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.
Obama’s “Déjà vu” Vietnam Diplomacy
A high-stakes diplomatic drama is playing out between the United States and Vietnam. While the focus is on enhancing bilateral economic ties in the ongoing Trans-Pacific Partnership negotiations, the economics are also related to broader security- and human rights issues. This article has some fresh news to report on what’s going on behind the scenes: What the ruling Politburo in Hanoi has decided about deepening its economic ties with the major powers. What Vietnamese President Truong Tan Sang and U.S. President Barack Obama had to say to each other during their July 25 White House meeting in the Oval Office. Who else was in the room — and why that was important.
There is also background information to report that sheds light on the intense pressures that U.S. Trade Representative Michael Froman has been bringing to bear on Vietnam, notably last week in Bandar Seri Begawan, Brunei. On Aug. 22-23, Froman had private talks with his Vietnamese counterpart, Vu Huy Hoang, on the sidelines of the 19th round of the TPP trade talks, which are continuing this week in Brunei. Washington has been playing an intimidation game, pressuring Hanoi to accept an economic deal that is clearly not in Vietnam’s best interests — and just might get away with it.
But it’s not the hard news that captivates, but rather, the déjà vu feeling of another historical turning point in U.S.-Vietnamese relations. On Aug 30, 1945 — 68 years to the day, it turns out, that the TPP’s 19th round of negotiations will conclude this Friday in Brunei — Ho Chi Minh wrote the first of several letters to U.S. President Harry Truman. Uncle Ho sought Truman’s support for Vietnamese aspirations to gain independence from French colonial rule. The letters went unanswered, as the Truman administration’s higher priority involved helping the French recover from the devastations of World War II.
“In historical terms, it was a monumental decision by Truman, and like so many that U.S. presidents would make in the decades to come, it had little to do with Vietnam herself — it was all about America’s priorities on the world stage,” historian Fredrik Logevall has observed in his acclaimed Embers of War. The concerns of more enlightened observers in the U.S. State Department and in the intelligence community, who worried about the consequences of getting on the wrong side of the battle against colonialism, were overridden.
When they met in the Oval Office last month, President Sang displayed a keen sense of history when he gave Obama a copy of one of Uncle Ho’s letters to Truman. Hanoi has good reason to worry that the top Obama White House priority, once again, is not really focused on the Vietnamese economy.
In the TPP trade talks, the White House has been fighting tooth and nail on behalf of the protectionist U.S. textile lobby — Obama’s loyal allies who have supported him in his two successful presidential races. The top priority of the (globally uncompetitive) U.S. mills is denying Vietnam more access to protected U.S. clothing and footwear markets in a TPP trade deal.
As in the late 1940s, a few enlightened U.S. diplomats (quietly) and intelligence officials (very quietly) have now let their concerns be known around Washington. But Washington’s seasoned Asia hands find themselves basically sidelined by the White House domestic political priorities, much as their predecessors were nearly seven decades ago.
Meanwhile, President Sang, on behalf of the ruling Politburo, had his own message to deliver to Obama last month.
To better understand the nuanced blend current spot news and history, let’s begin with that White House meeting.
Spinning Oval Office diplomacy
When it comes to diplomacy, sometimes what the public sees is true — just not the whole picture. Consider the video that the White House posted on its website on July 25. Viewers see Sang and Obama meeting alone in the Oval Office, sitting in armchairs in front of a fireplace, each wearing appropriate dark power suits with muted ties. The image that the White House spinmeisters — who also put the video on You Tube — intended to convey recalls famous historical one-on-one diplomatic talks at the highest level: Nixon with Mao, or Roosevelt and Stalin.
But the Obama-Sang meeting was hardly a Roosevelt-Stalin like moment. It was a scripted, ceremonial occasion, typical of how American presidents have come to host visiting foreign dignitaries in recent years.
An unpublished photo shot by someone else in the room with a wide-angle lens shows that Sang had nine men in the Oval Office with him. Trade Minister Hoang was there, along with Agriculture Minister Cao Duc Phat and the head of Vietnam’s presidential office, Dao Viet Trung. Vietnamese Ambassador to the United States Nguyen Quoc Cuong also was present, as was Lt. Gen. To Lam. Gen. Lam is the deputy minister of Public Security, and formerly headed the ministry’s counter-intelligence department. Lam is also a member of the Communist Party’s Central Committee.
With so many watchers — not all of them necessarily loyal to President Sang’s own supporters in the Politburo — no Vietnamese president would be positioned to engage in substantive bargaining.
