TPP is good for Vietnam

Dear Friends,

Let’s talk a little about TPP and trade agreements in general:

– In general, trade agreements are good for all signatory countries.  They allow the member countries to move their competitive products and services into other member countries (which otherwise they may not be able to move, because of import tariff, import quota or other import barriers).

– In general, trade agreements are better for the poorer countries.  Example: See the statistics of US trade with Vietnam below,  with the bilateral US-VN Trade Agreement:

Millions of dollars

Month Exports Imports Balance
January 2015 528.0 2,693.4 -2,165.3
February 2015 505.2 2,330.2 -1,825.0
March 2015 598.0 3,214.9 -2,616.9
April 2015 520.4 2,990.0 -2,469.5
TOTAL 2015 2,151.6 11,228.4 -9,076.8

Source: http://www.census.gov/foreign-trade/balance/c5520.html

The reason is that the poor sells all he can sell, and the rich can buy all that the poor sells. But the rich only can sell to the poor what the poor has money to buy.

So in general, the American should worry more about a trade agreement than the Vietnamese do.

– But, of course, the trade agreement may have provisions, such as the ISDS provision, that allow foreign companies to attack a country’s legal system from the flank, like the one we are trying to avoid.

In many trade agreements, only signatory governments (or its agencies) can sue.  In recent years, some ISDS provisions allow private companies of signatory countries to directly sue another signatory government, although the companies are not a signatory of the trade agreement.

These  ISDS provisions are really to help powerful companies use them as a weapon to pressure poor governments into submission. A powerful company, motivated by profits, will constantly sue, or threaten to sue, the government of a poor country, for having a law or planning to make a new law, that is against the company’s interest.  The poor country doesn’t have enough money for constant litigation will simple cave in and changes its law or stop making the new law.  Phillip Morris is doing just that in Australia and Uruguay.

    (Note: Litigation, especially international  litigation is extremely expensive and stressing.  Not only the fees to international litigators are extremely high, many departments of the government party may have to spend countless hours to gather data for the case as demanded by the other side or by the court.  Plus the news on the international arena that “this government is being sue”.  Not good if you (the government) are trying to invite foreign investment into your country.  And if you (the government) wins, you win nothing because you have no “damage”; the most the  government party may get is the litigation cost, if you are lucky.  In many cases, each party carries its own litigation cost. 

    However, a huge corporation will you the law (and lawyer and the court) to break into a market, to challenge the law, to attack another company, to  sue the government… to win the market.  (I was a corporate litigator for a fortune 100 company with that mentality).

    If the private party wins in a lawsuit against a government, he may claim a lot of “damage” to his business because of the government’s laws and regulations, and the damage that the court awards (and the  government party must pay) can be very high.

    Please note further that I am an international litigator, and my clientele includes government agencies)

Interestingly, many American intellectuals oppose such ISDS, I think, because they fear a flashback against the American legal system. Also, I believe that they don’t want the US companies to screw poorer countries around the world (Hillary and Joseph Stiglitz are two big examples of such great ethical intellectuals). Such ethical thinking from US top intellectuals make me respect US intellectuals.

– Under TPP, Vietnam may gain more from textile, fish and fruits export, and may lose in  meat and animal feed.

Vietnam is importing all industrial and hitech products anyway; the US may have more advantage via other countries in Vietnam market for hitech.

But the entrance of foreign products and services, under FDI (foreign direct investment) or other ways, will help Vietnam, because at the least it will train Vietnamese employees in sophisticated skills.

– The provision concerning drugs (stopping or reducing generic drugs for major diseases) will hurt everyone in the world, but the poor countries will be hurt the most.

– Concerning strategy: unsophisticated countries like Vietnam think in term of country, the US negotiators think in term of corporation — their strategy is to have provisions for US companies to have the freedom to do whatever they want, to sell products. That is why they love ISDS provisions. And unsophisticated countries may not be smart enough to catch these provisions.

Have a great day!

Hoanh

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