The Philippine president is determined to forge closer ties with China — but at what cost?
BY GREG RUSHFORD
OCTOBER 17, 2016
Since he took office on June 30, Philippine President Rodrigo Roa Duterte — also known as “Duterte Harry” — has earned international notoriety for a harsh anti-drug campaign that has led to the extrajudicial killings of more than 3,600 alleged traffickers around the country. The crackdown has alarmed the European Union, the United Nations, and the United States. At one point Duterte called Barack Obama “a son of a whore,” later telling the U.S. president “to go to hell” after Washington dared to criticize the murders. Sooner or later, Duterte has vowed, he will “break up with America,” the Philippines’ longstanding treaty ally and security guarantor.
There’s one international power that doesn’t seem particularly bothered by Duterte’s excesses. “The Chinese side fully understands and firmly supports the Duterte administration’s policy that [prioritizes] the fight against drug crimes,” said Chinese Ambassador to the Philippines Zhao Jianhua in a speech last month. He went on to express his satisfaction at the “friendly interactions’ between the two countries since the new president began his term, predicting that the sun “will shine beautifully on the new chapter of bilateral relations.”
If anything, the ambassador may have understated the matter. This week Duterte is set to meet Chinese President Xi Jinping in Beijing, where the two are planning to sign a range of high-level bilateral agreements that will dramatically boost trade and investment between the two countries. Nor is their new friendship restricted to business. The visit comes just days after Duterte declared an end to joint Philippine-American naval patrols in the strategically sensitive waters of the South China Sea, where China has been steadily expanding its presence despite rival claims by Manila and other countries. The 65-year alliance between the U.S. and the Philippines has never looked so fragile.The 65-year alliance between the U.S. and the Philippines has never looked so fragile.
So why the shift in policy? On one level, Duterte’s desire to seek friendship with the Chinese reflects a willingness to appease Beijing’s aggressive stance in the disputed waters. Chinese Coast Guard warships armed with machine guns and water cannons have harassed Philippine fishermen, preventing them from earning their livelihoods in their traditional fishing grounds in the South China Sea (90 percent of which China claims as its own). Chinese dredges have been deployed well within the Philippines’ 200-nautical-mile exclusive economic zone, where they have destroyed irreplaceable coral reefs to build airstrips and naval bases aimed at enhancing Chinese offensive power. China has also forcibly prevented Filipinos from developing valuable oil, gas, and mineral resources that they’ll need in the coming years to power their electricity grid. “I will not go to war” over such matters, Duterte has declared.
On July 12, just short of two weeks into Duterte’s presidential term, an international tribunal in The Hague ruled that China has been acting in violation of Beijing’s sworn obligations under international maritime law. The litigation was brought in 2013 by Duterte’s predecessor, Benigno Aquino Jr., who sought to use the rule of law to rally international opinion to pressure the Chinese to respect Philippine sovereignty. Now Duterte appears to be signaling that he’s willing to overlook the tribunal’s findings if China is willing to do a deal.
There are various explanations for Duterte’s eagerness to seek a compromise. Some of those who know the president well suggest that the pivot is rooted in the left-of-center ideology he has professed in his past, which left him with a residual suspicion of the West (and Americans in particular). Duterte openly admires one of his former college professors, Jose Maria Sison — the founder of the Communist Party of the Philippines and its armed wing, the New People’s Army. Others point out that Duterte, who has several times threatened to declare martial law, has praised authoritarian leaders like former Philippine strongman Ferdinand Marcos. And besides China’s President Xi, Russia’s Vladimir Putin has been wooing the Philippine president with suggestions of cheap financing for Russian attack helicopters.
Meanwhile, Duterte and his foreign secretary, Perfecto Yasay, have been courting the support of business elites who favor closer relations with Beijing. In his career as a lawyer, Yasay represented the interests of Chinese-Filipino tycoons who have good connections in Beijing. Yasay, who brought no foreign policy experience to his position, has also been careful to speak respectfully of the Chinese — while telling an audience of Washington, D.C. insiders that Filipinos no longer want to be America’s “little brown brothers.”Filipinos no longer want to be America’s “little brown brothers.”
Among Yasay’s prominent clients has been Lucio Tan, one of the country’s richest men, who Duterte has said was one of the first to urge him to seek the presidency. While little-known outside Asia, billionaire Tan — who was born in China’s Fujian province and is considered on the mainland to be a “patriotic” Chinese — is one of the most controversial figures in Philippine political circles. He was one of the original so-called “Marcos cronies,” who became rich thanks to the tax breaks and other government subsidies granted in the 1970s by Ferdinand Marcos.
