Author Archives: Greg Rushford

How Hanoi Buys Influence in Washington, D.C.

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 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.

Hot (Headed) Yoga

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(The conclusion of a two-part series)

Note to readers: Yesterday, in an article headlined “Fed Up,” I reported that many members of the World Trade Organization have reached the end of their patience with a handful of members — India, and a few African and Latin Americans who love to nurture their grudges against the “rich” countries. Frustrations that such countries have poisoned the WTO’s negotiation atmosphere have been gradually building since the WTO was launched in 1995. The tipping point came in July, when India’s new prime minister, Narendra Modi, vetoed the only successful multilateral trade negotiation the WTO has ever conducted.

 As the future viability of this vital international trade rule-making institution is now on the line, it’s important to take a closer look at how the present fight started, and why. Today’s report offers more details on: where Modi is coming from, exactly what he wants, and who his sympathizers are. While India claims to speak for the world’s poor, that certainly is not the view of an increasing number of developing countries around the world. India’s trade distorting agriculture subsidies have caused food riots in parts of Asia, Africa, and Latin America. These days, complaints of the harm that India is inflicting upon other poor countries are surfacing again, particularly in Rwanda and other African countries. Concluding, the report highlights how leading WTO member countries plan to move on, with or without the cooperation of India and the other laggard countries.

So where is Modi coming from?

Modi, proudly, is a hardline Hindu right-winger, an economic nationalist who boasts of a 56-inch chest. He is a tough guy, a man who loves a brawl. His top political aide is dodging a prosecution for various murders. Modi himself has denied (unconvincingly) his role in the killings of some 2,000 Muslims in organized riots in his home state of Gujarat, back in 2002.

And in the past week, Modi has rather exuberantly been raining mortars and machine-gun fire across a populated India-Pakistan border area of Kashmir. The fighting, which has broken a tenuous truce reached in 2003, has so far killed nearly 20 civilians and displaced nearly 20,000 civilians, according to news reports. “The prime minister’s office has instructed us to ensure that Pakistan suffers deep and heavy losses,” a senior Indian Home Ministry official has told Reuters reporters Rupam Jain Nair and Mehreen Zara-Malik. Modi himself has boasted that “it is the enemy that is screaming.” Kashmir, with the possible exception of the Korean DMZ, is perhaps the world’s most dangerous border. A border where Hot Heads on both sides brandish their nuclear weapons.

Some of the other opinions that Modi brandishes are less scary, but well, unusual. Speaking to the United Nations General Assembly in New York on Sept. 27, Modi called for an “International Yoga Day.” He asserted that “yoga,” “spiritualism” and clean living could contribute to a better global environment. “By changing our lifestyle and creating consciousness, it can help us deal with climate change,” he explained to the diplomatic dignitaries. Meanwhile, back in New Delhi, the clean-living prime minister has authorized “hundreds of projects” to clear pristine forests, making way for mega power plants and other industrial projects that previous Indian governments had rejected on environmental grounds, Tommy Wilkes has reported for Reuters.

Modi held the WTO’s trade-facilitation package hostage to India’s demands to be allowed — permanently — to violate existing WTO restrictions on the subsidies it is allowed to dole out to uncompetitive Indian subsistence farmers. Adding to the indignity: previous Indian governments had agreed to those WTO rules in the 1980s. And the Indian government that Modi replaced in May had duly signed onto the Bali Package last December. As U.S. Trade Representative Michael Froman said last week, India has now “reneged” on its signed obligations.

Moreover, Modi’s demands have left WTO diplomats scratching their heads, wondering what he might have been smoking.

***

Food Insecurity

Since obtaining independence from Great Britain in 1947, India’s leaders have never figured out how to feed their people. In the name of “food security,” Indian governments have been buying food from the country’s farmers, paying above-market prices. The grains are then stockpiled. Perhaps half of the mountains of grain rot away, or are eaten by rats. Much of the rest is siphoned off by corrupt (politically connected) operators for sale on the black market.

What doesn’t rot or is not stolen is then doled out to feed India’s infamously malnourished urban population — especially when elections loom, which in India is often.

Perhaps because politics trumps economics, Indian politicians — no matter which party is in power —  have been increasing the subsidies, making bigger stockpiles.  And they have been demanding permission from the WTO to keep jacking up the subsidies as much as they want, even higher than the allowable limits that Indian governments have pledged to honor.

