US lifts curb on Cambodia, Laos trade
By Brian McCartan
BANGKOK - The removal of Cambodia and Laos from a United States blacklist that
limits government support for US companies doing business with the two
countries represents the latest strategic move by Washington to counterbalance
China's rising influence in mainland Southeast Asia. The new designation will
open the way for more American investment in two of Southeast Asia's poorest
nations, both US adversaries during the Cold War era.
President Barack Obama has determined that Cambodia and Laos have both shown
commitment to open markets, including through more liberal investment laws and
fewer market controls, and should no longer be considered "Marxist-Leninist"
countries
as defined by the 1945 Export-Import Bank Act, the White House announced on
June 12.
With the trade restrictions removed, American companies can apply for financing
through the Export-Import Bank of the United States for working capital
guarantees, export credit insurance and loan guarantees to conduct business in
Cambodia and Laos. Only six countries now remain on the US trade blacklist:
Cuba, Iran, Myanmar, North Korea, Sudan and Syria.
With a combined population of 20 million, Cambodia and Laos do not represent an
especially large or high purchasing power market for US companies. US exports
to Cambodia in 2008 totaled US$154 million while those to Laos were a mere $18
million. Cambodia's exports to the US, which mostly consist of clothing and
textiles, last year totaled around $2.4 billion while US-bound shipments from
Laos were just $42 million. US trade with Thailand stood at $30 billion last
year, and with Vietnam $15 billion.
Obama's decision was highly criticized by US-based ethnic Hmong groups,
comprised of people who fled Laos after the 1975 communist takeover and claim
their relatives continue to be persecuted by the authoritarian regime. Several
thousand Hmong remain in a refugee camp in northern Thailand with another 158
Hmong recognized by the United Nations as refugees with real concerns for their
safety if repatriated to Laos held in an immigration detention center in
northeastern Thailand.
US-based Hmong activists have said that the Obama administration should first
secure guarantees from the Laos government for the safety of the Hmong and
investigate claims of human-rights abuses before agreeing to improved
diplomatic and economic ties. The Hmong and their former Central Intelligence
Agency and military allies during the Vietnam War have said the Hmong deserve
better from a country they honorably served.
The US State Department's information site on Cambodia says, "In the past three
years, bilateral relations between the US and Cambodia have deepened and
broadened." That hasn't always been the case. When the Khmer Rouge deposed a
US-propped regime in 1975, the American Embassy was evacuated and a mission was
not reestablished in the country until 1991. A US embargo on trade with
Cambodia ended with the normalization of economic relations in 1992 and full
diplomatic relations were recommenced the following year.
A Congressional ban on direct assistance to the Cambodian government was
imposed in 1997 following violent factional infighting between current Prime
Minister Hun Sen and then co-prime minister Norodom Ranariddh. Further
complicating US-Cambodian relations was a grenade attack that same year on a
rally for opposition politician Sam Rainsy, where a US citizen was injured. A
US Federal Bureau of Investigation probe that followed linked the attackers to
government politicians and Hun Sen's special bodyguard unit. The congressional
ban was only lifted 10 years later in 2007 and allowed for direct technical
assistance.
The US sent over $57 million to Cambodia last year, scattered across programs
in health, education, governance and economic development. The US State
Department's website also lists as programs it supports as the fight against
terrorism, reduction in HIV/AIDS, improving democratic institutions, promotion
of human rights, elimination of corruption, accounting for MIAs and justice for
victims of the Khmer Rouge.
Long on a diplomatic backburner, US-Laos relations have also seen a revival in
recent years. Although diplomatic relations were never severed after the
communist takeover in 1975, the US mission in Vientiane was downgraded and full
diplomatic relations were not restored until 1992. Trade ties with Vientiane
were normalized in December 2004 after congress passed the Miscellaneous Trade
and Technical Corrections Act which extended non-discriminatory treatment of
Lao products entering the US. The following year, a bilateral trade agreement
between the two former adversaries entered into force.
Commercial countermove
The motivation behind these overtures, some analysts say, is growing US concern
over the diplomatic and commercial inroads China has made the region. Since the
late 1990s, China has stepped up its influence in both Cambodia and Laos.
Although China is not the largest single donor to either country, its
investments and aid projects are often strongly publicized, including
high-profile infrastructure projects such as hydro-electric dams and roads and
public projects like the main stadium for the 2009 Southeast Asia Games to be
held in Vientiane.
The exact amounts of Chinese aid are difficult to discern since development
assistance is often tied together with direct economic investment and loans.
