America’s Philippines Blunder
Failing U.S. trade policy exacerbates Manila’s doubts of Washington’s security promises.
By GREG RUSHFORD
July 28, 2016 12:46 p.m. ET
U.S. Secretary of State John Kerry on Wednesday discussed the “full range” of economic and security issues with Rodrigo Duterte, the Philippines’ newly elected president. The visit comes in the wake of The Hague’s July 12 ruling that Chinese actions in the South China Sea violate Philippine rights.
Mr. Kerry’s diplomatic mission was to assure Mr. Duterte that Manila can count on Washington’s mutual-defense promises. But there are also Mr. Duterte’s doubts that the U.S. can support the Philippine trade and economy.
When Mr. Duterte was sworn in to office on June 30, U.S. Trade Representative Michael Froman announced a new trade policy that upends important economic growth plans in the Philippines. It threatens to wipe out an estimated $100 million annual boost to Philippine exports of travel goods such as luxury handbags, wallets and backpacks. It also complicates Philippine investment aspirations to create some 75,000 travel-goods-related jobs in the next five years.
At first glance, Mr. Froman’s announcement gives no hint of the economic controversy it has sparked. He says that President Obama wants to make “a powerful contribution to lifting people out of poverty and supporting growth in some of the poorest countries in the world, while also reducing costs to American consumers and businesses.” The policy benefits 43 least-developed beneficiary countries, such as Cambodia and Haiti, and 38 African nations. Pursuant to the U.S. Generalized System of Preferences (GSP) program, these countries will no longer have to pay stiff tariffs of up to 20% on handbags, wallets and other travel goods exported to the U.S.
The U.S. decision to give preferential treatment to the industry’s small players, while blindsiding the most competitive producers, is perplexing. Cambodia, for instance, holds a modest 0.4% of the U.S. market, producing mostly backpacks. Africa’s total travel-goods exports to the U.S. amount to roughly one hundredth of one percent market share. As a result, the policy gives just two countries—China and Vietnam—a combined 90% share of the $5 billion U.S. travel-goods market.
It is unlikely that preferential treatment will prompt least-developed countries to boost their exports. Even with 15 years of duty-free access to U.S. clothing markets under the African Growth and Opportunity Act, 40 African countries combined to export less than 1%, or $1 billion, of garments each year to the U.S. The Philippines alone exceeds Africa in clothing exports by more than $100 million.
Diplomats from other countries and industry giants in the U.S., such as Coach, Columbia Sportswear and Kate Spade, have written to Mr. Froman asking for an explanation. On Wednesday 14 members of U.S. Congress, including 10 from the powerful Ways and Means Committee that has jurisdiction over trade, also issued a strong letter to the U.S. trade chief. But Mr. Froman has yet to offer any economic rationale for the decision, nor is there any evidence on the public record to support it.
Developing countries with larger market shares of the travel-goods industry, such as India, Indonesia, Pakistan, the Philippines, Sri Lanka and Thailand, must now reconsider their plans to expand their investments. Major U.S. players such as Coach and Michael Kors, which looked to U.S. trade officials to provide financial incentives to shift production away from China, will now put those investment plans on hold. China is thus poised to keep its 85% share of the U.S. travel-goods market.
Vietnam, as a communist country, is not eligible for the GSP preferences. But in the Trans-Pacific Partnership trade deal, the U.S. agreed to give the Vietnamese—who now hold a 5% market share—the same duty-free treatment withheld from GSP-eligible countries. Pakistan’s Prime Minister Nawaz Sharif thought he had received assurances directly from President Obama last year that U.S. trade officials understood the “importance” of increasing enhanced market access for Pakistan’s GSP-covered exports. Diplomats I have spoken to chafe at the unfairness.
Viewed through the Philippine lens, the failure to connect economic cooperation with the security aspect of Obama’s pivot to Asia is glaring. Cambodia, apparently thanks to financial inducements from Beijing, has been the spoiler whenever the Philippines has sought solidarity from its partners in the Association of Southeast Asian Nations in standing up to China in the South China Sea.
Asked repeatedly for his side of the story, Mr. Froman asserted through a spokesman that “travel goods are a product particularly well-suited to be produced in least-developed countries.” He declined to explain further.
While the broader security relationship will survive, it is worth noting that in international economic diplomacy, like in personal relationships, unnecessary smaller slights erode trust. With the Chinese watching on the sidelines and eager to buy their way out of their South China Sea mess, this is not a wise time to rub the volatile new Philippine leader the wrong way.
Mr. Rushford edits an online journal that specializes in international economic diplomacy.
