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.

China Bashing

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.

Mr. Sang Comes to Washington

posted by
on July 23, 2013

Mr. Sang Comes to Washington

Vietnamese President Truong Tan Sang — a powerful senior member of the ruling Politburo, where the major governmental decisions are hammered out for the Central Committee of the ruling Communist Party — will meet with U.S. President Barack Obama in the White House on July 25. One way or the other, Thursday’s meeting for the two heads of state will be important. It comes at a time of increased tensions that have been holding back closer strategic and economic ties between the two former war enemies.

Sang and Obama have an opportunity to forge a deeper (mutually respectful) bilateral relationship. But it is not at all clear whether either leader has the vision or the necessary political instincts to seize it.  The two heads of state may just try to put out an attractive spin, hoping to gloss over important differences on the core issues that presently divide Washington and Hanoi. The two most difficult of those: Vietnamese human-rights practices that insult accepted international legal norms (as seen from Washington’s perspective), and insulting rich-country economic pressures (Hanoi’s view).

The White House has listed “human rights” as the first of three topics that will be on the agenda when the two leaders meet on Thursday. “Climate change” is the second named priority, followed by the Trans-Pacific Partnership trade talks involving the United States, Vietnam and ten other Asia-Pacific countries.

But the real agenda is broader, involving fundamental decisions that need to be made by both countries on whether to deepen their strategic and security cooperation. The sharp-eyed David Brown, a special correspondent for the Asia Sentinel, has written that President Sang and the Politburo appeared to have been “shaken” when Sang visited Beijing in June. Apparently in his private talks with top Chinese leaders, including President Xi Jinping, the Vietnamese president came away with nice words, but little of substance. Because of the “evidently jolting encounter with China’s leaders,” Brown wrote, a “hurried” visit to Washington was then arranged. In Washington, the Politburo wants Sang to find out whether President Obama — a politician who, in some Asian eyes, has acquired a certain reputation for offering mostly happy talk in his dealings with his foreign peers — will be any more helpful.

Neither government was divulging further details of what Sang and Obama will have to chat about on Thursday. A White House spokesman refused even to say in what room of the White House Presidents Obama and Sang would be talking, much less identify who else might be in that room.

A close look at each of the three specific items on the Sang-Obama agenda suggests that for each president, any truly “frank” diplomatic exchanges would pose awkward questions, not to say outright mutual embarrassments.

For Sang, the most awkward question would be to explain to Obama what benefit Vietnamese leaders think they really gain by holding hostage more than 160 political prisoners. These are Vietnamese citizens who have committed no “crimes” — other than to peaceably voice their complaints that their government is seen as becoming increasingly corrupt and unaccountable.  And Obama might ask about a July 15 Hanoi decree that is aimed at prohibiting speech that goes “against the state of the socialist republic of Vietnam,” or any criticism that the party fears could “jeopardize national security,” Radio Free Asia has reported. The targets are popular internet icons like Google and Facebook.

Of course, it’s always tricky business for Americans to express reasonable opinions on human rights without sounding arrogant and self-righteous to always-sensitive Vietnamese leaders. Press too hard, and too publicly, and the commies could just arrest more innocent bloggers to stick it to the Americans. Press too quietly, and the authorities in Hanoi could just keep on doing whatever they please. Nobody’s ever really figured out the most appropriate diplomatic language.

[And if Obama’s tone on human rights offends Sang, the Vietnamese president might bring up the subject of dioxin. Sang might ask if the U.S. leader feels a sense of shame over the fact that a spokesman for the U.S. Embassy in Hanoi has recently denied to McClatchy reporter Drew Brown that many Vietnamese citizens today are still suffering from the tragic effects of dioxin sprayed by the U.S. Air Force on Vietnam during the shooting war.]

For Obama, perhaps the most embarrassing thing is that his White House — for purely domestic parochial reasons involving his political ties with U.S. organized labor and the globally uncompetitive U.S. textile lobby — has been stridently making demands of the Vietnamese in the TPP trade talks that the Politburo would be foolish to accept. Obama’s rather crude economic pressures, in fact, have been playing into the hands of those in Hanoi who increasingly question the value of closer commercial and strategic ties with the United States.

Beyond the mutual embarrassment potential, it turns out that what the White House wants to talk about regarding climate change illustrates — most likely, unwittingly for both Sang and Obama — just how complicated deepening the bilateral economic relationship has become.

Power Politics

On climate change, it could be that all Obama wants to do is burnish his “green” credentials by giving President Sang a nice lecture on the importance of nations’ working together to combat global warming.