A sense of history
Perhaps the three most interesting Vietnamese officials present were the translator, Pham Xuan Hoang An; Foreign Minister Pham Binh Minh, and Colonel General Nguyen Chi Vinh, the deputy minister of national defense. These men carry a sense of history with them — and a longstanding serious professional interest in U.S.-Vietnamese diplomacy. To experienced Vietnamese watchers, the news that An, Vinh and Minh were in the Oval Office will convey a sense of Vietnamese seriousness.
Interpreter An’s father, Pham Xuan An, was perhaps the most important communist spy during the Vietnam War. An’s cover was as a reporter for western news outlets, including Reuters and Time magazine. This complicated man was made a general after the North Vietnamese victory in 1975. But then Gen. An was also detained in a camp for “reeducation” for a year, because he was suspected as being too close to the Americans.
In fact, An loved America (he helped one of the CIA’s most important assets escape when the communists took Saigon). But after the war, the spy explained to his American friends that his top priority had always been working for his country’s independence. An’s double life was the subject of Larry Berman’s fascinating Perfect Spy, published in 2007. Now, An’s son, translator Pham Xuan Hoang An, works in Vietnam’s consulate in San Francisco. Like his father, the younger An is a man who knows both countries very well.
While Colonel Gen. Nguyen Chi Vinh is hardly a household name in America, he is well known to Vietnamese watchers. His father, Gen. Nguyen Chi Thanh, was Vietnam’s second-ever general, after Vo Nguyen Giap. Gen. Thanh was the mastermind of the coordinated uprisings in nearly every major South Vietnamese urban center during the Tet Lunar New Year festivities in January of 1968. The Tet Offensive did not succeed in a military sense. But it is credited with being the proverbial last straw for the fed-up American public, which realized that the White House claims that the communists were on the verge of defeat were false.
Vinh is a member of the Communist Party’s Central Committee, and formerly headed the military intelligence department known (and feared) as Tong Cuc 2. Veteran Hong Kong-based foreign correspondent Greg Torode has called Vinh Vietnam’s wily “Old Fox,” a man who is generally regarded as “Vietnam’s shrewdest strategic thinker.”
Vinh has been a key actor in Vietnam’s delicate balancing act involving major powers with security interests in the Pacific. He has been an important player in a variety of sensitive issues: countering Chinese intimidation in the South China Sea while simultaneously establishing military ties with Beijing; submarine and other weapons purchases from Russia; and also increasing U.S.-Vietnamese military cooperation. Vinh, who is well known in both Washington and Beijing, also showed up earlier this month for private talks with senior defense officials in Tokyo (who also have good reasons to worry about Chinese continuing aggressive moves in the Pacific).
Foreign Minister Pham Binh Minh also has a famous father. Nguyen Co Thach was Vietnam’s foreign minister from 1980 – 1991, where he worked unsuccessfully to normalize ties with the defeated Americans. Like his father, Foreign Minister Minh has a reputation as being keenly aware of the strategic importance of developing closer ties with the United States, by way of countering undue Chinese influence.
Minh related candidly at a Council of Foreign Relations event in 2011 that he had been full of “hatred” during the war, when as a child he endured the U.S. bombing of Hanoi. But ever since he joined the Vietnamese diplomatic service after the 1975 communist victory, Minh — like his father — has focused his own career upon finding ways to forge closer ties with Vietnam’s former war enemy.
Obama’s Diplomatic Team
While the July 25 Sang-Obama White House meeting was a tightly scripted affair, there was at least one moment of spontaneity, where Obama briefly reached out to strike a personal rapport with his Vietnamese guest. When U.S. and foreign “pool” journalists were admitted to the Oval Office for the usual photo opportunity, they shouted some questions to the two presidents. Obama ignored them, but was overheard whispering to Sang, “reporters are the same everywhere.”
A White House press aide declines to discuss who else was in the meeting on either the Vietnamese- or the American side. Pool reporters who were let in for the photo ceremony saw two U.S. officials besides National Security Adviser Susan Rice: Commerce Secretary Penny Pritzker, and U.S. trade negotiator Froman.
Pritzker, an Obama fundraiser from Chicago, is new to foreign affairs. Her Commerce Department is the agency that is widely resented in Vietnam for inflicting protectionist anti-dumping tariffs on the Vietnamese shrimp and catfish industries. And Froman, although also close to Obama, brings more of a domestic political focus to his job than genuine foreign policy experience. (Any diplomatic heavy lifting that was done would have been done a few blocks away from the White House, at Secretary John Kerry’s State Department. Kerry, a Vietnam War veteran, hosted the Vietnamese presidential delegation on July 24. He was in New York when the Vietnamese visitors met with Obama the next day.)
Scripted or not, still, important signals were sent by both presidents.