U.S. Secretary of State John Kerry arrives in Hanoi this Thursday for a two-day visit. Expect much talk of how the United States and Vietnam have been developing closer security and economic ties — and how Vietnam’s praiseworthy “progress” in improving its human-rights record is making this possible. Hopefully, Vietnam’s feared Ministry of Public Security will be on better behavior this week than back in May. Then, Kerry’s top human-rights advisor, Tom Malinowski, held what he characterized as “productive” meetings in Hanoi with senior Vietnamese officials. On May 11, two days after Malinowski’s visit, thugs wielding metal pipes bloodied a courageous Vietnamese political dissident named Anh Chi. Malinowski deplored the incident, while still insisting that Vietnam has been making commendable “progress” on human rights.
Kerry’s Aug. 6-8 trip comes on the heels of a successful visit to Washington last month by Nguyen Phu Trong, the general secretary of the Communist Party. Trong had a “productive” meeting with President Barack Obama in the Oval Office on July 7, after which the two leaders issued a joint “vision” statement that said each country recognized the importance of protecting human rights. The next day, Trong made a major speech at an influential U.S. think tank, the Center for Strategic and International Studies (better known by its acronym, CSIS). “Protecting and promoting human rights is the main objective of our development,” Trong declared. “We want to ensure, promote and protect the rights of all people in Vietnam.”
Well, maybe not all. Once again, a familiar pattern emerged: Shortly before Trong’s speech before a CSIS audience of mainly well-connected Washington insiders, there was another ugly incident behind the scenes. The incident illustrates what’s really going on when American and Vietnamese officials praise Vietnam’s “demonstrable” human-rights progress. Moreover, the CSIS embarrassment offers a glimpse into how the Communist Party has been quietly buying influence to advance its foreign policy agenda in Washington — a sophisticated lobby campaign that appears to be working. Hanoi, it appears, has learned that in Washington, money talks.
But that’s getting ahead of this story, which begins with Trong’s July 8 historic speech — the first-ever such appearance for a senior Communist Party leader — at CSIS’ gleaming modern headquarters a few blocks from the White House. As the secretary general was preparing to speak about his deep interest in protecting human rights, Vietnamese security officials were quietly demonstrating otherwise, even on American soil. It seems that Hanoi’s intelligence operatives had a file on one of the invited CSIS guests — like Anh Chi, another enemy of the state.
Persona Non Grata
When Dr. Binh T. Nguyen, a prominent Vietnamese-born physician (and an American citizen) showed up to hear the secretary general’s speech, she was informed that she was persona non grata.
Binh, an invited guest, cleared CSIS security at the entrance, as she had on several previous occasions. But when she went upstairs to join the audience, a CSIS senior fellow was waiting. Murray Hiebert, accompanied by a CSIS security guard, insisted that Binh leave the premises. An obviously uncomfortable Hiebert explained that he was so sorry, but the communist security operatives simply would not permit Binh to hear Trong’s speech. The apologetic Hiebert told Dr. Binh that he had tried his best to reason with the Vietnamese security officials, but to no avail. They were not interested in negotiating, and were adamant that Binh would not be allowed to hear Trong’s speech, Hiebert related.
Hiebert apologized sincerely to Binh, admitting that it was wrong for CSIS to have given into the pressure. Ejecting her had ruined the event for him, Hiebert told the doctor. I spoke with Binh twice, for nearly an hour, going over the facts carefully, in great detail. Subsequently I was able to substantiate that the doctor’s account was the same as how Hiebert explained the incident to one of his colleagues at CSIS, Benjamin Contreras, the program director for CSIS’ Southeast Studies section.
Dr. Binh told me that Hiebert was characteristically polite. Still, it was intimidating that he had a guard with him to make sure she left the premises, the doctor added. Binh said she does not seek publicity, and looked forward to being invited to future CSIS events. She asked not to be quoted directly in this article.
The Canadian-born Hiebert, 66, is a soft-spoken former journalist with the Far Eastern Economic Review and the Wall Street Journal. He is perhaps the last person one would expect would get caught up in a dubious human-rights episode. In 1999, Hiebert, then the Review’s Kuala Lumpur bureau chief, was jailed for writing an article that raised disturbing questions about the integrity of Malaysian courts. Even though his report was accurate, Hiebert was convicted of “scandalizing” the judiciary, and spent a month in a Malaysian jail.
At CSIS, Hiebert has spoken out against human rights practices in Thailand and Malaysia. Hiebert notes that he approved several recent blogs written for CSIS by respected Vietnam watchers that have been critical of Vietnamese human-rights practices, including curbs on the media. But at the same time, Hiebert seems to have become careful not to cause too much offense to authorities in Hanoi. He co-authored a 2014 study, for example, that treated Vietnam’s human-rights practices rather gently, while not being entirely forthcoming about the fact that the Vietnamese government had paid for it (more on that later in this article).
CSIS Gives Its Side of the Story
Hiebert declined to be interviewed, but he did answer some (but far from all) questions that were submitted in writing — until a CSIS public-relations spokesman sent me an e-mail saying that he had advised Hiebert to cut off the communications.
