in the WTO — the “North” definitely, and many in the “South” — believe that this time, the chronic naysayers have simply gone too far.
An Uncertain Plurilateral Future
While the WTO’s future is presently clouded, one thing appears clear: no longer will a handful of malcontents be allowed to poison the chances of dismantling as many of the world’s remaining trade barriers as possible. That means the WTO will turn away from its tradition of conducting trade-liberalizing negotiations on a multilateral basis. Instead, there will be smaller groups of like-minded countries that will work together to facilitate trade flows. This is the so-called plurilateral option.
The future likely model has precedents. The WTO’s Government Procurement Agreement has 43 member countries (counting the European Union’s 28). The GPA’s rules, which are only extended to participating countries, are aimed at improving transparency and competitive bidding when governments agree to award contracts to all bidders (as opposed to just doling out lucrative contracts to well-connected domestic cronies). China, New Zealand, and eight other countries have been negotiating to join in that plurilateral. No African country has shown interest in joining in such an experiment in open government. Nor has India.
India is, however, a member of the WTO’s Information Technology Agreement, a plurilateral WTO success story that dates to 1997. ITA signatories, including India, have slashed tariffs on imports of high-tech gadgets like computers and telecommunications equipment. But India has refused to participate in ongoing negotiations to expand the ITA’s product coverage to include new inventions — iPhones, iPods and so forth — that weren’t invented in the 1990s. In fact, Modi has already moved in the opposite direction: jacking up tariffs on imports of iPhones.
Late last week, the WTO’s director-general, Roberto Azevedo, described the uncertain future for further WTO multilateral trade negotiations, especially if “no solution” is found for the “Bali impasse.” In such a case, the director-general noted to a business audience in Toronto on Oct. 9, “then members must ask themselves some tough questions — about how they see the future of the Bali package and the post-Bali agenda. And what this means for the WTO’s negotiating function.”
Translated from the nuanced diplomatic language, Azevedo was pointing to a plurilateral future for the WTO, at least until the benefits of multilateral trade liberalization become apparent to the laggards. It might even turn out that the Bali deal will proceed as a plurilateral arrangement. India and the backward-looking African and Latin countries will be offered the choice to be left behind, if they prefer. Such, it appears, is their future — at least until the day comes when they will be willing to take off their economic dunce caps.