Asian powerhouses · Developing nations and LDCs · Regional Trade Agreements/FTAs · Western World

Part II: Good morning, Vietnam!

The irony in the title is that while the 1987 Robbin Williams starrer was based on the US war in Vietnam during the 60s and 70s, this post is about a 21st Century trade pact where the former is still trying to “make the world more like them“. Let me explain.

The United States is one of the few “true-blue” imperialists in the world. And I don’t necessarily mean that in the strict, legalistic way.  It is not only known to chase out whole regimes from countries (to say nothing of the mess being made in Assad’s Syria), but also to be extremely paranoid about supposedly US-unfriendly policy decisions made by these regimes/countries. Of course one could argue that that is one and the same thing- but I do see a difference. For example, during the Vietnam war the US wasn’t just fighting the Vietcong and the North Vietnamese Army, it largely justified its involvement on eco-political lines. Communism was the enemy, not necessarily Vietnam. And why? Simply because it disliked the way they did their business.

Similarly, the Trans-Pacific Partnership seems to be an attempt by the US to impose its own policy standards, however lopsided, on the entirety of the Pacific region. Supporters of the pact call it a “gold standard” for FTAs (Free Trade Agreements), a shining beacon of hope for developing countries. But a perusal of the rhetoric emerging from Washington makes it clear that the primary aim of the pact, from the US’ perspective, is to “write the rules” lest China does it first [See also]. In its opinion the rule-book is up for grabs and it would be geopolitical suicide to let China exert influence on how these rules will look. Notwithstanding the fact that this isn’t exactly the best premise from a negotiating stand-point, it also makes it clear that concern for the environment or labor rights or even basic global economic parity, is secondary to US’ desire in becoming the ring-leader in the region. Thus American claims regarding fostering “better” eco-political policies in the world through its trade agreements, are nothing short of a facade. Like a friend of mine points out, the TPP is more about access to Pacific markets than what it actually does in those markets.

The reason why Vietnam is chosen as a medium of analysis for the TPP is simple. The TPP includes 12 members, largely developing countries though it also has big players like Japan, Canada and Australia involved. So on one hand there are countries like the US which most commentators are sure will reap huge benefits (as is usually the case) and on the other there are small nations like Brunei which most people agree will land in a lot of trouble when the TPP is actually implemented. Vietnam falls in a cosy grey area in the middle. It is the pivotal piece of the North-South see-saw in the agreement and will be, in my opinion, crucial in determining whether the agreement is seen as an overall success or failure in the region.

With a population of over 85 million and per capita GDP of $3,100, this developing communist country is one of the fastest growing economies in the Asia-Pacific region. It became a member of the WTO in 2007 and has been actively increasing its international trade footprint by entering into numerous Bilateral and Regional Trade Agreements (RTAs), most recently with the EU and South Korea. However at the same time, the country’s regime has several aspects, which though already problematic, will burst through the seams when it feels the impact of increased trade.

You see, increased or “free-er” trade is not necessarily a good thing by itself. In an ideal world, it should be free as well as fair tradeFair trade usually involves policy decisions regarding things related to trade – be it IP rights, labour issues or environmental damage. Trade is invariably interlinked with all these in the modern age. It needs little explaining that what and how we trade effects these aspects as well. Let me clarify.

Whether “parallel imports” should be allowed, though an IPR law concept, essentially relates to trading in goods containing IP. Similarly, an increase in the trade of (to take WTO examples) carcinogenic asbestos like in the case of EC-Asbestos or redone rubber tyres as in the case of Brazil-Retreaded Tyres has massive health and environmental consequences.

Another way of looking at it, and this is key to understanding Vietnam’s problem, is how an increase in manufacturing (obviously a component of international trade) negatively effects environment, health, and in the country’s case – labour rights. Today’s trading age has seen an emergence of global “value-chains”, where an item passes through several countries in its production process. In particular, for multinationals the decision of where to manufacture is influenced very strongly by the question of where is the cheapest labour available. Manufacturing follows labour. Basic economics. Less costs, more profits. At one point of time, that country was China (interestingly, also a communist state and completely excluded from the TPP negotiations). Then foreign manufacturing moved through countries like India and has now come to the doorstep of Vietnam. For Western companies, it is the most attractive destination for off-shoring its production activities. US international trade policy simply seems to be following the tunes of the corporate pied-piper.