Hiebert’s written responses did not directly dispute Dr. Binh’s account about what happened. But he attempted to minimize the incident, not mentioning the main human-rights point: how he had been pressured by the Vietnamese security officials to escort Binh from the building, and that did so, knowing that it was wrong for CSIS to give into such pressure.
The CSIS spokesman, H. Andrew Schwartz, first claimed that “Murray’s side of the story is quite different from what you have recounted.” But Schwartz had no further response after being informed that Dr. Binh’s account was, word-for-word, the same as Hiebert had related to his CSIS colleague, Benjamin Contreras. (Schwartz was formerly a spokesman for the American Israel Public Affairs Committee, known for its hard-nosed dealings with inquiring reporters. Before that, Schwartz was a producer for Fox News.)
While acknowledging that Dr. Binh had indeed been an invited guest, Hiebert seemed to brush off the incident as a sort-of bureaucratic snafu. “No one makes decisions about who attends events at CSIS but CSIS,” Hiebert wrote. “Dr. Binh was not on the initial RSVP list…CSIS made a mistake by allowing her to RSVP late to the event when the registration process had already been closed.” But Binh should have been allowed to attend, Hiebert agreed.
Enemies of the State
A public-record search shows why the Communist Party would have a file on Binh. She is chief of the thoracic radiology section at the Walter Reed Army Medical Center, and has received awards for her professional accomplishments. Being affiliated with one of the most respected medical institutions in the world, of course, wouldn’t send up any red flags in Hanoi. But what Binh does away from the office definitely would.
On her private time, Binh has worked on human rights issues in Asia with high-profile organizations including Human Rights Watch and Amnesty International. She has testified before the United States Commission on International Religious Freedom, among other respected panels. She serves on the Virginia Asian Advisory Board, which advises the governor “on ways to improve economic and cultural links between the Commonwealth and Asian nations, with a focus on the areas of commerce and trade.”
And on July 1, Binh joined several other respected human-rights champions who were invited to the White House. There, Binh and her colleagues gave advice to the National Security Council on how President Obama might want to handle human rights when Secretary General Trong came to the Oval Office on July 7.
Also, during the Obama-Trong White House meeting, Binh may well have been photographed by communist officials across Pennsylvania Avenue in Lafayette Park, where she joined several hundred Vietnamese-Americans who peaceably protested Vietnam’s lack of democracy.
Vietnam’s ambassador to the United States, Pham Quang Vinh, did not respond to an e-mail asking if he would care to join Hiebert by apologizing to Dr. Binh. It didn’t take much digging to understand why.
On May 24, Amb. Vinh had appeared on a CSIS panel moderated by Hiebert. Vinh was visibly upset when he was questioned by a former political prisoner, Cu Huy Ha Vu. Ha Vu made a short statement criticizing Vietnam’s human rights record, asking when Vietnam would stop its practice of incarcerating citizens whose only crimes were to criticize the Communist Party. The angry diplomat retorted that Vietnam has no political prisoners — avoiding eye contact with Vu. (Asserting that Vietnam has no political prisoners is like claiming that there is no cheese in Paris.)
Vu told me that he was not invited to the July 8 CSIS event with General Secretary Trong. Hiebert declined to explain, but it’s easy to surmise that the Communist Party chief had made it clear he would brook no awkward questions.
Vu is no ordinary political prisoner. He is one of Vietnam’s most prominent pro-democracy advocates today — especially because of his family’s elite revolutionary background. Vu’s father, the poet Cu Huy Can, was close to Ho Chi Minh during the Vietnam War, and served in Vietnam’s first national assembly. The well-educated Vu also earned his doctorate in law from the University of Paris.
Vu became an enemy of the state when he started challenging senior Communist Party officials for their lack of accountability. He even filed lawsuits against Prime Minister Nguyen Tan Dung on several occasions in 2009 and 2010, charging Dung with complicity in abuses of the environment, and for banning Vietnamese citizens from pressing complaints against the national government. Vu was imprisoned after being convicted in a 2011 show trial. His “crimes” included criticizing the Communist Party in interviews with the Voice of America and Radio Free Asia.
Vu was released from prison last year, and exiled to the United States, where he continues to advocate peaceably for the Communist Party to enact democratic reforms. While he was not on the invitation list to hear Secretary General Trong proclaim his deep interest in protecting human rights at CSIS’s July 8 event, Vu has been welcomed at the White House.
On July 1, Vu joined Dr. Binh and several other pro-democracy advocates who were invited to brief the National Security Council ahead of Trong’s visit. Imagine what Vietnamese intelligence officers thought, if they spotted press accounts of that White House meeting.