But there’s something else important going on between Washington and Hanoi that illustrates how the politics of climate change have interjected themselves into the bilateral relationship. It’s not certain that the White House staff — which seems to be spread pretty thin these days — has briefed Obama on the implications of a decision last week by the U.S. Export-Import Bank to deny U.S. export financing to build a 1,200-megawatt coal-fired power plant in Vietnam’s Thai Binh province. But for sure, President Sang wouldn’t need a special briefing to understand fully the implications of the American act. This is because the Ex-Im decision goes directly to the heart of how political power is exercised in today’s Vietnam — and touches sensitive nerves in the Politburo.

Greenpeace, Friends of the Earth and other environmental groups complained in a July 17 letter to Obama that “this dirty coal plant will emit unacceptable air pollution that will worsen climate disruption and poison local communities.” Obama’s climate action plan, they (rightly) noted, is against U.S. financing of overseas coal projects, on grounds they increase greenhouse gas emissions.

The green lobbyists portrayed the Obama climate-action policies correctly. Ex-Im’s guidelines basically discourage financing for high carbon density overseas projects like coal plants. These days, Ex-Im is more interested in participating in viable renewable-energy projects. Anyway, after conducting an environmental “due diligence” examination, the U.S. export-financing agency found that the Thai Binh plans failed to pass muster. Because of that, the bank did not examine the other details of the project: financing, credit-worthiness, and so forth.

Most of the above was reported by U.S. wire services — but the best part of the story has gone unreported: precisely who wanted U.S. export financing for the Thai Binh coal-power plant?

Ex-Im doesn’t put such details on the public record before projects are approved.  But a little digging reveals that the Ex-Im financing was sought to help one of Vietnam’s giant state-owned enterprises, PetroVietnam Power Corporation, which refers to itself as PV Power. PV Power is a subsidiary of the Vietnam National Oil and Gas Group, which goes by its acronym, PVN. According to a 2011 Vietnamese news report, PV Power’s Thai Binh 2 Thermo Power Plant is a $1.6 billion project. The main players are Korean and Japanese construction firms.

On August 3, 2012 the Charlotte, Va.-based Babcock & Wilcox Co. announced that a Beijing-based subsidiary — Babcock & Wilcox Beijing Co. Ltd. — had won a $300 million Thai Binh-related contract from South Korea’s Daelim Industrial Co. Ltd.  Babcock & Wilcox said that it would do the engineering work in Beijing for two coal-fired boilers for the Thai Binh project, and would also participate in the manufacturing.

While a Babcock & Wilcox spokesman was unable to respond to questions asking about Thai Binh before this article went to press, it seems logical that PetroVietnam and the Korean company could have sought financing from the U.S. Ex-Im Bank to buy U.S.-manufactured equipment. How many American jobs would have been supported with the financing is not on the public record. (Nor is it clear what role coal plays — or perhaps should play — in addressing the energy needs of a developing country like Vietnam.)

The involvement of PetroVietnam, for those who know how what might be called the Vietnamese “political economy” works, suggests that the story’s ramifications go way beyond a normal fight over money and jobs with just one construction project.

State-owned corporations control perhaps a third of the Vietnamese economy. Inefficient, secretive and widely considered corrupt, SOE’s are also cash cows for senior members of the Communist Party. They report to the Prime Minister’s office, and are thus an important source of political patronage. (Imagine if President Obama would appoint the top echelons of a third of the Fortune 500, the likes of Boeing, General Electric, Microsoft, Google, Exxon, and so on.)

In the Trans-Pacific Partnership trade talks, the Americans are demanding that the Vietnamese enact transparency reforms, and also that steps be taken to bring SOEs more market-oriented. It’s asking a lot, considering that the same government corporations have been making a lot of senior party officials — including at the Politburo level — very rich. The Politburo has been wrestling for most of the past decade over what to do about all this.

PetroVietnam  has become controversial in Vietnam. Last October a report by Thanh Nien Daily, a Vietnamese newspaper, noted that PetroVietnam had been cricitized by economist Le Dang Doanh on grounds it “needs to disclose its finances and profit numbers.”

The Thanh Nien report added that the giant government corporation had denied accusations made publicly by National Assembly members that it had been using its taxpayers’ money to engage in real estate speculation. Then the Vietnamese newspaper asked why PV Power and other wholly-owned subsidiaries of PVN have their own real estate companies. The newspaper even ran a photo of the Nam Dan Plaza in Hanoi, described as “a new luxury department store project developed by PV Power.” (From the view of SOE executives, speculating in real estate ought to be more commercially attractive than power, because the government forces them to set electricity rates too low for Vietnamese consumers to be commercially viable.)

This week, Vietnamese officials who will be travelling with President Sang will be pressing their case with their Ex-Im counterparts. It is unlikely they will succeed. The U.S. officials might wonder whether PetroVietnam officials might just take any profits obtained from low-cost U.S. Ex-Im financing to speculate in even more dicey property deals.

