The Rushford Report 2007

Risky Business:
Mr. Gutierrez goes to Vietnam

posted on November 5, 2007
by Greg Rushford


U.S. Commerce Secretary Carlos Gutierrez flew to Hanoi last night, on what the secretary proudly touted as the "first-ever" cabinet-level trade mission to Vietnam that will conclude in Ho Chi Minh City on Thursday. The secretary has in tow for the Nov. 4-8 trip top executives of 23 American corporations who are looking for export opportunities, including 3M, Marriott International, Northwest Airlines, AES, and Timken Co. Many of the corporate big-wigs have political action committees that have been far more generous in giving campaign cash to Republicans than Democrats. But since the fuss over appearances of reciprocal political favors associated with such junkets during the days of Bill Clinton's first Commerce secretary, the late Ron Brown, hardly anyone in Washington seems to take note these days. I'll file a separate report on the political contributions. Meanwhile, there are other linkages associated with this particular trip that the Commerce secretary and his business friends should be worrying about.

Soon after he landed on Vietnamese soil, Gutierrez didn't waste much time doing what American trade officials are accustomed to doing when they travel abroad: lecturing the foreigners on how they should do more to open their markets to U.S. exports. The headlines after Gutierrez met with Prime Minister Nguyen Tan Dung and President Nguyen Minh earlier today (Vietnamese time) had a familiar ring: "Commerce Secretary asks Vietnam to open faster" (Reuters); "Gutierrez Urges Vietnam to Give U.S. Businesses More Market Access" (Wall Street Journal).

If it were only so simple. Privately, some leading members of the U.S. business community in Vietnam say that they have reasons to be nervous. The Vietnamese are still unhappy that the Commerce Department slapped on stiff anti-dumping tariffs on their exports of catfish and shrimp in 2002 and 2003, respectively. And earlier this year, just as the Vietnamese were being wooed for multi-billion aircraft orders in a competition that pitted bitter rivals Boeing and the European Union's Airbus against each other, Gutierrez really angered the Vietnamese by taking actions that threatened to wipe out Vietnamese exports of clothing to the United States. (I'll file a detailed report this week on how Gutierrez not only angered the Vietnamese, but also sparked a bitter internal dispute in the U.S. clothing industry, as U.S. clothing manufacturers and importers like Wal-Mart and Target jockeyed for advantage over other leading members of the American business community in Vietnam.) In short, Gutierrez has been trying to have it both ways: promoting U.S. exports with his right hand, while with his left, attacking U.S. imports of Vietnamese products, thus giving the Vietnamese incentives to play a tit-for-tat game that would target U.S. exporters. Indeed, there are suggestions that such may have already happened. There is some reason to suspect that Boeing may have just lost a couple billion dollars worth of Vietnamese business.

On October 1, Vietnam Airlines inked a memorandum of understanding to purchase 12 Boeing 787-8 Dreamliners valued at $1.9 billion. But at the same time, the Vietnamese announced that they would be buying 10 Airbus A350-900XWB passenger jets and 20 single-aisle A321 jets -- a package of $3.8 billion. The math is simple: Airbus is looking to get nearly $2 billion more business than Boeing. Is this evidence of a payback for catfish, shrimp, and clothes?

"I can't say for certain that Boeing is being punished," says one senior U.S. executive who asks not to be identified. "But I do know that the Vietnamese are smart enough to understand that there is a relationship between catfish, shrimp, clothes, and airplanes."

To be sure, nobody I approached while researching this article, especially at Boeing, was willing to voice such concerns for attribution. But privately, sources in the business community acknowledge that even if Boeing hasn't already been punished, the continued protectionist actions from Commerce constitute risky business that, sooner or later, will rebound against U.S. corporations. "Our biggest problem in doing business in Vietnam is with the U.S. Commerce Department," one senior member of the American business lobby in Washington reports that he informed Gutierrez aides recently, brusquely rejecting their suggestion that he might want to participate in this week's trade mission.

Gutierrez, obviously hoping to deflect critics who accuse Commerce of being two-faced on trade, denied that he was doing any such thing after today's meeting with Vietnamese officials: "We do not want to have a policy that limits Vietnamese exports to the U.S. We just want to be able to export more."

It is unlikely the secretary's Vietnamese hosts were much impressed.

Here's how they might have responded, if the Vietnamese would have felt free to express their feelings without the usual diplomatic niceties: We Vietnamese buy fish food for our catfish from Cargill, and you Americans retaliate by calling catfish exports "unfair" and hitting us with high tariffs. Your Congress even passed a law saying that our catfish had to be called by their Vietnamese names like basa and tra, hoping to confuse American consumers. We buy processing and cooking equipment for our shrimp industry made by the Louisiana-based Laitrum Machinery Inc. Our reward is that U.S. again calls us "unfair" traders and applies anti-dumping duties to our shrimp exports. Now, you Americans don't even make most of the clothing items we are selling to you, yet you have been jumping through hoops for protectionist Republican senators in the Carolinas who are pressing for a new anti-dumping action on our clothing exports. And while all these things have been going on, you ask us to spend billions of dollars to buy Boeing airplanes, favoring Boeing over Airbus? We are still a poor country where more than two million people go to bed hungry every night -- and the richest country in the world is afraid of our catfish, our shrimp, and the clothes that we export?

Last Friday, as Gutierrez and the corporate honchos were looking forward to being wined and dined by their hosts in Vietnam, Inside U.S. Trade published a story that certainly didn't do much to alleviate the simmering behind-the-scene tensions. The article quoted sources in both the U.S. retail industry and in the domestic textile lobby who declined to be named as saying that "they expect" Commerce officials will say early next year that they have found new "evidence" that would justify an anti-dumping action against Vietnamese clothing exports. "Several Southern senators are up for re-election in 2008 including Sens. Lindsey Graham (R-SC) and Elizabeth Dole (R-NC), which could put political pressure on Commerce to find dumping, they said," the trade publication reported.

The message to U.S. exporters: worry about where this risky business is headed. Sooner or later, what goes around, comes around.