In Vietnam, for all practical purposes, Trade Unions (TU) are illegal. As of now, the only “real” TU allowed to exist is the one affiliated to the Communist Party of Vietnam (CPV), the only serious contender in the country’s political space. To make matters worse, and this is not very surprising, the labour conditions are pathetic. The minimum wage is unreasonably low (less than $100/month) and protests against employers results in death threats and intimidation. The lack of unionising power for its workers is thus particularly disturbing.

How does the TPP figure into this?

Well, for one, the US has a chequered history of entering into trade pacts  which involve chapters on labour rights and obligations that the signatories will have to respect and follow. Though the US administration ostensibly claims that such chapters are included with an aim to increase worker welfare, the facts are quite different from the fiction.

In 2011, when the US-Columbia FTA (Free Trade Agreement) was entered into force (with “side-agreements” on labour issues), ENS statistics (the country’s primary data-collection service) revealed that there was a 76% jump in unionist evictions and death threats. Similarly, after five years of the DR-CAFTA (Dominican Republic-Free Trade Agreement), Guatemala earned the infamous title of the “world’s most deadly place for trade unionists”[See this 2013 ITUC Report for a detailed analysis on this point]. This is largely because US implementation/enforcement and monitoring of these labour rights is very weak. Even the Government Accountability Office (GAO) has gone ahead and admitted as much. Senator Elizabeth Warren is one of the most open critics of the US administration on this point and has recently released a, rather sentimentally-titled report called “Broken Promises” wherein she takes stock of the White House policies regarding labour rights in FTAs since the 1990s. Now this belies the underlying intention here. It really isn’t in the US’ interest to follow up on these labour rights because it would be in direct conflict with its ability to extract profits through cheap labour.

Take the example of Nike, an American company with huge investments in the country (nearly 43% of all Nike footwear products were manufactured in Vietnam till now in 2015). Notwithstanding the fact that the TPP is becoming another example of how corporate greed fuels US trade policy, the situation of the workers in Nike factories is miserable. Reports claim that workers in these factories (as well as others) have to borrow money from other sources to meet their daily requirements of food, clothing and shelter. US’ blatant disregard for human rights in order to further its corporate appetite is pretty much in line with Nike’s “Just Do It” ideology.[See this April 2015 Report by the Institute for Global Labour and Human Rights for all the information you need on this point. Read more here.]

Secondly, the text itself is a problem. Chapter 19 of the Agreement deals with Labour and it pretty much restricts the countries obligations to the slightly vague 1998 ILO Declaration on Fundamental Principles and Rights at Work rather than applying the broader, full-fledged ILO Conventions of 1948, 1949, 1951 and 1958. This further shows that the US is not at all serious about following up with subsequent labour violations that would arise as a direct result of the TPP bringing in more manufacturing to Vietnam. To be sure, the official US position is that one of the benefits of the TPP is the “institutional reforms” that it will bring about in communist Vietnam’s understanding of worker rights, be it in terms of increased wages or decreasing hours. By the way, Vietnam has not ratified the aforementioned basic Conventions and so expecting it to suddenly change its view on labour because of a trade agreement, would be quite foolish. ILO also reports that domestic enforcement of the already minimal labour rights is (unsurprisingly) very weak and awareness among the workforce is quite low.

On the point of enforcement, it is interesting to note that previously the US has entered into side-agreements with specific countries and these allow the US to “threaten” retaliation by reinstallation of tariffs (not regular dispute settlement) if certain standards are not met. Never have these “threats” actually been used by the US and this goes on to show, even more clearly that labour rights are just a convenient selling point for the Obama administration.

President Obama may claim that his benevolent TPP, as a trade agreement, contains the “strongest set of labour standards ever”, but three points completely oppose this stand.

For one, his concern is only American workers. This is from the USTR website:

The Trans-Pacific Partnership (TPP) levels the playing field for American workers and American businesses, leading to more Made-in-America exports and more higher-paying American jobs here at home. By cutting over 18,000 taxes various countries put on Made-in-America products, TPP makes sure our farmers, ranchers, manufacturers and small businesses can compete— and win—in some of the fastest growing markets in the world. With more than 95 percent of the world’s consumers living outside our borders, TPP will significantly expand the export of Made-in-America goods and services and support American jobs.