A delicate mix

The Obama administration has turned up the pressure on Vietnam’s human rights practices. The price of Vietnam’s admission to the TPP, and of forging a genuine strategic relationship with Washington, will be explicitly linked to “demonstrable” progress on human rights, as U.S. Ambassador to Vietnam David Shear put it on June 1 to a Vietnamese-American audience in Orange County, California. The ambassador’s context was unambiguous: “I have been telling senior Vietnamese officials since my arrival in Vietnam in August of 2011, that if the Vietnamese people want a Trans-Pacific Partnership, if they want stronger cooperation in regional diplomacy leading to a strategic partnership, then we need to see demonstrable progress on human rights in Vietnam.”

Traditionally, it has not been official U.S. policy to make such an explicit link with human rights in any commercial negotiation. Shear’s remarks — which he declines to comment further upon — were initially dismissed as unserious by some veteran trade observers who cautioned that they should not be taken literally. Shear was just telling his California audience what it wanted to hear, according to this interpretation. Vietnamese-Americans and their representatives in the U.S. Congress have been critical of Shear, on grounds he has not done enough to improve Vietnamese human-rights practices.

Still, Shear is a senior, well-regarded American diplomat with considerable experience in Asia — he’s served in Japan, China, and Malaysia, and speaks Japanese and Mandarin. Nor does Shear have a reputation for loose talk. In his June 1 Orange County appearance, the ambassador spoke slowly and deliberately, conveying the impression that he was reciting officially authorized talking points. Also, Shear’s reference to how lack of human-rights progress has been the biggest obstacle to closer U.S.-Vietnamese strategic ties was fully consistent with official U.S. foreign policy as expressed often by senior State Department officials. The official State Department position is that U.S.-Vietnam strategic ties will not improve until there is “demonstrable, sustained improvement in the human rights situation.”

U.S. Trade Representative Michael Froman has declined to engage in any diplomatic walk-back that would put distance between U.S. trade policy and Shear’s remarks in Orange County. So it appears that the White House is comfortable with the notion that the Vietnamese should take Amb. Shear’s words at face value.

Enter the U.S. trade police

From the Vietnamese perspective, what Obama is asking them to do on “human rights” in the TPP trade talks appears, well, insulting.

Obama’s trade negotiators have been insisting in the TPP that the Vietnamese agree to the U.S. labor lobby’s demands that they permit independent union organizing — which U.S. officials insist must be enforceable. Such could be considered “human rights” progress, in American eyes.

Before it signs onto this idea, the Politburo might consider how similar arrangements have worked out for other countries that have struck recent trade deals with the Americans.

In the U.S.-Colombia bilateral trade agreement, that Latin country has been required to set up an “action plan” on labor that contains measurable “milestones” and a “robust enforcement regime,” with American officials playing their roles as the enforcers. The way this works practice in Washington, the American officials pay close attention to AFL-CIO labor activists, who never seem to be satisfied that foreigners are doing enough to live up to American standards.

On April 11, 2013, the Office of the U.S. Trade Representative and the Labor Department touted how they had pressed Guatemala to submit to “a robust enforcement plan to resolve concerns” that had been raised in a labor complaint by the United States in the preferential trade agreement involving the U.S. and the Latin country. The American officials congratulated themselves for making Guatemala come up with an 18-point plan to satisfy Washington’s demands. The plan “includes concrete actions with specific time frames that Guatemala will implement within six months to improve labor law enforcement.”

This is the first labor case that the U.S. has brought in any of its preferential trade deals — but the Vietnamese would have good reason to suspect that the American labor police have plans for them.

U.S. double standard

Enter the outright embarrassing part of the story for Obama. The reason the Vietnamese find the TPP talks attractive is the possibility of gaining additional access to protected U.S. clothing- and footwear markets — protected by high tariffs that hover in the 16-18 percent range, but for some lines, twice that. The Obama trade negotiators have been demanding essentially that the price of any tariff cuts  for shoes and apparel be that the Vietnamese agree to purchase their fabric from U.S. suppliers.

The idea is hardly attractive to Hanoi.

First, as I reported in “Imperial Preferences” in this space on Sept. 11, 2012, one of the main reasons that Napoleon III sent the French navy to take the port of Saigon in 1859 was to force the Vietnamese to open their markets to exports of French textiles. Economists would agree that current American pressure in the TPP is just a modern-day version of French colonialism.

Secondly, the so-called “yarn forward” rules of origin don’t work. Only about 17 percent of U.S. imports of clothing from Mexico and other Latin American countries that have been forced by U.S. trade negotiators to accept the cumbersome rules actually get duty-free treatment. The importers prefer to pay the duties, rather than jump through the bureaucratic hoops, bear the costly paperwork burden, and such.