Also present in the White House that day were two U.S.-based leaders of the Viet Tan, Angelina Huynh and Hoang Tu Duy. Viet Tan — shorthand for the Vietnam Reform Party — is particularly feared in Hanoi because of its skills in using social media to reach its followers inside Vietnam. The organization is also known for its peaceable advocacy of democracy for Vietnam. The Communist Party considers the Viet Tan to be a “terrorist” organization. The Vietnamese government has admitted that it has imprisoned citizen journalist/bloggers for the “crime” of being associated with the group.
A Lobby Plan Comes Together
While the U.S. government respects the Viet Tan’s legitimacy, Hiebert ducked the issue. Asked repeatedly whether he agreed with Hanoi that the Viet Tan is a terrorist group, Hiebert did not respond. That’s about when CSIS spokesman Andrew Schwartz cut off the communications, asserting that “Hiebert has answered all of your questions.”
Why would a respected CSIS political analyst avoid direct questions concerning Vietnam’s human rights record? The suspicion arises that it has something to do with money.
Hanoi has been paying $30,000-a-month to the Podesta Group, a high-powered lobby firm with close ties to major U.S. political figures. David Adams, who has been working on Vietnam’s behalf for the Podesta Group, was Hillary Clinton’s chief of legislative affairs when she served as President Obama’s first secretary of state.
Adams would be valuable to Hanoi because he has an insider’s knowledge to sell: he knows firsthand how U.S. officials at the State Department and the Pentagon tend to think about Vietnamese issues.
For instance, when Adams was with Clinton on Foggy Bottom, David Shear was the U.S. ambassador to Hanoi. Shear is now an assistant secretary of Defense, where he is helping shape U.S. military policies regarding Asia — including the issue of how to respond to Vietnam’s request for U.S. sales of lethal weapons that Hanoi wants to help fend off Chinese intimidation in the South China Sea. (Shear, when he was the U.S. ambassador, routinely assured Vietnamese-American audiences that before Vietnam would be allowed to join the Trans-Pacific Partnership trade deal, Hanoi must make “demonstrable progress” on human rights. He never explained what that might mean.
The Podesta Group and Amb. Vinh declined comment on the Vietnamese foreign policy agenda they have been advancing. But it doesn’t take much digging to discover the three top priorities: Hanoi wants the U.S. arms embargo lifted. The Vietnamese also want to convince Obama and Congress that they have indeed been making enough “demonstrable progress” on human rights to join the Trans-Pacific Partnership trade deal. And they have been lobbying for Obama to visit Vietnam, hopefully by the end of 2015.
Is it a coincidence that Hanoi’s agenda is generally shared by CSIS? The Podesta Group’s website boasts of its ability to help controversial clients boost their credibility. “We recruit allies from left-and right-leaning think tanks…to validate our clients’ messages and build an echo chamber of support,” Podesta boasts. It’s far from an unusual practice in today’s Washington lobbying scene.
Hiebert insists that he is unaware that the Podesta Group has been lobbying for the Vietnamese government. But Hiebert knew enough to invite someone from the Podesta Group to hear Trong speak on July 8; he says that CSIS does not disclose its invitation list.
(Hidden) Money Talks
Nor is CSIS completely transparent about where it gets its financing. CSIS is one of 150-plus think tanks around the world that are rated by an impressive non-profit named Transpacific on their willingness to disclose — or not — where they get their money. The well-regarded Transparify, based in Tibilisi, Georgia, is part of the Open Society Foundations that were founded by George Soros. In 2014, Transparify gave CSIS poor marks, awarding it One Star, near the opaque bottom of a Five-Star transparency scale. This year, CSIS earned Three Stars from Transparify — neither fully opaque nor transparent, but at least moving in the right direction.
The CSIS website now lists donors on a general range. It discloses that the Vietnamese government gave CSIS somewhere between $50,000 and $500,000 in 2014. But the site does not disclose what the money was intended for.
Hiebert co-authored a major 2014 CSIS study of U.S.-Vietnamese relations: “A New Era in U.S.-Vietnam Relations. So who might have paid for that?
Readers couldn’t tell from the study’s acknowledgments. “We would like to acknowledge the thoughtful and generous support and counsel received from the Embassy of the Socialist Republic of Vietnam in Washington, D.C., the U.S. Embassy in Hanoi, and the U.S. Consulate in Ho Chi Minh City.” But who, exactly, paid for it?
Hiebert — after being asked twice — confessed that the Vietnamese government paid for the study. He said that there was no U.S. government funding for that study.
CSIS spokesman Andrew Schwartz insisted that it is “mean-spirited” to suggest that anyone who read the acknowledgment would not have known that it was “clearly” the Vietnamese who paid for A New Era. “[I]f you decide to write that CSIS didn’t acknowledge the support of the government of Vietnam, you will be in error,” Schwartz declared. CSIS always discloses the sources of funding for its studies, the CSIS media analyst declared.
