Vietnam squeezed by rival trade deals
By Khanh Vu Duc
The Regional Comprehensive Economic Partnership (RCEP) and Trans-Pacific Partnership (TPP) trade pacts both aspire to shape the economic future of the Asia-Pacific region. The former is an Association of Southeast Asian Nations (ASEAN) initiative absent of the United States; the latter is a US-led partnership agreement that purposefully excludes China.
Though similar in their trade liberalizing agendas, the competing pacts underscore efforts by China and the US to assert their respective economic might and build preferential trade communities outside of the World Trade Organization. Vietnam is a participant in both the RCEP (which does include China) and the TPP, and increasingly finds itself balancing the economic interests of China and the US.
As a member of ASEAN, Vietnam already maintains free trade
agreements (FTA) with other countries in the 10-member organization. The RCEP, in turn, aims to integrate these FTAs among ASEAN members and non-ASEAN states to harmonize and deepen these agreements. For China, the RCEP will extend the FTA it already has in place on a bilateral basis with ASEAN.
Given that it was formed independent of any multilateral body, the TPP has no such basis. Although the TPP includes many RCEP members, including Vietnam, its broad scope requires members to first resolve any differences they might have with RCEP before addressing additional concerns with the TPP, including the pact's heightened provisions for intellectual property protection.
The challenge for a relatively small country like Vietnam is how best to balance the great trade powers: the RCEP's power is largely in the hands of China, whereas the TPP is a US-driven initiative conceived to compete with other regional pacts. Both of the pacts pose a challenge for Hanoi that reach beyond basic trade-related issues.
Although the RCEP would boost Vietnam's trade across the Asia-Pacific, Hanoi has broader strategic concerns about China's rising assertiveness, including over contested maritime territories in the South China Sea. Hanoi has welcomed recent counterbalancing strategic overtures from the US, but not to the degree to significantly irk its giant neighbor to the north.
Nationalist sentiments among some senior members within Vietnam's Communist Party, as well as the grassroots population, could give reason for pause on the China-oriented RCEP - although it seems unlikely there will be serious opposition given the potentially huge economic opportunities of the partnership.
Without the US to balance China's influence in the RCEP, Vietnam could be susceptible to Beijing's economic manipulation, especially in light of Vietnam's status as a net importer of Chinese goods, without a counterbalancing US trade deal. Although Vietnam already holds a bilateral trade agreement with the US, the TPP would open more market opportunities for Vietnam, enhancing its net exporter status with the US.
What might be beneficial to the Vietnamese people, of course, might not suit the country's communist leaders. Even if Vietnam accepts the terms and conditions set out in the TPP, its formal admission to the TPP is by no means guaranteed.
In particular, the US continues to have reservations about Vietnam's poor human rights record. Despite urgings from Washington for progress, Vietnam has badly regressed since entering the World Trade Organization in 2007, seen in a mounting crackdown on dissent, including a recent spate of long prison sentences handed down to activists and bloggers.
It remains unclear what would constitute sufficient progress to assuage the US's concerns and whether Vietnam's leaders would be willing to respond. There are some concessions Vietnam's leaders could easily make, such as releasing certain high-profile political dissidents and adopting a less sensitive stance to criticism on the Internet. It is unlikely, however, that the Communist Party will turn a blind eye to any organized dissent.
The US could begin by demanding basic labor law reform, including allowances for unionization independent of the Communist Party. The TPP will likely address issues related to workers' rights, although it has yet to formally commit to establishing labor standards and mechanisms of enforcement. Even if separate from the TPP, the US can demand for Vietnam to show an intent to reform by allowing workers the right to free association and collective bargaining.
For Vietnam's Communist Party leaders, the challenge will be to adequately satisfy the US through concessions without yielding strong control. If reforms prove to be too drastic, the party could inadvertently give oxygen to activists and reformers to push for more changes. If the reforms prove to be insufficient, however, Vietnam could be denied entry into the TPP.
Labor law reform, however, will likely be only the beginning. As TPP negotiations proceed, there will undoubtedly be calls from US-based rights organizations and other lobby groups for the release of all dissidents and the cessation of government action against so-called acts of "propagandizing against the state". The same groups have campaigned against Vietnam's substantial curbs on freedom of speech, assembly, and religion.
If the US pushes too hard on human rights reform, Vietnam could withdraw from the TPP. If the US does not push hard enough, US President Barack Obama could face a backlash from congress and human rights groups for emphasizing business-friendly policies over democracy and rights promotion. It is significant that the RCEP is unlikely to make any demands for political reforms as a condition for entry.
If Vietnam continues to participate in both the TPP and RCEP, its leaders must acknowledge that some reform will be necessary. Although the RCEP will demand considerably less change from Vietnam, the ASEAN-led initiative will strip away any remaining layers of insulation against China's economic dominance.
As Hanoi has shown in strategic affairs, Vietnam needs the US to balance China's rising economic clout. In doing so, however, will invite renewed US pressure for human rights-related reform, pressure that Vietnam's leaders have strongly resisted since entering the World Trade Organization in 2007. There are no easy choices for Vietnam's communist leaders. But to maintain trade-driven economic growth and counterbalance China's influence, they may need to cede some control to ensure their own survival.
Khanh Vu Duc is a lawyer and part-time law professor at the University of Ottawa who researches on Vietnamese politics, international relations and international law.
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