And last, think of how President Sang — under fire from Washington because of the Vietnamese government’s many interventions in its economy —  could turn the tables on Obama. Sang might ask: Is it right for the U.S. government to pressure such major American corporations like the iconic Levi, Strauss & Co. and Gap, to agree to buy their (heavy) denim from U.S. suppliers and ship it all the way across the Pacific to Vietnam? Is it right for the White House to pressure Hanesbrands, which has its underwear plants and supply chains in nearby Asian countries like Thailand and China, to buy its cotton instead from the continental United States, and ship that cotton across the ocean? How about Patagonia, which makes down vests in Vietnam from high-tech Japanese materials? Why would the U.S. government want to disrupt the global operations of other respected private-sector corporations: Nike, Adidas, Macy’s, Nordstrom, and so many others?

Obama would, of course, be hard-pressed to respond with credible economic answers to such questions. But the White House has repeatedly insisted that Vietnam swallow the “yarn forward” rules of origin for textiles, and also the high tariffs on footwear.

From a Vietnamese perspective, Obama’s TPP negotiating strategy is reminiscent of how Presidents Lyndon Johnson and Richard Nixon once based American policies during the Vietnam war upon the premise that, with enough pressure from the rich superpower, this small Southeast Asian nation would ultimately bend to America’s will. But unless the Vietnamese get meaningful additional U.S. market access they are seeking in the TPP, it is difficult to think of good reasons why they should cave.

Prospects for closer U.S.-Vietnamese relations?

The final uncertainties involve just what the Vietnamese really want from their relations with Washington.

“There’s a delicate game going on” presently in the Politburo, explains scholar Carlyle Thayer of the Australian Defence Force Academy. Hardly for the first time in its long history, Vietnam is striving to balance it’s always-contentious relations with China, the Southeast Asian country’s closest neighbor, and at the same time with the United States. “Some in Hanoi want better ties with the U.S., while another group would sabotage those ties,” observes Thayer.

It’s the latter group that currently appears to have the upper hand, according to Thayer and other experienced Vietnam watchers interviewed for this article. That would help explain why Vietnam has arrested more than 40 peaceable bloggers this year, more political prisoners than all of 2012 — perhaps a deliberate hostile signal to the U.S. State Department and the White House.

To be sure, with any issue involving Vietnam there are so many nuances that nothing is ever what it seems to be. Sang’s three-day visit to China that began on June 19 could be interpreted as a sign that closer Vietnamese-Chinese ties were being considered. Even if it’s true that Chinese intransigence marred those meetings, Beijing could recover (by being less aggressive in claiming waters in the South China Sea that are clearly Vietnamese, for instance).

But how to interpret a visit that Vietnam’s deputy defense minister, Sen. Lieut. Gen. Do Ba Ty, made to the Pentagon on June 20, while Sang was in China? The Vietnamese general met with Chairman of the U.S. Joint Chiefs of Staff Martin Dempsey. Gen. Ty’s was the first such visit by a Vietnamese chief of staff to the United States, a Dempsey spokesman observed. The senior Vietnamese military delegation also notably included Lt. Gen. Pham Ngoc Hung, the deputy chief of the general intelligence department. Something’s afoot.

The only reasonably clear conclusion at this point in time is that the traditional Vietnamese foreign-policy balancing act will continue. And because the issues and differences that divide Vietnam, China, and the United States are so difficult to resolve neatly, the situation will continue to remain messier than it should.

 

 

 

 

 

Tar Baby

posted by
on November 27, 2012

As President Barack Obama won’t begin his second four years in the Oval Office until January 21, nobody yet— at least nobody beyond the president himself and a narrow circle of White House insiders like top economic aide Mike Froman — really knows whether the president is interested in bringing a new vision to get US trade policy moving again. He doesn’t seem to be, if a response I received from Froman’s office indicating that trade will not be one of the president’s top international economic priorities turns out to be an accurate guide. The clear impression is that Obama and his top advisors are satisfied that they have already been doing the right things on trade policy, so nothing major will change in the second term. And as I’ll report later in this article, the president’s otherwise highly successful recent trip to Southeast Asia produced more evidence of why U.S. trade policy is presently stuck on the Tar Baby that the Trans-Pacific Partnership negotiations seem to becoming for Obama.