Mostly always, might be more apt. A recent CSIS study focusing on human rights in countries like Russia, Venezuela and Ethiopia was forthright about where the money came from: “This report is made possible by the generous support of the Oak Foundation” it discloses. And still another CSIS study on U.S.-Japan relations discloses that the money came from Japan’s Sasakawa Peace Foundation. The contrast with the misleading acknowledgment to Hiebert’s New Era study is about as clear as it gets.
In that study Hiebert criticizes U.S. congressional human-rights champions for being an ineffectual name-and-shame crowd. He further criticized many Vietnamese-American pro-democracy advocates for being out of touch with realities in today’s Vietnam.
But when it came to Vietnam’s human-rights record, Hiebert seemed to pull his punches. There is no mention of Hanoi’s non-compliance with the International Covenant on Civil and Political Rights, which Vietnam is a signatory to. There is no mention of the provisions of Vietnam’s penal code that criminalize free speech and assembly — and criticizing the Communist Party. Instead, the study basically acknowledges the obvious: that human rights is the most difficult issue between the U.S. and Vietnamese governments. Instead of suggesting that Vietnam could help improve its credibility by modernizing its offensive penal code, Hiebert merely recommended more meetings between the U.S. government and Vietnam’s Ministry of Public Security.
Hiebert vehemently denied that he softened his tone because of who paid for that study.
Meanwhile, Hanoi’s lobby agenda seems to be working. The U.S. government and Congress are leaning toward allowing Vietnam to purchase the lethal arms it seeks. There is little talk in the Trans-Pacific Partnership trade deal about Vietnam’s first making “demonstrable progress” on the core human-rights issues involving the freedoms of speech, assembly, religion — and the offending provisions of the penal code that mock the international rights covenants that Hanoi has signed. (The precise details of the TPP deal, which has not been finalized, remain classified.)
President Obama has said he would like to accept Secretary General Trong’s invitation to visit Vietnam, although the president has not yet set a date. Hiebert pointed out in our exchange of e-mails that he has recommended that when Obama does fly to Vietnam, he speak forcefully on human rights.
A skeptic might observe that this is what Assistant Secretary of State Tom Malinowski, Secretary John Kerry, and so many other U.S. officials have done — so many times, over so many years, to such little avail.
Don’t Blame (Just) Obama
As anyone who has even casually skimmed recent headlines would already be aware, President Barack Obama’s international trade agenda is basically stuck. Blame Washington, D.C.’s familiar political gridlock. As the incumbent president, Obama, who has never made trade a high priority, naturally is getting the lion’s share of the blame. But while the president is hardly beyond criticism, don’t just blame him. Trade became a wedge issue long before Obama became president. And many of the dubious policies that Obama is being criticized for endorsing — protectionist Buy America laws, complex and basically unworkable special rules for textiles, regressive high U.S. tariffs on shoes and clothing, and so forth — were inherited from his predecessors of both political parties.
So anyone who really wants to play the blame game — and in Washington, D.C., who doesn’t? — would be well-advised to look beyond the White House to both sides of the aisle on Capitol Hill.
Scratch deeply enough into any policy failures in Washington, and Congress is usually the culprit. On trade, Senate and House Democrats are basically controlled by the party’s union-dominated protectionist wing that fears global competition as a threat to American jobs. The more encouraging news should be that most Republican lawmakers’ instincts are that trade expansion and free markets are good things. Still, Republican leadership on trade has become an oxymoron, as a look at the recent record of the House Ways and Means Committee reveals.
To take a glimpse into how U.S. trade politics are (not) working in Obama’s Washington, the story begins with the unfortunate recent headlines.
In his Jan. 28 State of the Union 2014 message Obama asked Congress to pass legislation giving him so-called Fast Track trade promotion authority (fast track is sometimes called by the acronym TPA, for the latter three words). This would allow the president to negotiate trade-liberalizing pacts with the European Union and important Asia-Pacific trading partners. Fast Track legislation would require Congress to vote either Yea or Nay to any trade deal that Obama would submit for ratification. Such a special rule would bypass the inevitable crippling amendments that lawmakers would offer on behalf of protectionist constituencies — crippling because the amendments would undo the carefully crafted negotiations.
But the next day, Sen. Majority Leader Harry Reid (NV) warned Obama “to not push this right now.” The feisty Reid, who controls the senate calendar, bluntly said that Fast Track would not be on it. Within days, other influential leaders of the Democratic Caucus like Sen. Richard Durbin (IL) weighed in. Their clear message: we have zero interest in forcing Democrats to approve Fast Track — and thus offend the party’s protectionist wing — before the November midterm elections.