In Bali last December, the Indian negotiators won a generous four-year “peace clause.” That gave New Delhi four years to go ahead and violate existing WTO limitations by increasing agriculture subsidies, without fear of being held legally accountable. As the purpose of the WTO’s trade negotiations is to reduce trade barriers, not allow additional protectionism, this was arguably overly generous.

Yet the four-year grace period still wasn’t enough for Modi, when he came into office in May. He demanded that India be given the “permanent” right to break the existing rules — and right away, by the end of this year, thank you. Many diplomats, in many ways, have told the new Indian leader that this would never happen. Undeterred, Modi, somewhat joyously, brought down the Bali Package, thus shaking the foundations of trust that the WTO must have to remain viable.

At least, the ploy has generally played well at home. Indian officials have launched a whispering campaign, some of which has made its way into various Indian news accounts, falsely accusing the WTO’s top leadership of favoring the rich countries.

Claiming the Moral High Ground

Modi, like all of his predecessors dating to Jawaharlal Nehru (who ran India from 1947 to 1964, useful information for readers who are crossword puzzle addicts), has claimed that he holds the high moral ground. We are simply demanding the rights to feed our own poor, and we are the champion the world’s poor, so goes the refrain.

Some champion.

India is the world’s largest exporter of (subsidized) rice. The subsidies distort food markets in other countries by driving down prices. That’s bad enough in normal years for farmers in African and other nations who have to compete with the cheap Indian rice. Of course, the Europeans and Americans aren’t exactly innocents in such matters. But at least they have long ago moved away from stockpiling surpluses that cause real damage in world markets, preferring to pay their farmers cash subsidies that are considered less trade-distorting.

But India seems stuck on stockpiling and other protectionist schemes that cause real harm to trading partners. Remember the 2008 food riots in Haiti, Cameroon, Senegal and other countries? Global rice prices had skyrocketed after India put a damper on supplies by slapping on export controls during the previous year’s election season. Not only has no Indian politician ever apologized for the damage those export controls inflicted — after coming to power this May, Modi quickly imposed new price controls on onions and potatoes.

More recently, Rwanda’s trade minister, Francois Kanimba, explained to Shawn Donnan, the world trade editor of the Financial Times, how India’s present agriculture subsidies are hurting his country’s farmers. Rice and sugar from India had been reaching Rwanda “at such low prices [that] you are left wondering if these are really global market prices, simply explained by the competitiveness of the Indian economy,” Kanimba said. Donnan noted that the same concerns are being expressed in Nigeria, Benin, and other African food importers. This is “why the solution India is seeking at the WTO, which celebrates its 20th birthday in January, is unlikely to be palatable to many of its members,” Donnan concluded.

India’s claims to speak for the world’s poor used to be accepted automatically in the Third World. Signs that that’s been changing surfaced at the WTO’s Bali meetings last December. At a press conference, India’s then top trade official, Anand Sharma, asserted that India was only seeking “food security” for poor people everywhere. Sharma was humiliated by a furious journalist from Benin, one of the world’s poorest countries. “You don’t speak for us,” the Benin journalist angrily shouted. Those of us who were in the room will never forget the emotions on display at that press conference. (For further details, see “India’s Bali Debacle,” which I authored for the Wall Street Journal Asia. The piece, along with two other investigative reports into India’s WTO stance in recent years, is posted on the Wall Street Journal section of www.rushfordreport.com.)

India’s Admirers

These days, Modi’s been enjoying his success in having placed himself on the WTO’s center stage, even though he is playing the role of a pariah. Modi knows he enjoys the tacit backing of envious fellow economic nationalists in places like Venezuela, Bolivia, Zimbabwe, Ecuador and Cuba. Such leaders love to nurture their grudges against the rich countries, seeing the WTO as a tool of the rich. President Jacob Zuma of South Africa runs with this crowd. These days, Zuma must be especially envious of Narendra Modi’s nerve.

Zuma is another economic nationalist who is skeptical that the WTO’s multilateral trade liberalizing negotiations will benefit South Africa. But he might be better advised to seek some sound economic advice as to why South Africa’s economy has been losing its dynamism.

Two very savvy Pretoria-based authorities on what used to be called “political economy” — Mzukisi Qobo of the University of Pretoria and Peter Draper, of Tutwa Consulting — recently succinctly explained Zuma’s attitude on economics in a May 27 article in South Africa’s Business Day. Under Zama’s economic guidance, South Africa’s economic growth has been on a steady decline, Qobo and Draper noted. Nor does Zuma seem to grasp the “gravity” of the economic challenges that are holding his country back, they added. “He also seems to have given up on leaving a great economic legacy, and instead prefers to manage a balancing act of contending factions within the African National Congress (ANC).”