A Message from the Politburo
The Vietnamese delegation made it clear to Obama — as they had a day earlier in a meeting with trade negotiator Froman — that they were sincere about attaching a very high priority to advancing economic ties with the United States in the TPP negotiations, according to well-informed Vietnamese officials and also senior U.S. diplomatic officials who asked not to be identified.
Carlyle Thayer, a respected Vietnamese watcher who has excellent high-level connections in Hanoi, explains. Thayer, who is affiliated with the Australian Defense Force Academy, says he has seen a copy of an April 10 resolution drafted by the ruling Politburo, which has not yet been publicly released. “It makes economic integration with all the major powers Vietnam’s top priority, over all other forms of integration, including security,” Thayer reports.
In the Oval Office, President Sang stressed to Obama what Vietnamese officials have been saying for the last three years: that if the TPP negotiations are to succeed, Vietnam will need economic incentives — mainly substantial additional access to U.S. clothing- and footwear markets, which are currently encumbered with high tariffs. Vietnam’s main problem with the TPP is that for the same past three years, the White House has held up progress in the negotiations by refusing to make serious tariff-slashing offers.
White House press officials decline to discuss Obama’s response to Sang. For public consumption the two presidents agreed to put out a (bland) public statement noting that they would instruct their aides to do their utmost to complete the TPP by the end of this year. (The White House said the same thing last year, and also in 2011. Froman has been telling people that this time, the administration really means it.)
Signals from Washington
What little detail is known about what Obama said during the meeting has been revealed by U.S. Ambassador to Vietnam David Shear, who spoke to a high-powered Vietnamese-American gathering in Washington, D.C.’s Virginia suburbs on August. 16. Shear said that the Obama administration considers the TPP negotiations to be “extremely important.” But without “demonstrable progress on human rights” by Hanoi on human rights, “we will not be able to generate congressional support” for a TPP deal, the ambassador added.
Shear related that human rights had come up twice in the Obama-Sang meeting. The first, he said, was part of a general reference linking human rights as the key to enhanced economic and security ties.
According to the ambassador, the second reference to human rights came after Sang expressed Vietnam’s desire to purchase U.S. “lethal” weapons. “If you want to do that,” Shear said that Obama replied, “you’ve got to improve your human-rights practices.” (A full transcript of Shear’s remarks has not yet been posted on the U.S. embassy’s website.)
As Hanoi’s human-rights record is currently being compared unfavorably to Vietnam’s Asian neighbors — even notorious Cambodia has held elections, while Myanmar has been busy freeing its political prisoners — Obama’s point is well taken. The Politburo must be asking itself these days what benefits the country is getting by continuing to imprison more than 160 peaceable political prisoners, whose “crimes” were merely exercising their rights to free political speech and peaceable assembly.
But the same Politburo members who are on the defense on human rights must also be asking why they should sign onto a TPP deal that would offer Vietnam dubious economic benefits.
Secret “21st Century” negotiations
Some parts of the TPP negotiations, to be sure, would clearly be aimed at boosting the Vietnamese economy. Vietnam has been struggling with the politically difficult task of reforming the country’s famously inefficient state-owned enterprises for some two decades.
Vietnam’s SOEs basically are secretive black holes and a drag on more than a third of the country’s economy. When the Obama White House spins the TPP deal as a “high-standard, 21st century” deal that will set an enviable template for trade in the Asia-Pacific region, SOE reforms come immediately to mind.
But other than the self-serving slogans, the White House has been refusing to explain to the watching publics any details of what the Vietnamese are being asked to do. Ironically, the White House is demanding that the Vietnamese economy become more open to market-oriented economics, while classifying what that might entail as a state secret.
Enter “Yarn Backward”
What Hanoi wants most in the TPP is for the United States to slash its high tariffs on imported footwear and clothing. There is a sort of role reversal here. The commies in Hanoi are pressing for free-market access to protected American markets. The Americans are demanding state control. The economic notion is called “yarn forward,” but the economics are hardly forward looking.
As I’ve previously reported, the French 19th century colonialists required that their Vietnamese subjects supply the mother country with textiles. Such imperial preference schemes supported France’s economic domination of Indochina — and inspired Vietnam’s independence movement.
Now the Americans are demanding the same sort of arrangement in the TPP. Vietnam would only qualify for duty-free treatment on its clothing- and footwear exports to the United States if it bought yarn and fabrics from another TPP country — translation: from the declining mills in the U.S. South, not non-TPP countries like China.