The White House protested, sort of, with spinmeisters insisting to reporters that the president still hoped to get Fast Track, sometime anyway, in an unspecified future. When Obama met on Feb. 3 with Reid and the chairman of the Democratic Senatorial Campaign Committee, Sen. Michael Bennet (CO), the president never mentioned trade, according to a report by New York Times reporters Peter Baker and Ashley Parker that the White House did not dispute. Instead, Obama, Reid and Bennet talked about the upcoming November congressional elections, and how Obama might help raise money for the party’s coffers. (Reid is perhaps the most implacable opponent of international trade on the Hill. In 1994, he even voted against legislation that ratified the so-called Uruguay Round of multilateral trade liberalization that created the World Trade Organization.)
House Minority Nancy Pelosi and other prominent Democratic trade skeptics also were not shy about saying they also didn’t want to see a Fast-Track vote before the midterm elections. On Feb. 14, Vice President Joe Biden met with House Democrats and said that he “understood” their political concerns, according to other authoritative news accounts. No president has had Fast Track negotiating authority since 2007, when Pelosi, then House Speaker, killed it. Three preferential trade deals (with South Korea, Colombia, and Panama) that had been signed by Bush were not ratified by Congress until 2011, after the Republicans had won control of the House.
Stalled in Singapore
Predictably, Obama’s trade agenda stalled in Singapore on Feb. 25, after several days of talks between U.S. trade negotiators and their official counterparts in the 12-nation Trans-Pacific Partnership talks. U.S. Trade Representative Michael Froman had hoped to seal the deal in Singapore. But when he arrived in Singapore, Froman quickly learned that his counterparts were not willing to reveal their bottom lines. “If I were a minister from one of the TPP countries, I would be extremely reluctant to put my most sensitive items on the table,” explains Deborah Elms, a respected American trade watcher who is based in Singapore.
Elms and other veteran trade watchers point out that it would be foolish for any country to try to negotiate an end game with U.S. trade negotiators, knowing that without Fast Track, the U.S. Congress is poised to move the goal posts that would undo any “binding” trade deal that Obama might cut. Until this is fixed, the Obama trade agenda will remain stuck: no TPP deal, and no trade agreement with the European Union, either.
There will be geopolitical consequences. The longer Washington’s isolationist international trade gridlock lasts, the more other countries will move on without American participation. That has, in fact, been the trend for several years. China, Canada, Japan, the European Union, Singapore, the Association of Southeast Asian Nations, Hong Kong, New Zealand, Australia and others have all been busy enhancing their economic ties with selected trading partners, while Uncle Sam has been sidelined. The latest news on that front came on March 11, when Canada and South Korea announced that they had concluded a preferential trade deal. The United States is the one country that once did the most to foster multilateral trade liberalization. But nowdays, memories of the terrible tit-for-tat protectionism of the 1930s that contributed to the devastation of World War II have faded in official Washington. The emerging 21st century story line is how America is being left behind.
Froman goes to Capitol Hill
In recent weeks, U.S. Trade Representative Michael Froman has been prowling the corridors of Capitol Hill, doing everything he can to persuade reluctant congressional figures to grant the president the necessary Fast Track negotiating authority. While Froman’s meetings have been held behind closed doors, by all accounts the USTR has changed few if any (closed) minds.
Froman is considered an able man, and his political strength is anchored to his close relationship to Obama that dates to their days at Harvard Law School. That’s always valuable currency in Washington. But neither Froman nor the president has the stature to cajole, pressure, intimidate and otherwise move difficult members of Congress than the late Robert Strauss memorably displayed, when he served as the chief U.S. trade negotiator in the late 1970s.
Consider Froman’s recent efforts to reason with Rep. Rosa DeLauro (CN), a member of the House Democratic leadership. DeLauro’s basic view of international trade blames China for stealing American jobs. She has lined up 151 Democratic lawmakers who say they will not support Fast Track legislation. A few weeks ago, Froman was observed talking with DeLauro in the halls. When he tried to reason with her, the congresswoman subjected the USTR to a shrill earful about how trade deals like the TPP were only going to “kill” more American jobs. The likes of DeLauro would never have dared to speak to Bob Strauss that way.
(DeLauro represents New Haven, an important U.S. port that brings thousands of jobs to her district. The port makes a lot of money from traffic that comes through the Panama Canal, yet DeLauro voted against the U.S.-Panama preferential trade agreement.)
Froman’s efforts to try to reason with Democratic senators have not been much more rewarding. The man he’s got to deal with first-and-foremost is Sen. Ron Wyden (OR). Wyden assumed the chairmanship of the Finance Committee in February, replacing Max Baucus, who is now the U.S. ambassador to China. (Wyden has also chaired Finance’s trade subcommittee, a position he is holding onto.)