Zuma’s trade minister, Rob Davies, is a member of the Politburo of South Africa’s Communist Party. That fact speaks well of Davies’ personal courage in having opposed apartheid in the days when to do so was to risk one’s life. But it doesn’t necessarily suggest that Davies’ economic credentials are sterling. Many African observers worry that South Africa, traditionally the most solid African economy that still regards itself as the “gateway” to the rest of Africa, will inevitably be left behind. Watch the East Africans — especially the emerging ties and improved infrastructure linking Rwanda, Tanzania, Uganda and Kenya — many African watchers say. Yes, these countries also have their own economic weaknesses. And in the WTO, the East Africans seem to be split on whether to speak out in favor of India, or against. Still, one has a growing sense that their future could be brighter than South Africa’s, depending upon how well they manage to integrate themselves into the global economy. At some point, the South Africans will likely kick themselves for their lack of economic foresight.

Zuma first worked earlier this year behind the scenes with the Addis Ababa-based African Union (an opaque organization which wasn’t even a participant in the Bali negotiations) to reopen the Bali deal. Conveniently, Zuma’s former wife now heads the AU. But Zuma and the AU came under intense pressure, mainly from Europeans and Americans, but also by dozens of other WTO member countries. They backed down during African Union meetings held in Malabo, Equatorial Guinea, in August. Since then the African Group of WTO members has basically been holding their tongues, trying to pretend that what India has done, hasn’t really happened. (For the background, see “Power Plays in the WTO,” www.rushfordreport.com, June 3, 2014). South African and African Union officials declined repeated requests for comment, as did a spokesman for the WTO’s Africa Group.

In sum, what the Africans started and India’s Modi finished was the tipping point. Leading circles in the WTO — the “North” definitely, and many in the “South” — believe that this time, the chronic naysayers have simply gone too far.

An Uncertain Plurilateral Future

While the WTO’s future is presently clouded, one thing appears clear: no longer will a handful of malcontents be allowed to poison the chances of dismantling as many of the world’s remaining trade barriers as possible. That means the WTO will turn away from its tradition of conducting trade-liberalizing negotiations on a multilateral basis. Instead, there will be smaller groups of like-minded countries that will work together to facilitate trade flows. This is the so-called plurilateral option.

The future likely model has precedents. The WTO’s Government Procurement Agreement has 43 member countries (counting the European Union’s 28). The GPA’s rules, which are only extended to participating countries, are aimed at improving transparency and competitive bidding when governments agree to award contracts to all bidders (as opposed to just doling out lucrative contracts to well-connected domestic cronies). China, New Zealand, and eight other countries have been negotiating to join in that plurilateral. No African country has shown interest in joining in such an experiment in open government. Nor has India.

India is, however, a member of the WTO’s Information Technology Agreement, a plurilateral WTO success story that dates to 1997. ITA signatories, including India, have slashed tariffs on imports of high-tech gadgets like computers and telecommunications equipment. But India has refused to participate in ongoing negotiations to expand the ITA’s product coverage to include new inventions — iPhones, iPods and so forth — that weren’t invented in the 1990s. In fact, Modi has already moved in the opposite direction: jacking up tariffs on imports of iPhones.

Late last week, the WTO’s director-general, Roberto Azevedo, described the uncertain future for further WTO multilateral trade negotiations, especially if “no solution” is found for the “Bali impasse.” In such a case, the director-general noted to a business audience in Toronto on Oct. 9,  “then members must ask themselves some tough questions — about how they see the future of the Bali package and the post-Bali agenda. And what this means for the WTO’s negotiating function.”

Translated from the nuanced diplomatic language, Azevedo was pointing to a plurilateral future for the WTO, at least until the benefits of multilateral trade liberalization become apparent to the laggards. It might even turn out that the Bali deal will proceed as a plurilateral arrangement. India and the backward-looking African and Latin countries will be offered the choice to be left behind, if they prefer.  Such, it appears, is their future — at least until the day comes when they will be willing to take off their economic dunce caps.

