Vietnam Surrenders Sovereign Future to Trans-Pacific Partnership

Vietnam Surrenders Sovereign Future to Trans-Pacific Partnership

The news about the Trans-Pacific Partnership agreementsigned by 12 countries in October 2015, was largely overshadowed by the latest reports about the fighting in Syria. Vietnam, a country with a population of over 90 million, was one of the signatories to that agreement. Let’s compare two different events. The first took place on May 29, 2015, when Vietnam signed a free-trade agreement (FTA) with the Eurasian Economic Union (EEU). The second was Vietnam’s signature on the TPP agreement on Oct. 5, 2015.

It is patently obvious that it might not be easy for Vietnam to meet its obligations under both integration agreements. So why did Hanoi make these incongruous decisions? Hasn’t American imperialism already caused a lot of misery for the Vietnamese in the second half of the twentieth century?

In order to understand the reasons behind Hanoi’s actions, one must analyze how the Vietnamese leaders rank their priorities. Their top concern is to expand the role of foreign business in the Vietnamese economy, second – they want access to markets for sales and capital, and third – they are looking for access to technology intended for export.

There is an explanation for this hierarchy. For example, in a Vietnamese company that operates with the help of foreign capital the average salary is $230, but in businesses that only have access to domestic capital – the paycheck goes down to $160. Therefore, in terms of funding for the national tax coffers, a Vietnamese employed by a foreigner is 30% more lucrative than a Vietnamese hired by a local entrepreneur.

What are the advantages of a foreign business for a Vietnamese bureaucrat who is responsible for boosting exports? First of all, the sectors controlled by foreigners are the ones seeing the greatest gains. Specifically, in 2013 the export of mobile phones expanded by 67.1% and computers – by 35.3%. But many traditional Vietnamese exports suffered a noticeable decline: crude oil dropped by 11.9%, petroleum products – 32.8%, rice – 18.7%, and coffee – 26.6%. 

Why have foreign markets become so problematic for Vietnam? Back in 2013, almost a quarter of its exports were shipped to the EU. However, due to the EU’s new Generalized System of Preferences (GSP), which went into effect in January 2014, Vietnam’s main exports may not qualify for EU preferential tariffs. Under the new policy, if over three years’ time the export of a specific product from one country exceeds 17.5% of total imports of that product by all GSP beneficiary countries, then that country is no longer eligible for preferences. The limit on textiles and apparel is 14.5%. Many of Vietnam’s exports (including coffee, tea, spices, textiles, and clothing) could exceed that threshold.

China is one of Vietnam’s competitors: imports from China totaled $36.8 billion in 2013, rising more than 25%. But Vietnam exported only $13.1 billion worth of goods to China that year, an increase of only 2.1%. Much like the EU market, the Chinese market offers few opportunities for Vietnam.

The EEU free-trade agreement gives Vietnam access to the Russian market, and Russian purchases from Vietnam did rise after the introduction of US and EU sanctions, but that increase has a limit, because Vietnamese goods are not as competitive on the Russian market as Chinese products. In terms of Vietnam’s biggest trade partners, Russia only makes it into the top twenty.

Moving from an analysis of the flow of goods between Russia and Vietnam to the movement of capital, here it is obvious that Russia was unable to influence Vietnam’s decision to join the TPP. According to the Russian’s Chamber of Commerce and Industry, total Vietnamese investment in Russia amounted to $456 million at the end of 2012. But Russia invested only $27 million in Vietnam. In other words, Hanoi does not see Russia as a source of capital.

Given the linear logic of the Vietnamese officials in charge of the parameters for developing the national economy, there were no alternatives to the TPP.

But there’s no such thing as a free lunch. Perhaps it was precisely because of the hidden costs that they had to hold multiple rounds of negotiations behind closed doors in preparation for the Trans-Pacific Partnership agreement.

The Vietnamese themselves have spoken about the first part of that hidden cost: the regulation of intellectual property rights – or rather, the need to completely rewrite them. As Bui Hong Hai, the deputy director of the SMiC Law Firm, has noted, Vietnam will not only have to change its public laws, but will also be forced to review internal corporate procedures and cooperation at the level of individual companies.

This means that all Vietnamese citizens, as well as the workings of all the country’s mechanisms – manufacturing, financial, and technological – will fall under the microscope of American Big Brother. This is no longer merely an issue of large corporations issuing dictates in order to maximize profits. This ability to control information at the level of individual companies will provide a virtually unlimited opportunity to influence the actions and motivations of every citizen in the country.

The second part of that cost involves dictates from multinational corporations (MNCs) that are issued through a center – which is not subject to any national jurisdiction – for resolving conflicts and commercial disputes with the country in which the interests of those very same MNCs lie. To put it simply, in twentieth-century practice, arbitration was conducted on the basis of a given country’s laws, and contracts included provisions for the location where the contracting parties would request a judgment, such as in Stockholm or in Moscow, but now the source of legal authority will not be determined as a matter of principle. A precedent exists, and it has to do with financial decisions on a global scale. This is the Federal Reserve System (FRS), which has been an absolutely private company since its inception in 1913, and which is sometimes erroneously called America’s Central Bank.

Finally – the third part of this impressive price tag. All investment financing will come from a financial bubble. And there is no need to break open the American negotiators’ safes to prove this is true. The simple fact is that the sponsor of the TPP, Washington, has no funds other than money it pulls from thin air. The problem is that national economies have become addicted to these investments that come out of thin air, and thus they cannot have any impact on the process of creating capital within their country, as this capital can be instantly withdrawn. And then the economy deflates, since even current payments within the country cannot be backed by financial settlements, and any foreign debts incur demands for additional collateral (a margin call). 

The text of the TPP agreement has not been published. We can only make an educated guess about the additional financial burdens Vietnam will incur. But the Vietnamese leaders who were authorized to sign the full text of the agreement could not have been unaware of the consequences of that step, and, in particular, of the fact that their decision to join the TPP was putting the future of their country into the wrong hands.

The implications for Russia are obvious. Russia remains outside the new Pacific Rim that has been created by the United States, which means it is in the same situation as China. China remains outside the Trans-Pacific Partnership, which means its biggest financial and trade battles with the US are still ahead.

Tags:   Asia-Pacific  China  US