After Marcos was deposed in 1986, a series of successive Philippine prosecutors sought unsuccessfully to recover Tan’s allegedly ill-gained wealth. Today, he is chairman of Philippine Airlines, the country’s flagship carrier, and has extensive holdings in banking, mining, tobacco, beer, hotels and property development. He’s also made some major investments in China, which have clearly earned him the goodwill of Beijing. When Chinese presidents come to Manila, they always stay in one of Tan’s hotels.
Though there’s no evidence that Duterte is financially beholden to Tan — the president says he turned down the tycoon’s offer of cash and the use of aircraft during the campaign — they share a strong interest in closer ties with the Chinese. During his campaign, Duterte received an especially warm welcome from the Federation of Filipino-Chinese Chambers of Commerce and Industry, of which Tan is an honorary chairman. Along with the Chinese ambassador, Tan was one of the first prominent visitors Duterte received after his election victory.
In his eagerness to establish close economic ties with Beijing, Duterte has also said he is looking to revive various Chinese-Philippine joint ventures that were envisioned a decade ago during the presidency of Gloria Arroyo. The most notable project on Arroyo’s watch involved a $329 million telecommunications contract with China’s state-owned ZTE Corp. But Arroyo’s hopes to forge closer economic ties with China were derailed by various allegations of pay-offs that involved ZTE, Arroyo herself, and members of her entourage. Authorities in Manila recently dropped graft charges against Arroyo and her former colleagues, and her four-year house arrest has been lifted. Duterte has insisted that he had nothing to do with those decisions, though he had publicly offered to pardon Arroyo, in any case.
While no corruption allegations have surfaced in the new Duterte administration, the concerns about the adverse consequences of doing business with China remain. As Philippine professor Aileen Baviera has observed, the ZTE deal “was an example of how Chinese wealth … can undermine already weak institutions and government norms in a recipient country.”
While some members of the Manila elite worry that Duterte’s campaign of extrajudicial killings threatens to corrode the hard-won rule of law, Filipino-Chinese businessmen are among the most vocal defenders of the president’s drug war.Filipino-Chinese businessmen are among the most vocal defenders of the president’s drug war. And a tycoon from mainland China, Huang Rulun, who first acquired his wealth while living in the Philippines, has pleased Duterte by volunteering to pay for a new internment camp for thousands of drug users who have surrendered to police rather than fall victim to the slaughter.
While Duterte is currently riding high in public opinion polls, signs of a backlash are already starting to emerge. A notable indicator came last week when respected elder statesman and ex-President Fidel Ramos — whom Duterte has said would be a special envoy to China — publically expressed deep concerns about where the new Philippine leader is headed. Ramos lamented that “Team Philippines” is losing, “and losing badly.” Also last week, Supreme Court Justice Antonio Carpio even felt it necessary to remind Duterte that to surrender Philippine sovereign rights would be an “impeachable offense.”
Indeed, if Duterte continues on his current course — downplaying the legally binding decision of the Hague tribunal and watering down his own country’s territorial claims — his honeymoon with voters could end quickly. The Philippines remains one of the most pro-American countries in the world; in one recent survey, a whopping 92 percent of the population held positive attitudes towards the U.S. And some of the most pro-American Filipinos are to be found in the military, which looks to the American security relationship to counter Chinese bullying — which might help to explain why Duterte has been busily showering top officers with favors and cash.
By Greg Rushford
Last week marked some memorable history being made — and some key dates perhaps fraught with deeper historical significance than either Philippine President Rodrigo Roa Duterte or China’s Xi Jinping would care to be reminded of.
On Oct. 17, Xinhua reported that the president of the Philippines — then enroute for an official state visit to China — had admitted he would not fight for his country. “There is no sense in going to war” to recover Philippine territory that Chinese forces have seized in the South China Sea, Rodrigo Roa Duterte had declared. “There is no sense fighting over a body of water.” Also on Oct. 17, Duterte told Hong Kong’s Phoenix Television that he wanted to hold war games with China — and no longer with the Philippines’ longstanding treaty ally, the United States. “I have given enough time for the Americans to play with the Filipino soldiers,” he said.
On Oct. 20, speaking in the Great Hall of the People, Duterte delivered on what he had promised would be the “defining moment of my presidency,” sticking the knife into the Americans. “In this venue, your honors, in this venue, I announce my separation from the United States.” Duterte went on to say this: “I’ve realigned myself in your ideological flow and maybe I will also go to Russia to talk to [President Vladimir] Putin and tell him that there are three of us against the world — China, Philippines and Russia.” America, he added, “has lost.”