Fed Up

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Fed Up

(First of a two-part series)

 Sometimes in life, there comes a tipping point when — enough is enough. And that pretty much describes the present mood in the Geneva-based World Trade Organization. The Americans, Aussies, Kiwis, Europeans, Canadians, Scandinavians, Japanese — basically, all of the most important trading centers around the world that comprise the vast majority of world trade — have had it. They are fed up. Fed up with India, especially. India’s new prime minister, the pugnacious Narendra Modi, has brought all WTO negotiations to a halt, thanks to his unprecedented recent veto of the only successful multilateral trade-liberalizing negotiation in the institution’s nearly twenty years of existence.  “Disgusted” even more, as one diplomat based in a European country un-delicately puts it, because Modi’s reasons simply defy economic logic.

Leading WTO members have also had it with various African and Latin American leaders like those in South Africa, Zimbabwe, Venezuela, and Bolivia. The leaders of such countries have gradually eroded their credibility by making no secret of the fact they just don’t really believe in the WTO’s core mission of dismantling trade barriers on a multilateral basis. Fed up with how the economic laggards have meanwhile been holding the rest of the WTO’s 160-member countries hostage to their parochial demands.

Over the years, the WTO and its predecessor international trade rules-making organization have operated on two core beliefs. First, that trade liberalization must be done for the good of all members, on a multilateral basis. Second, that the negotiations to dismantle trade barriers will be reached by consensus — but with the expectation that member countries will conduct themselves with a certain civility, and restraint. The institution cannot function when those core beliefs are trampled upon.

True, some WTO members like Switzerland, Norway and Japan who are presently outraged at India have their own protectionist rackets that they defend vigorously in negotiations (think only of Japan’s 500-plus percent rice tariffs). But, in significant contrast with India, such respected WTO member countries always conduct themselves with civility and restraint. It is unthinkable that they would wreck the institution for domestic political gain.

The frustrations with India and the other chronic economic under-achievers who have anti-colonial chips on their shoulders hardly stop at the traditional “North-South” divide between the rich countries and their former colonial possessions. Privately, some key officials from countries that have traditionally identified themselves with the WTO member countries from the “South” — including Mexico, Brazil, Pakistan, and even some in Rwanda, Ghana, Kenya, Nigeria, and Benin — share the frustrations. True, some of these same countries can’t seem to make up their minds which side they are on — Kenya comes immediately to mind, as do Tanzania and Uganda. Africans have often joined in the constant attacks against the WTO since it succeeded the General Agreement on Tariffs and Trade in 1995. But now, there seems to be an emerging fear in Africa that things have gotten out of hand, and that vulnerable African economies will suffer the consequences of India’s irresponsibility.

And there are the more economically enlightened smaller countries in the “South” — like Panama, Costa Rica, Peru, and Chile — that have been prospering because they have wisely embraced the global trading system. These admirable symbols of what trade liberalization can accomplish have been leading by their examples. And they are growing weary of the continuing shrill attacks against the system brought by WTO members who just don’t get it.

In short, there is a growing belief in leading WTO circles that if the institution is going to survive, it can no longer continue to do business as usual. Leading trade diplomats in Geneva and other key capitals have concluded that WTO’s future ability to liberalize trade cannot be based on the traditional consensus-based multilateral approach, where any single member can enjoy veto power. Instead, the WTO’s future negotiations will focus on a so-called plurilateral approach, where smaller groups of like-minded countries that genuinely want to liberalize trade will do so. If the laggards don’t participate, fine. From now on, well-placed diplomatic insiders vow, no longer will weak countries which aren’t really important international trade players anyway, be allowed to poison progress for everyone else. India, for example has about a 1.9 percent share of global trade flows, but Indian leaders seem to think they deserve 90 percent of the attention.

U.S. President John F. Kennedy once famously said, “trade, or die.” Now, for the World Trade Organization, the new mantra is becoming “change, or die.”

Such are the impressions gleaned from nearly two-dozen confidential interviews conducted over the course of several months with key players in the USA, Europe, Africa, Asia, and Latin America. This two-part series offers details and analysis aimed at explaining in in clear language what many thoughtful trade diplomats would like to say publicly, if they were not constrained by the requirements of diplomacy.

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An Institution Under Constant Attack

With apologies for the use of the personal pronoun, I have been covering the WTO and its predecessor the General Agreement on Tariffs and Trade — the GATT — for more than three decades. Launched in 1947 by the United States and 22 other countries, the GATT became the world’s most successful international economic experiment. Seven successive multilateral trade-liberalizing rounds contributed to expanding global prosperity by slashing tariffs and dismantling trade barriers. The last of those negotiating successes, called the Uruguay Round, set up the WTO in 1995.

And that’s when multilateral trade liberalizing negotiations pretty much hit the wall. One could say the GATT morphed into the General Disagreement on Tariffs and Trade.