That’s at least a skeptic’s view. But if it turns out that Obama really will be looking at what he could do to boost global trade flows, while reclaiming America’s lost high ground on important international economic issues, he won’t have to look far. On the decency side of the equation, the president might want to consider the advice that Ed Gresser has patiently offered for years. Gresser is a loyal Democrat and a widely respected trade analyst who directs the GlobalWorks Foundation’s ProgressiveEconomy project. He has become well-known for making both a moral and economic argument that high U.S. tariffs on shoes and clothing should be eliminated. Basically, Gresser reasons that those tariffs — which generally hover from perhaps 12-18 percent to more than 30 percent — are regressive taxes on America’s poorer consumers. He also points out that the tariffs constitute unnecessary trade barriers that hamper millions of women in developing countries who are trying to sew their ways out of poverty. Washington’s traditional reluctance to get rid of those cruel tariffs — in both Republican and Democratic administrations — is widely resented in the so-called Third World, and is one of the reasons why the WTO’s Doha Round of tariff-slashing has been so acrimonious.

And for a very significant international economic payoff, Obama only has to look uptown, beyond K Street to the 19th Street, N.W. offices of the international law firm, Squire Sanders. There, Shanker Singham, who heads Squire Sanders’ global market access practice, has a big idea. Beyond its purely financial rewards, Singham’s idea would truly restore America’s former claims to international economic leadership (especially in the WTO, which remains the all-important bedrock of the global trading system). Read the rest of this article »

Disconnect

posted by
on November 13, 2012

Now that President Barack Obama has defeated the hapless Mitt Romney to win a second term in the Oval Office, its time to look at where the president’s international trade agenda currently stands — especially viewed in light of how Obama’s trade policies fit into broader U.S. national security policies towards the fastest-growing region in the world: Asia. That brings us to the first problem. There’s a disconnect. Obama’s foreign policy — the so-called Asian “pivot, or “rebalancing” — promotes closer security ties across the region, with a particular emphasis on traditional Asia-Pacific treaty allies like Japan and the Philippines (which are embroiled in threatening maritime disputes with China). But the president’s trade agenda excludes the Japanese, the Filipinos, and other important Asian trading partners from participation anytime soon in the ongoing Trans-Pacific Partnership trade talks.

Later this week, as the president heads for a triumphal post-election tour of Southeast Asia, he will likely be embarrassed, as other Asian nations will signal clearly their intent to expand regional trade, whether the United States participates or not. But I’m getting ahead of the story, which is best understood in the context of the White House ambitions for the TPP negotiations.

To date, Obama has placed all of his trade chips on the TPP talks. They are the only international trade negotiations the administration is involved in (although the Office of the U.S. Trade Representative has been talking about opening new preferential trade negotiations with the European Union). For four years, Obama has paid scant attention the World Trade Organization, showing little interest in working with that vital multilateral trade institution to set the rules for global trade expansion. Lack of support from the United States — once the indisputable genuine leader in promoting multilateral trade liberalization — has weakened the WTO as an institution. Obama has, in fact, not launched any new U.S. trade initiatives whatsoever, not even the TPP. Predecessor George W. Bush and his top trade negotiator, Susan Schwab, signaled their intent to join the TPP process in 2008. But when Obama became president the next year, he put the TPP on ice until late 2009. But since the White House joined the talks, the TPP has made little progress. The first deadline for completion, November, 2011, was missed. So was the next deadline, this past June. Now, there is no end in sight for the TPP. Obama has never even sought so-called congressional fast-track negotiating authority to conduct any international trade negotiations, so if he would somehow manage to strike a TPP deal, it’s chances of being well-received on Capitol Hill are uncertain.

The White House gets most of the blame for the TPP’s present uncertainty. First, Obama has conveyed the clear impression that he sees the TPP as a regional trade model where the United States would play a dominant role at the hub of an economic coalition of the willing. The U.S.-led trade bloc would gradually bring in other members who would agree to rules basically established in Washington — except for China. Beijing would be encircled, and would only eventually be welcomed into the club as one of the spokes to the American hub. The notion that the TPP is at the center of a U.S. strategy to build an Asian trade bloc aimed at containing China is not sitting well with the other TPP negotiating countries, especially Singapore, Australia and New Zealand. While the diplomats from such countries remain discrete, their concerns are reflected in The Trans-Pacific Partnership: A Quest for a Twenty-first Century Agreement. This is an important new book, with chapters contributed by some of the best-informed trade authorities on both sides of the Asia-Pacific. Specifically, the White House would do well to contemplate the observations drawn in Chapter 18 by Australian scholars Ann Capling (of Murdoch University, in Perth) and John Ravenhill (Australia National University, in Canberra).

The TPP, the well-connected Capling and Ravenhill report with authority, is increasingly being perceived as “part of a U.S. foreign policy strategy to contain China.” Already the White House has heard from officials in Australia, New Zealand that “it is not in their interests to participate in trade arrangements that are seen to be hostile to China.” The Aussies and Kiwis have laid down a red line that they could bolt the talks, if the Americans don’t step up their economic game.