Before he left the senate, Baucus had worked successfully with pro-trade Republicans Orrin Hatch (UT), the Finance Committee’s top Republican, and House Ways and Means Chairman Dave Camp (MI), to come up with a bipartisan Fast Track bill. But while Wyden has a history of generally supporting trade deals, he has been lukewarm at best to the carefully-crafted Baucus-Hatch-Camp compromise.
At a March 13 hearing, Wyden highlighted his declared economic priorities, which he said were to come up “innovative approaches to strengthen and expand the middle class.” His priorities involved “education,” “savings,” “tax reform,” “health care,” “strengthening the social safety net” and raising the “minimum wage.” Expanding international trade flows and passing Fast Track legislation were not mentioned.
Railing against Secrets
Wyden has developed a certain style since he was first elected to the House 33 years ago (he became a senator in 1996). Whatever the issue, he’s always looking out for ways to rail against government secrecy, while at the same time never making much effort to dig deeply.
As a member of the Intelligence Committee, Wyden frequently rails against alleged CIA secrecy abuses — as least when the cameras are around. In 2007, Wyden played a leading role in killing the nomination of John Rizzo to become the general counsel of the Central Intelligence Agency. Anyone who wants a glimpse into what it is like to deal with the senator from Oregon might want to read Rizzo’s riveting account of his thirty-plus years in the CIA, Company Man. Rizzo relates that he learned only by reading an account in the New Yorker that Wyden had put a hold on his nomination in August, 2007. Rizzo wrote that he had never spoken with Wyden. He further related that the senator had declined a routine personal “courtesy” pre-hearing meeting.
But when the CIA lawyer’s public confirmation hearing was held in September, Wyden asked Rizzo a series of questions about classified CIA operations. Rizzo understandably demurred, saying that he could not respond fully in a public setting. “With everyone watching, he wagged his finger at me and vowed to get deeply into these issues at the closed session,” Rizzo relates of Wyden. Yet when the cameras were turned off, and that closed session was held, Wyden— along with Sens. Diane Feinstein (CA) and Carl Levin, who had also helped trash Rizzo’s nomination — failed to show up. In the face of such shabby treatment to a civil servant who had served his country for three decades, the White House ultimately was forced to withdraw Rizzo’s nomination.
Wyden has also been a vocal critic of the TPP trade talks, on grounds the White House has been negotiating the details in secret. So it raised some eyebrows on March 10, when this champion of openness in government called a “Senators’ Meeting” to talk about the TPP with USTR Mike Froman — behind closed doors. When he came out of the secret meeting, the senator wasn’t particularly forthcoming to reporters about what had transpired. “This was the first of what is going to be a series of discussions on the committee on a bipartisan basis,” he told Politico’s Doug Palmer.
While Wyden criticizes the White House’s secrecy on the TPP talks, there is nothing to prevent the senator from holding a number of informative hearings that would illuminate in great detail what’s at stake in each of more than 20 TPP chapters — without ever getting into classified U.S. negotiating positions. But that would take a certain amount of intellectual effort — and a close attention to the sort of details that all successful trade agreements turn on.
A Stacked Subcommittee
Beyond the lackluster Wyden, the Finance Committee’s trade subcommittee is stacked with anti-trade Democratic stalwarts. There’s Sherrod Brown (OH), a union ally and economic nationalist who basically speaks for the interests of the insular-looking western parts of his state. Debbie Stabenow (MI) watches out for the Detroit auto lobby. Chuck Schumer (NY) is mainly interested in punishing China. Jay Rockefeller (WVA) has long been the senator from the steel lobby. And there is Michael Bennet, the Colorado elections strategist who does not want to force Democrats to vote on Fast Track before this November’s congressional elections. Imagine being a U.S. trade negotiator who has to try explaining the benefits of trade liberalization to such a crowd.
Which brings us to the Republicans, who are generally pro-trade, pro-Fast Track, Pro-TPP and pro-T-TIP (the acronym for the Trans-Atlantic U.S.-EU trade talks that Obama has launched.) Here’s where the news should become more positive — but it doesn’t.
The Republicans control the House of Representatives, with a 33-seat advantage over the Democrats. Speaker of the House John Boehner (OH) has the votes to pass Fast Track. But when the president asked for that two months ago in his State of the Union address, Boehner’s reaction was tepid — while the Democrats started immediately building up a political head of steam to kill the idea.
On Jan. 29, the day after Obama’s declaration he was committed to Fast Track, Boehner said that while Republicans would support the idea, it was really up to the president to lead. “We cannot pass this bill without his help,” the Speaker said of Obama. “If this is one of his own priorities, you would think that he would have the Senate Majority Leader working with him to pass Trade Promotion Authority in order to expand opportunities for our fellow citizens.”
By passing the buck, Boehner has — so far at least — been passing up a wonderful opportunity to demonstrate real bipartisan leadership. If House Republicans were to move aggressively to pass Fast Track, Republicans would demonstrate that they will support the president on a matter of great economic importance to the country. The political beauty is that forcing the Democrats to vote for Fast Track would split the opposition party in an election year. Such opportunities for Republicans to do the right thing for the country, while embarrassing the Democrats, don’t come along every day in Washington.