It doesn’t take an economics degree to see the flaws. Nobody — beyond insular-looking U.S. mills that long ago lost their competitive edge in global markets — pretends it makes economic sense. Why would any White House pressure the likes of Levis or Gap to buy their (heavy) denim from U.S. suppliers and ship it across the Pacific to Southeast Asia? Why would Obama even think of trying to force giant underwear manufacturer Hanesbrands to stop supplying its Vietnamese manufacturing from Hanes’ established suppliers in China or Thailand? Why would any White House insist that it has the right to disrupt the global supply chains of such respected major American corporations?
U.S. Trade Representative Froman has refused repeated requests to explain exactly why “yarn forward” would be in Vietnam’s best economic interests.
I have also asked U.S. Ambassador Shear if he was able to point to any economic benefits to Vietnam in the yarn forward notion. Shear has been put in the diplomatically awkward position of defending the White House position on yarn forward to the Vietnamese. Shear declined to defend yarn forward’s economic rationale publicly. The ambassador referred the question back to trade negotiator Froman, who again declined comment.
[Ambassador Shear has a reputation as a thoughtful diplomat, albeit something of a team player. His deliberate non-answer could be interpreted as a diplomatic wink, conveying his distaste for the whole business. In private meetings with U.S. corporate executives, Shear has toed the Obama line, but his body language has suggested his discomfort.]
Meanwhile, the White House has been demanding that American clothing manufacturers turn over confidential information on how their global supply chains operate. Intimidated, the companies have mostly knuckled under. The Office of the U.S. Trade Representative even has a special web site for the companies to divulge their business secrets to the government. This access to the private proprietary data has given Froman and his aides the means to instruct the domestic industry where it can source their materials (the U.S. South) and where they can’t (China).
The American clothing importers are now scrambling behind the scenes to receive special exemptions for themselves from the White House. The corporate lobbyists are looking to protect at least parts of their global supply chains from White House interference.
Of course, even with the limited TPP carve-outs that the feds may grant, the rules would always still be subject to sudden change, depending upon unpredictable bureaucratic whims. The American companies could stop the whole business if they had the nerve to stop groveling — which they have never quite summoned in previous U.S. trade negotiations.
The White House unconvincingly denies that the TPP is part of an anti-China economic encirclement strategy. Yarn forward was first included in the U.S. preferential trade deal with Mexico in the early 1990s, and then to other Latin American countries. The idea then, as now, was to hold back Chinese and later, other Asian imports.
It has failed. The rules are so cumbersome that only about 17 percent of Latin American trade goes through the “yarn forward” rules. Companies mostly prefer to pay the tariffs rather than suffer the paperwork.
Relief for Africa
When the Africans were negotiating the Africa Growth and Opportunity Act with the United States in the 1990s, the congressional Black Caucus vehemently objected to yarn forward rules because the principle offended them. Congressmen like Charles Rangel, a Democrat who represents New York’s Harlem neighborhood, fumed that yarn forward reeked of colonialism. Moreover, Rangel protested, such rules were even racist. Consequently, the AGOA trade deal allows the Africans to buy their cotton and other fabrics from China, or anywhere, as long as the final clothes are “cut and sewn” in Africa. In the TPP negotiations, anything short of clean “cut and sew” rules for clothing would hold back Vietnam’s export potential.
Another bitter irony for Vietnam: These days Rep. Rangel and other African-American lawmakers are lobbying for Obama to force upon Vietnam the same yarn-forward rules they formerly attacked as colonial and racist. And Central American countries like the Dominican Republic, who aren’t in the TPP and want to keep Asian competitors at bay, are also piling on Vietnam.
Undeterred, in Brunei last week, trade negotiator Froman still insisted that strict yarn forward rules remained at the “core” of what the U.S. wants in the TPP. He continued to withhold from the public any real details of what was in the TPP, other than the spin that it would be a “high standard, 21st Century” trade template.
The smart money would bet that the Vietnamese will end up swallowing hard and accepting a watered-down TPP deal, giving them modest increased market access for shoes and clothes, while making minimal market-opening concessions to the Americans. Call that TPP Light.
But perhaps the shrewd Politburo operatives in Hanoi, or at least enough of them, have the same sort of determination as did their fathers’ generation. After all, the Vietnamese negotiators should understand that Obama is the one who needs a TPP deal most. Could the American president really allow the TPP to fail, just because the Vietnamese want to sell Americans more pairs of underwear, blue jeans, and sneakers?
Talk about a déjà vu feeling. In the 1940s, President Truman ignored prescient warnings from U.S. intelligence and diplomatic officials that it would be a big mistake for the United States to get on the wrong side of the struggle against colonialism. Now, President Obama pays little heed to warnings that it is unwise to risk important trade talks with Vietnam — and America’s standing in Asia — for parochial domestic politics.
Some people never seem to learn their history.