Remember the famous 1999 anti-trade riots in the streets of Seattle? Many Third World countries inside the WTO’s ministerial meetings quietly cheered the unruly protestors who trashed that beautiful city. There would be no Seattle Round. In 2001, the WTO did manage to launch the Doha Round (for trivia fans, named for the city in Qatar where that year’s ministerial meetings were held). But the Doha Round has been in deep trouble ever since.

In 2003 many African countries openly celebrated their success in killing that year’s WTO ministerial in Cancun. We came to make demands, not make concessions, the Africans boasted. Indian negotiators contributed to that failure, although to their credit, the Indian official delegation seemed crestfallen that they had gone too far. They had not meant to put the Doha negotiations in intensive care.

Then in 2008, a deal was close to being struck in Geneva that would have completed the Doha Round. Among other economic benefits, trade-distorting agriculture subsidies for both rich- and poor countries would be substantially reduced. Financial services would be allowed to flow more freely across international borders. And both rich- and poor countries would do more to open their markets to global competition. But that deal also collapsed in bitterness. While there is plenty of shared criticism for the 2008 failure, it was clearly India’s intransigent “non-negotiable” demands that did the most to poison the atmosphere. And this time the Indian negotiators, led by their abrasive trade minister, Kamal Nath, returned to New Delhi boasting of their triumph.

In those previous WTO trade spats, at least, everyone came away from the battlefield vowing, at least for public consumption, to do better the next time. Until this year, when some of the Africans and the Indians struck again. The bitter irony is that the present mood comes in the wake of the WTO’s most impressive negotiating success, where the rich- and poor countries (finally) worked together for the common good to give global trade flows a significant boost.

Meeting in Bali last December, the WTO’s then 159 member countries agreed to a so-called Trade Facilitation deal that promised, over time, a trillion-dollar economic payoff. Essentially, the wealthier WTO members have already been giving poorer countries hundreds of millions of dollars annually to help facilitate trade by fixing embarrassments that have long clogged Third World borders — corrupt customs offices and cumbersome red tape, inefficient ports, shoddy roads, and such. It doesn’t take a PhD in economics to understand why difficult borders prevent the rising economic prosperity that stems from enhanced trade flows. The Bali deal promised much more assistance to speed the movement of goods and services across borders. The deal was a win-win for everyone: both for giant multinational corporations that move goods and services across borders, and for millions of citizens of poor countries whose living standards would stand to rise along with the resulting expanded trade opportunities.

The Bali Package was the first successful multilateral trade-liberalizing deal in the nearly two decades of WTO history. Finally, the institution had shown that it could deliver something meaningful on the multilateral negotiating table. The general belief was that the success in Bali would spur the revival of the Doha Round, which now has been floundering for thirteen years.

 But now those hopes have been dashed. On July 31, India’s Narendra Modi vetoed the schedule to implement the Bali deal.  Since then, all subsequent efforts to give Modi a face-saving way to back off have failed. There are some (slim) hopes that meetings in the WTO’s headquarters in Geneva scheduled later this week could put the deal back on track. But the sad truth is that the Bali deal has acquired a definite Humpty Dumpty look. The essential trust in the system — that countries will honor what they have agreed to instead of negotiating in bad faith — has been lost. It will not easily be regained. Whether it will be officially declared or not, the Doha Round is dead.

The WTO’s wealthy countries are even bitterer because they had had to work very hard, for years, just to persuade the poor countries to accept substantial financial sums to bind themselves to do things they should have long ago done themselves, in their own self-interests.

Adding to the bitterness, Modi’s demands simply made no good sense. He was fighting for policies that are clearly not in India’s best interests. “India’s economy is today the least integrated into global production chains among the world’s top-25 exporting economies,” Hosuk Lee-Makiyama, Natalia Macyra, and Erik Van Der Marel of the highly respected European Centre for International Political Economy in a recent paper: India & the WTO. “India is failing in sectors it chooses to protect, and is only competitive in sectors where it chose to liberalise, for example its IT services sector and the outsourcing business.”

Nor are the specific agriculture policies that Modi has fought for in the interests of other WTO countries that import Indian rice and other grains. In recent years, and up to the present, India’s domestic farm policies have inflicted economic damage in other poor countries. India’s grain exports have distorted food prices not only in neighboring Pakistan and Bangladesh, and on to Haiti and some African countries as well.[Coming tomorrow, the conclusion: “Hot (Headed) Yoga”]