According to a January 2008 Congressional Research Service (CRS) report
entitled "China's 'Soft Power' in Southeast Asia", the US disbursed some $55
million annually in aid to Cambodia during 2006-2007. China, which for the
first time donated money through the Western-dominated Consultative Group that
coordinates foreign aid to Cambodia, pledged $91.5 million in 2007.
According to the same CRS report, the US has been a small donor in Laos, with
aid amounting to $4.5 million between 2005 and 2007. The US bolstered its
disbursements last year, according to the US State Department statistics, with
$18 million going to the removal of unexploded bombs and mines,
counter-narcotics, health, education, economic development and governance.
China has become increasingly important to Vientiane as a source of
low-interest loans, grants, development projects, technical assistance and
foreign investment.
US relations with Cambodia and Laos have been tempered by concerns lingering
from the Vietnam War. In Laos, that includes issues involving the treatment of
ethnic Hmong who supported the US during the war and accounting for US
servicemen lost during the conflict. Laos and Cambodia, for their part, remain
wary of engaging too closely with the US, which dropped thousands of tons of
bombs on both countries during the 1960s and early 1970s and as unexploded
ordinance continue to kill and maim innocent civilians.
Yet China has its own public image problem in both countries, including
Beijing's support for the murderous Khmer Rouge regime in Cambodia. In Laos,
there are new fears of being swallowed up by its massive northern neighbor, a
perception reinforced by the growing presence of all things Chinese ranging
from imported goods to migrant workers, who, Lao officials say, do not return
home once their work obligations have expired.
China has worked to counter those criticisms, including through building
high-profile infrastructure and public works projects. There have also been
frequent visits of Chinese cultural missions, expansion of local Chinese
language courses, scholarships for study at Chinese universities, technical
assistance programs and Beijing-supported study tours to China for government
officials.
Some analysts sense a shift, especially in the younger generation of officials
whose formative years did not take place during the Vietnam War, away from
erstwhile ally Vietnam to a more pro-China stance. China's recent extensive
investments in both Cambodia and Laos have convinced many that the way to
prosperity comes through working with the Chinese.
China's inroads into both countries have been helped by inconsistent US
attention to the region. Under the George W Bush administration, Washington was
perceived by many to have downgraded its commitment to Southeast Asia while
concentrating its resources on the so-called global war on terror. When America
did engage with the region, it seemed to be focused primarily on
counter-terrorism.
It was not lost on countries in the region that then-secretary of state
Condoleezza Rice skipped the Association of Southeast Asian Nations (ASEAN)
Regional Forum in 2007, or that Bush postponed the US-ASEAN summit in September
2007 and left a day early the Asia-Pacific Economic Cooperation meeting later
that year.
Under the Obama administration, some sense a change in course, with this
month's lifting of restrictions on Cambodia and Laos. Southeast Asian nations
noted with some pleasure that Secretary of State Hillary Clinton's included
Indonesia in her inaugural tour of Asia and were heartened by her attendance of
ASEAN's opening session in Jakarta. Clinton has also announced that she will be
attending the annual ASEAN foreign ministers' meeting and ASEAN Regional Forum
in Phuket, Thailand, next month.
Still, Beijing is considered the primary economic patron of both Cambodia and
Laos, underlined in April when it announced a "special" aid package of $39.7
million to meet "urgent needs" in Cambodia, Laos and Myanmar. The US's
re-engagement in Cambodia and Laos, some say, has demonstrated a new
willingness in Washington to provide both governments alternative avenues to
prosperity apart from engagement with China.
At the same time, some say Obama must hedge his diplomacy to avoid upsetting
its traditional regional ally, Thailand. Despite being made in 2003 a US
non-NATO ally, Bangkok has shown signs of moving closer to China, especially
under deposed former prime minister Thaksin Shinawatra. Thai military officers
say increased US prioritization of Cambodia, which is currently engaged with
Thailand in a pitched border conflict, could push further Thai military ties
with China.
Several articles have already appeared in the Thai and English language press
expressing annoyance with America's move on Cambodia and Laos and dismay that
Thailand as a key strategic ally was not first consulted. That's added to
official consternation that began with a perceived snub by Clinton's choice of
Indonesia over Thailand for her first Southeast Asia visit earlier this year.
There are still some formalities to iron out under the new relaxed trade regime
and American officials have said it will be several months before loans can
actually be extended to Cambodia and Laos. Whether US private companies are in
a financial position to take advantage of the new designation of two of the
region's more marginal economies is also in question. But Obama has now
publicly stated and put money in the message that the US is keen to more
strongly engage Laos and Cambodia, with the subtext of countering China's
recent regional gains.
Brian McCartan is a Bangkok-based freelance journalist. He may be reached
at brianpm@comcast.net.
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