Singapore, as well as Australia and New Zealand, are looking for a clean, forward-looking so-called “21st Century Gold Standard” type of free trade deal that would help foster greater regional, even multilateral, trade expansion. While the White House has been happy to use such high-sounding rhetoric, much of what Washington has actually put on the negotiating table is a familiar litany of old-style protectionism aimed at pleasing Obama’s base in the anti-trade wing of his Democratic Party. It mainly comes down to special carve-outs to protect U.S. sugar quotas, subsidies for U.S. dairy farmers, legally binding rules on labor and the environment to satisfy U.S. labor unions, no liberalization of widely-resented U.S. anti-dumping rules, high tariffs on athletic footwear, and complex rules of origin aimed at preventing Vietnam from expanding its exports of garments to the United States. (Strident American demands for just the latter two alone could be deal killers.) Consequently, the once-promising TPP is beginning to look like just another ordinary trade-distorting scheme, and one that is not particularly economically important.

The disconnect worked for Obama in his first term, at least in terms of shoring up his domestic political position for a second term in office. For example, consider the decision to give Japan only tepid support last November, when Prime Minister Yoshihiko Noda expressed his interest in joining the TPP. “That was an extremely courageous act” on Noda’s part, observes R.K. Morris, who heads the respected Global Business Dialogue, in Washington, D. C. Noda immediately came under heavy fire from Japanese protectionists. To make matters worse, as Morris points out, “there was no real welcoming” from Washington. Noda was left hanging.

One would have thought the White House would have jumped at the chance to welcome Japan into the TPP. After all, Japan is America’s most important security ally in the Pacific. And the potential of making the TPP a truly big economic idea with the participation of the world’s third-largest economy should have duly impressed the White House.

It didn’t. Obama’s lukewarm treatment of Noda’s bold move was rooted in U.S. domestic politics and the president’s re-election campaign. The White House aimed at pleasing the United Autoworkers of America and the luminaries of the U.S. auto-parts lobby who are vehemently opposed to the notion of expanding trade with Japan. Beyond Japan, trade expansion wasn’t part of the president’s election calculations anyway. Obama also ran against China as the Buy American candidate who boasted of his credentials as an economic nationalist at every opportunity on the 2012 campaign trail. (Republican Mitt Romney also tried to connect with the fears of American blue-collar voters, trying rather unconvincingly to out-flank Obama as a China basher. Romney’s former colleagues in the sophisticated private-equity world probably wondered what got into poor, oh-so-ambitious Mitt.)

But now, as the president heads to Southeast Asia at the end of this week to meet his regional peers at an East Asian Summit, Obama will begin to face the consequences of his permanent campaign. Japan, Korea, China, the Philippines et. al. are already preparing to move on to deepen their regional trading relationships, even if that means leaving the United States on the sidelines.

The TPP as presently constituted, Philippine Finance Secretary Cesar Purisima told a high-powered audience in Washington, D.C. convened in September by the new-and-energetic U.S. – Philippines Society and the Center for Strategic and International Studies, is economically flawed. It would distort regional trade flows and thus “hinder” the laudable goal of trade expansion. Manila has been working closely with Leon Panetta’s Pentagon, the Pacific Command, and Hillary Clinton’s State Department to deepen security ties. But it seems that the Philippines has accepted the fact that over at the White House, the president isn’t prepared to engage seriously on ways to enhance economic ties to the Philippines. On Nov. 12, Adrian Cristobal Jr., the Philippine undersecretary of the department for trade and industry, laid out his country’s trade priorities in Manila’s Business Mirror. The Philippines, he said, “should be a more active player in regional economic integration.” Toward that end, he advocated expanding trade ties throughout Southeast Asia, and also Japan, Korea, Australia, New Zealand, India — and China. There was no mention of the United States.

Obama is scheduled to fly to Myanmar (formerly Burma), Thailand, and Cambodia from Nov. 17 – 20, on what the White House is portraying as a triumphant post-election tour to emphasize America’s enduring commitment to remain an Asian power. But although the exact schedule has not been announced, trade aficionados would be well-served to watch what happens on Nov. 18, when Obama participates in the East Asian Summit in Phnom Penh. There, negotiations for a new regional trade-liberalizing deal called the Regional Comprehensive Economic Partnership will be announced. The RCEP’s members will include the ten members of the Association of Southeast Asian Nations, plus six other countries that have signaled their intentions to join in (the so-called ASEAN + 6): Australia, New Zealand, Japan, South Korea, India, and China. So far, neither Russia nor the United States has shown any interest in participating in the RCEP.