As you can see, the focus is American jobs held by American workers. It would be very naive to think that this concern permeates to workers in other countries as well. This relates to my second point. Since 2008only five complaints have been registered by the US Department of Labour in respect of violations of worker’s rights and only one has been resolved (that too with Peru, a close ally of the States). Serious about labour rights around the world? I think not. Thirdly, Mr. Obama’s concern of protecting the domestic workforce is slightly odd, basically since they are already quite well protected. In fact, it is possible (as many opponents of the deal have claimed) that the TPP will result in the usual “race-to-the-bottom” where jobs from the US will migrate to lower paying jobs outside, harming both domestic workers (as they will lose their jobs) and foreign workers (because of the conditions in which they will have to work). Apparently the same sort of complaints were raised against the NAFTA, when US workers were fired in order for the manufacturing to be off-shored to Mexican “maquiladora zones”.

Also, as can be seen from Mrs. Warren’s reports, the “greatest/highest/best standards in so-and-so” is a common piece of rhetoric in the American trade circles and has been used in an almost copy-pasted manner for a number of trade agreements in the Clinton, Bush and now Obama administrations.

So it is quite safe to say that we should not be taken in by Mr. Obama’s promises on labour rights. Lesser still, should be our inclination to see the deal positively on account of it ostensibly “protecting” these rights.

A related problem here, and one that interested groups keep harping about, is that workers as such don’t have any right to complain. Only a country involved in the trade deal would have the right to bring a case (under the dispute settlement provisions of the TPP) against another member. This means that the workers, individually or as a group, would have no real avenue to express their concerns. The TPP way of doing things would require the US (or some other member) to bring a complaint against Vietnam for violating the rights of its workers. As can be seen from the above discussion, there is a very slim chance of that really happening.

Naturally most of the opposition to the TPP comes from the Left – worker unions in countries like Vietnam who claim that the agreement will be used against them rather than for their benefit. [A compact statement of their grievances can be found in this letter by groups such as Viet Labor and Brotherhood for Democracy]. The letter reveals some disturbing statistics and shows how TU supporters are labelled as “gang members” in the country. [See also for a compilation of Vietnamese worker efforts] Interestingly, even some American industry leaders like Ford Motors have also joined the workers in their protest agains the agreement. Senator Bernie Sanders has also famously said that the final text of the agreement is “worse than he [I] thought”. Even Nobel-Prize winning economist Joseph Stiglitz has agreed that tackling the issue of labour through trade agreements is not exactly advisable.

Vietnam also happens to have huge tariff barriers for a range of products including agriculture and apparel. This implies that trade is restricted on account of a high amount of money that is to be spent on taxes and other duties in order to bring in goods into the country. There is some discussion about the trade creation v/s trade diversion effects that the TPP is expected to bring about, but all that maybe for another day.

For now, human rights are a major problem in at least three other TPP countries, namely Malaysia, Brunei and Mexico. Homosexuality is punishable by death in Brunei, let alone talks of preventing employment discrimination by promoting all-inclusive hiring policies Btw, there was a time when the lawmakers in the country were persuading the government to exit TPP negotiations on account of its reluctance to let go of its Shariat law. The US may think very highly of its social values and how they are  numero uno in the world, but it cannot really fool people into believing that its trade pacts are to spread these amazing values around the world. This is because none of these countries are really adopting these values (for better or worse) and the general public should not attach a positive tag to such attempts thinking that this is for global welfare.

Only the implementation of the agreement will actually tell us how it fares in “solving” these issues. But the message from the US is clear – as long as we promise to ensure compliance with labour obligations, no-one can challenge our intentions. Who really cares about actual enforcement?

In the end, it can only be suggested that if the US is really so keen about promoting labour rights, it would use the TPP as leverage to make immediate changes in the Vietnamese way of doing things. It would have to, as The Guardian suggests, force Vietnam to make positive changes in its labour sectors and then talk about economic benefits in trade agreements. Not the other way around. The “free-market solution” won’t completely end the country’s reliance on cheap labour.

[Special thanks to Divyansh Singh (aka Shahid Manjoor) for editing the post and brainstorming the issue with me]

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