WASHINGTON — In trying to win support for a controversial new trade pact in Asia, President Barack Obama has been offering one major reason why the deal is so important: to curb the economic power of China.
“As we speak, China wants to write the rules for the world’s fastest-growing region,” Obama said during his State of the Union address last month. “That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field.”
The theme resonates with American workers, who have seen factories close and wages stagnate at home in the years since China joined the World Trade Organization and became a manufacturing powerhouse. But the credibility of Obama’s pitch hinges on a difficult and unlikely diplomatic effort: reforming the economic and political structures of several smaller Asian nations — in particular, Vietnam.
Of the 11 nations negotiating with the U.S. over the proposed Trans-Pacific Partnership, none has a closer relationship with China than Vietnam. Like China, which is not participating in the talks, Vietnam has a one-party communist government with a long record of human rights abuses. It has also some of the world’s weakest labor standards.
As a consequence, Vietnam has become as an increasingly popular offshoring destination for businesses headquartered in China. Chinese companies regularly contract with factories in Vietnam, which in turn are overwhelmingly dependent on raw materials from China. One of Vietnam’s biggest industries — garments and textiles — imports about half of its yarns and fabrics from its neighbor to the north.
That means that higher labor standards in Vietnam would create higher costs for Chinese middlemen. And if TPP forces Vietnam and other Asian countries to improve workers’ rights, that could put political pressure for reforms on the Chinese government.
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Bringing Vietnam into the TPP deal, Obama argues, would at least be better than the status quo.
“I don’t know how it’s good for labor for us to tank a deal that would require Vietnam to improve its laws around labor organization and safety,” the president said in December before the Business Roundtable, a lobby group that represents corporate CEOs. “I mean, we’re not punishing them somehow by leaving them out of something like this. Let’s bring them in.”
A marginal improvement, of course, is a far cry from Obama’s call to alter the economic power dynamic between the U.S. and China.
While China’s holding of roughly 8 percent of the U.S. national debt is often noted to highlight the country’s growing clout, its real power is over supply chains. Many essential goods sold in America are now either made in China or dependent on Chinese outsourcing companies, which in turn get their products from other countries — like Vietnam.
“The fact is, this is not going to achieve the strategic goals that the administration says are so important,” said Barry Lynn, director of the Markets, Enterprise and Resiliency Initiative at the New America Foundation. “Increasingly, it’s Chinese companies that are determining where things go. And the idea that tinkering around with these numbers is going to have dramatic effects is naive.”