Boehner, a decent but sad-looking man — perhaps because of his well-known inability to control the intransigent tea party Republicans — has had other “fast track” legislative priorities. On March 12, the Speaker pushed through by a 233-181 vote a bill that would expedite congressional lawsuits to sue Obama for failing to enforce certain federal laws. One of those, predictably, was Obama’s health-care law. The others, noted AP reporter Donna Cassata, involved steps the president has “taken to allow young immigrants to remain in the United States and the administration’s resistance to defend the federal law banning gay marriage.”
Ways and Means: No Way
Meanwhile, the Republican-led Ways and Means Committee (the House Committee that has jurisdiction over trade) hasn’t been able to pass legislation that even the Democrats also support. It’s difficult to be worse at one’s job than that.
Consider the Miscellaneous Tariff Bill. For three decades, Congress has approved bills allowing American manufacturers to import raw materials and components they need to make products without paying tariffs. The MTBs have traditionally been so devoid of controversy that they used to be passed unanimously. And why not, as the duty-free imported components are reserved for products not manufactured in the United States. There are no domestic protectionist lobbies to appease, as MTB is only aimed at helping American manufacturers become more efficient.
The previous MTB authority that allowed duty suspensions on more than 600 products expired at the end of 2012. There had been very influential warnings all year that Congress should not let such a thing happen.
Throughout 2012, the National Association of Manufacturers, saying that the absence of tariffs supported some 90,000 American jobs, repeatedly urged passage of a new MTB bill. NAM pointed out that paying duties on items that are not available in the United States constitutes an unnecessary tax on American manufacturers. On April 20, 2012, Auggie Tantillo, the top executive of the American Manufacturing Trade Action Coalition, announced that 65 Republican freshmen members of the House supported prompt passage of an MTB renewal bill. “Plain and simple, the MTB is a trade bill that is a job creator for U.S. manufacturing,” Tantillo noted. The American Apparel & Footwear Association also registered its strong support. “By reducing or suspending duties on certain imports that are not found in the United States, the MTB lowers costs for U.S. companies that depend on those imports for their competitiveness,” the AAFA reasoned in a press release on May 10, 2012. “It’s that simple.”
Despite such broad support, the MTB authority expired on Dec. 31, 2012. On July 17, 2013, Dave Camp, the Republican from Michigan who chairs the Ways and Means Committee, and also the committee’s top Democrat, Sandy Levin (also of Michigan), introduced a bill to extend the MTB on July 17, 2013. They were joined by other key lawmakers from both parties. The Camp-Levin extension proposal to extend MTB has gone nowhere.
There’s more bad news. The Generalized System of Preferences legislation that provides duty-free access to U.S. markets for 123 U.S. trading partners, some of them among the world’s poorest countries, expired in July, 2013. In 2012 American companies imported some $19 billion worth of products covered by GSP — many of them necessary components that U.S. workers needed to manufacture products. Although both the Republican and Democratic leadership of Ways and Means have strongly supported GSP’s renewal, it hasn’t happened. Estimates are that the costs to U.S. manufacturers, who now have to pay the (unnecessary) tariffs, has been more than $750 million. Congress has been willing to let this happen.
The Ways and Means trade subcommittee held only three hearings last year: covering U.S. trade relations with Brazil, India, and the European Union. The full committee called USTR Michael Froman, who had just assumed the office, to a hearing in July. The questioning was light.
This year Chairman Dave Camp has issued 49 press releases on various topics ranging from healthcare to taxes. Two of them were about international trade. On Jan. 9, Camp noted that he had introduced Fast Track legislation, along with Sens. Max Baucus and Orrin Hatch. And on March 4, Camp issued a release commenting on Obama’s trade agenda. “TPA is my top trade priority,” he insisted. Rep. Devin Nunes, a California Republican who chairs the trade subcommittee, added: “TPA must be enacted immediately.”
In the past year, a Ways and Means Committee that was on top of its job might have held at least a dozen in-depth hearings that would have better informed the American public — and many of us in the press — on a variety of interesting international trade issues. The committee could have highlighted the stakes involved in pressing countries like Vietnam, Malaysia, and China to bring their state-owned enterprises more market-oriented. It could have highlighted what intellectual property issues in the TPP talks are all about. It could have highlighted the important contribution that imports make to sustaining American manufacturing jobs. It could have highlighted the World Trade Organization’s ongoing efforts to expand international support for multilateral trade liberalization. But the Ways and Committee has chosen to highlight —- nothing.
Blame Obama for his own contribution to the stalled U.S. trade agenda, if you will. But don’t just blame him.
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.