Also on Oct. 20, a triumphant-looking President Xi delivered his part of the bilateral bargain. In return for the Philippine president’s willingness to look the other way regarding Chinese naval- and air bases in the South China Sea, Beijing would start delivering more than $13.5 billion of soft loans and an array Chinese-controlled joint development projects to fill Duterte’s begging bowl.
Professor Erwin Tiongson of Georgetown University’s Walsh School of Foreign Service and a man with a keen historical eye, helps put last week’s chronology in a fitting context. October 20, as Duterte was venting his scorn for Americans in Beijing, marks the 72nd anniversary of Gen. Douglas MacArthur’s landing in Leyte. Five months later, a future President Rodrigo Roa Duterte would be born into freedom — on the island of Leyte.
The historical record is silent — and Duterte himself has not responded to a written invitation to clarify it — on how his parents, Vicente Duterte and Soledad Roa Duterte, might have celebrated when the Americans freed them from foreign aggression. We don’t know (yet) whether Vicente and Soledad were among the brave Filipino patriots who harassed Japanese forces on Leyte and passed valuable intelligence on to the U.S. Sixth Army — or whether they, like others, were collaborators. But we know what to call the son, who has admitted he is eager to look the other way in the face of foreign aggression, in return for money.
Also on Oct. 20, while Duterte was venting his spleen against Americans in the Great Hall of the People, the U.S. Embassy in Manila dispatched Col. Kevin Wolfla to Leyte. The decorated U.S. Army attaché spoke to an audience in the town of Palo that had gathered to mark the 1945 Leyte Gulf landing. “Our relationship with the Philippines is broad and our alliance is one of our most enduring and important relationships in the Asia-Pacific region,” Col. Wolfla (rightly) noted. “It is a cornerstone of stability for over 70 years.”
The Philippines News Agency reported that Leyte Gov. Dominico Petilla “repeatedly thanked the US for its role in the Philippines’ liberation and massive assistance of the US government after super typhoon Yolanda.” The governor’s mother, Palo Mayor Remedios Petilla, “assured that US officials will always be invited in future Leyte Gulf Landing celebrations,” the news report added.
Seventy two years after the landing that set the stage for the largest naval battle in history — and the liberation of the Philippines, Filipinos still mark the date with a MacArthur Landing Memorial National Park. And it turns out that President Duterte has a most personal reason to remember American sacrifices for his country. But for reasons that have yet to be explained, Rodrigo Duterte’s historical memories are shorter.
Duterte was born on Leyte on March 28, 1945. While his mother was giving birth, Japanese forces sunk an American submarine, the USS Trigger, which had been patrolling in Japanese waters. Eighty-nine Americans under the command of CDR David Rickart Connole lost their lives that day. The Trigger had already sunk “at least fifteen enemy vessels for a total of more than 85,000 tons of shipping,” according to the United States Navy Submarine Force Library and Museum, in Groton, Connecticut. Motor Machinist’s Mate First Class Constantine Guinness, one of the Trigger’s intrepid men, had captured the Trigger’s spirit with a poem: “I’m the Galloping Ghost of the Japanese Coast.”
The names of the Trigger’s crew are also remembered in the missing-in-action memorial in the USS Bowfin Submarine Museum and Park, in Honolulu, Hawaii. Duterte’s foreign secretary, Perfecto Yasay — who has also been busy expressing his disdain for Americans these days — was living in Hawaii with his family when his old friend Duterte tapped him for the Department of Foreign Affairs. As I reported in a column published on ForeignPolicy.com on Oct. 17, Yasay has professional ties to Filipino-Chinese tycoons with high-level connections in Beijing.
Duterte has not responded to questions as to whether he has ever been to the American Cemetery in Manila. Tucked away on 152 peaceful green acres, the cemetery honors the memories of the 16,632 Americans and 570 brave Filipinos who are buried there — and whose lives will be eternally marked by their sacrifices to free the Philippines from foreign occupation. There is also a chapel and a memorial honoring 36,285 Americans, Filipinos and other members of the allied armed forces who were killed in action — including the eighty-nine Americans from the Trigger who died the day Duterte’s mother gave birth.
There are other dates worth contemplation as the Duterte presidency continues down its anti-American path. But one stands out.
On September 9, 1945, Japanese forces surrendered in China. President Xi Jinping and other senior members of the Politburo like to pretend that China’s armed forces threw out the Japanese. The chest thumpers in today’s Beijing are loath to acknowledge that Americans, Australians, British, New Zealanders, Canadians and others also had their hands in that victory, to understate the matter considerably.
The missing date in the chronology is the time that China helped another country secure its liberty, at the cost of considerable Chinese lives. That’s because such a historical event has yet to happen.
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.
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.