As the sharp-eyed Ernie Bower noted in a recent analysis published by the Center for Strategic and International Studies, the White House and the Kremlin have set themselves up for a diplomatic embarrassment next week. “If the United States does not join the RCEP, the White House should prepare for an awkward moment at the EAS [East Asian Summit] when presidents Barack Obama and Vladimir Putin are asked to step out of the room while the rest of the Asia Pacific leaders move forward on economic integration and line up for the RCEP photo op,” Bower warned last month. “The RCEP need not be competitive with the TPP, and it fills the strategic gap that exists between U.S. strategy and U.S. trade policy in the Asia Pacific.”

Mike Froman, the top White House international economic aide — who, if Washington street talk is to be believed, could replace the soon-to-depart Ron Kirk as the U.S. Trade Representative — declined to be interviewed for this article. Nor would Froman respond to written questions that addressed Bower’s analysis of the disconnect. (One of my questions was whether Froman still believes that the Office of the U.S. Trade Representative — whose elite corps of skilled trade negotiators has served this country well, at least when they have received enlightened policy support from the White House — should be tucked away somewhere in the sprawling Commerce Department.)

Meanwhile, as the reality of TPP negotiations continues to lag far behind the hype, one wonders exactly what economic benefits the Obama administration is looking to. Washington already has preferential trade pacts with six of the ten TPP countries: Australia. Singapore, Chile, Peru, Mexico, and Canada. These countries have been informed by Washington that they cannot expect any further access to U.S. markets in the TPP. Those deals, the White House insists, are to remain static. (By contrast, Hong Kong’s preferential trade deal with mainland China is regarded as a “living” document. Hong Kong officials are constantly working with their mainland Chinese counterparts on ways to further liberalize their cross-border trade, to their mutual advantage.)

Any new economic opportunities for enhanced U.S. trade with the remaining TPP countries would only involve four remaining smaller (if vibrant) economies that currently do not have their own preferential trade arrangements with Uncle Sam: New Zealand, Brunei, Malaysia, and Vietnam. This is all there is at the core of the Obama administration’s only ongoing international trade negotiations. One is reminded of the Wizard of Oz.

To be sure, the task of persuading some Asian trading partners to participate in meaningful trade liberalization is never easy. Thailand, trapped in bitter domestic political divisions that make Washington’s gridlock seem tame, don’t seem able to move for the foreseeable future. (However, there are rumors that the Thais will give everyone a big surprise, perhaps even within the week, that they have changed their attitude and will participate in the TPP after all. If so, that would be widely regarded as a very helpful move within the region.) Cambodia’s Hun Sen presides over a corrupt and incompetent regime that has basically been captured by Beijing. Myanmar/Burma, happily is in the beginning stages of opening up to trade and investment. But Japanese multinationals, not American corporations which remain caught in the sanctions trap, are the ones poised to exploit the new business opportunities. Indonesia, which sees Asean as a Greater Indonesia bloc, is in a protectionist, chest-thumping mood these days. As Robert Fitts, a former U.S. ambassador who now heads the American Studies program at Bangkok’s elite Chulalongkorn University, told me when we met in August, there are presently limits to what U.S. economic diplomacy can accomplish these days, beyond being patient. Meanwhile, the Thais and Cambodians are stepping up their trade with China. Little Laos and Tajikistan, each of which shares borders with China and which are set to become the WTO’s 157th and 158th members, don’t even seem to be on the U.S. economic radar screen. But they are on China’s.

But however unfortunate the timing is for some Asian countries to pursue real trade liberalization, it’s different with Japan and the Philippines — difficult, to be sure, but hardly intractable on trade expansion. True, the Japanese are famously protective of their inefficient-but-beloved domestic rice, to cite the most famous example explaining Tokyo’s traditional reticence in international trade negotiations. And key sectors of the Philippine economy, the WTO has reported, remain reserved to entrenched local elites who have little enthusiasm for competing in global markets. Sometimes — well, quite often, actually — it seems that the Philippine elites are determined to do whatever it takes to discourage much-needed foreign investment. Moreover, Philippine President Benigno Aquino III acknowledges that he has sympathies for Filipino First economic policies (the equivalent to Barack Obama’s Buy American sentiments). Filipino First policies, in fact, are at the root of that country’s long economic decline since they were instituted in the 1950s.

But it’s a mistake to write the Philippines off. Aquino — the rare uplifting example of an honest leader in the Philippine presidential palace — has launched a serious anti-corruption campaign that has put his country on the right track toward economic growth. “We are firing on all economic cylinders,” Foreign Secretary Albert del Rosario rightly notes. Former U.S. diplomat John Forbes, a man with decades of experience in Manila, agrees. Forbes says that what Aquino has been doing to get his country moving is truly “unprecedented.” And former U.S. Navy Captain Dennis Wright, who is developing a major industrial park at what used to be the U.S. Air Force base at Clark Field, agrees that “the U.S. has been remiss in not engaging more substantively” with the Philippines. “Anything to strengthen trade and commerce would only help,” Wright adds.

I have been following the Philippines closely for more than four decades, and — despite the fragility of the reforms that Aquino has launched — have never felt more optimistic about that country’s reaching its great potential. The big worry, and one that Aquino and his team readily acknowledge, is that there is no assurance that after Aquino’s term runs out in 2016 that his successor would bring comparable dedication and integrity to the office. Over at the Pentagon and at the Pacific Command, it is generally understood that along with closer security ties, working with the Philippines to promote lasting economic growth should be a top American priority priority. Asia-watchers in Hillary Clinton’s State Department — especially Assistant Secretary for East Asian and Pacific Affairs Kurt Campbell, who has missed no opportunity to promote closer economic as well as security ties across the region — get it. But the White House doesn’t seem to understand that right now is the time to work with important allies like the Philippines on genuine economic reforms. (Readers who are interested in more details on the Philippines’ impressive recent history are referred to Asia’s Next Tiger, which I authored last June for ForeignPolicy.com. The piece is also posted on www.rushfordreport.com.)

Moreover, if the goal is to connect strategic calculations with trade liberalization, the White House might reflect upon what the United States might do to help foster Philippine-Malaysian relations. The two Southeast Asian neighbors have long shared a mutual suspicion, based in part on lingering territorial disputes over the island of Sabah. But as Steve Rood, the Asia Foundation’s top man in Manila, relates, Malaysian officials have recently played a helpful and constructive role in facilitating a promising peace deal that Aquino has reached with Moro insurgents in Mindanao. Aquino, who was originally reluctant to involve the Malaysians, is now thought to be most appreciative of their quiet-but-effective assistance to the delicate peace talks. But while Kuala Lumpur is welcomed by the United States into the TPP, the Philippines is not. Isn’t this another good reason for now reaching out more seriously to Manila?

This past August I had the opportunity to speak in Bangkok with Curtis S. Chin, a savvy former U.S. ambassador to the Asian Development Bank who served under Presidents George W. Bush and Obama. Chin now lives in Bangkok, where he is a senior fellow with the Asian Institute of Technology. “I think we have to be more strategic in how we engage Asia, and it has to go beyond a military pivot,” Chin told me. It’s a mistake, he added, “to compartmentalize our policies, with foreign policy separate from trade policy.”

Those are words that the White House would be well-advised to reflect upon more deeply as the president begins his second term in the Oval Office. Patrick Cronin, a man with more than three decades of national security experience who is now affiliated with the Center for a New American Security, sums up the general consensus among Washington’s Asia hands. “The U.S. has had no real trade policy” in the last four years, Cronin told me earlier this year. Obama can be grateful that he now has a second chance to help foster global economic expansion — as without this new opportunity to start fresh, history surely would not be kind to his lack of accomplishments on international trade in the first four years. It’s time for the permanent campaign to end, Mr. President.

Imperial Preferences

posted by
on September 11, 2012

[Part One of a Two-Part Series]

Last month I flew to Bangkok, Saigon and Hong Kong to try to get a better understanding of why something called “yarn forward” has been blocking progress in the Trans-Pacific Partnership trade negotiations. The TPP talks presently involve the United States and eight other countries including Singapore, New Zealand and Australia — soon to be a group of eleven nations, with the addition of Canada and Mexico — in the fastest-grown region in the world.

For sure, the term “yarn forward” would not mean much to regular folks. But to a handful of diplomatic insiders and trade junkies who immerse themselves in the arcane jargon of international-trade politics, yarn forward is anything but an obscure phrase. It turns upon America’s reluctance to give Vietnam, and to a lesser extent, Malaysia, enhanced access to U.S. clothing markets — unless the Asians agree to disrupt their current global supply chains to make their clothing from U.S. materials.

The fight over yarn forward rules of origin for textiles and apparel is widely considered to be one of the key reasons that the TPP negotiations, despite a lot of hoopla, have essentially made very little progress since March, 2010. That’s marks the date when American trade negotiators put the concept front-and-center of Washington’s TPP agenda during the TPP’s first round of negotiations, which were held in Melbourne. This Friday, the TPP’s 14th round will conclude in Leesburg, Virginia, The Sept. 6 – 15, 2012 Leesburg meetings, like the others, have been shrouded in near-total secrecy. Once again, about all that outsiders see is the usual diplomatic happy talk about all the “important” meetings that have been held by a lot of important, busy officials, and about all the encouraging “progress” that is being made.

Read the rest of this article »