The Rushford Report 2007

Is This Trip Necessary?
Perhaps, but for different reasons than advertised

posted on November 7, 2007
by Greg Rushford


U.S. Commerce Secretary Carlos Gutierrez has been in Vietnam this week with 22 internationally-minded senior executives from the higher echelons of American business. As originally planned, 23 companies had been planning on participating in the trade mission. But James Dicke II, the chairman and CEO of Crown Equipment Corp., which manufactures equipment like electric heavy-duty lift trucks and forklifts that are familiar sights in warehouses around the world, came down with a bug at the last minute and could not make the trip. This raises an interesting question that goes to the premise of the trade mission, the officially announced purpose of which is "to request the Vietnamese government to give our companies more access" to their markets and "to promote U.S. exports," as Gutierrez has put it. So, by failing to make the trip, what export-oriented business opportunities would the Crown Equipment Corp. have missed out on?

Perhaps not all that much. Headquartered in New Bremen, Ohio, Crown is a sophisticated global competitor with operations in countries like Australia, England, Germany, and Mexico. Last year, Crown began manufacturing several of its product models in its new 150,000 square foot facility in an industrial park in Suzhou, China. Crown also sells its forklift trucks in Vietnam. Why would such a world-class enterprise need the U.S. Commerce Department to do business in Vietnam?

Indeed, the American senior executives who have been busy networking in Hanoi and Ho Chi Minh City with Gutierrez this week seem already to be doing quite nicely in Vietnam on their own. I asked one high-powered American CEO why, then, he had been eager to fly to Vietnam this week. The surprising answer can be distilled this way: The executive thought it important to help build the credibility of the U.S. government, while demonstrating to the Vietnamese that America is serious about strengthening both the business and political relationship. The Vietnamese have good reasons to protest that they have been treated unfairly in anti-dumping cases against by Commerce bureaucrats, this CEO understood. Commerce's continuing monitoring of Vietnamese clothing exports -- which the Vietnamese well know has nothing to do with valid economics, but everything to do with pleasing protectionist lawmakers like Sens. Elizabeth Dole and Lindsey Graham in the Carolinas, who are pressing for trade restraints on behalf of the protectionist U.S. textile lobby -- remains an irritant to the overall U.S.-Vietnamese relationship, the corporate honcho understood. More broadly, the Vietnamese government, like others around the world, has good reason to be worried about the rise in protectionist sentiments in the United States. And even beyond that, the Vietnamese have known for years that the American business community has been a bit timid, lagging behind more entrepreneurial-minded investors from Singapore, Japan, Taiwan, and South Korea. Unlike many Americans, the sharp-eyed Asian competitors have generally been far more willing to take the risks of investing in countries like Vietnam that may be on their way up the economic ladder, but meanwhile remain, well, risky. The last time I was in Vietnam, seven years ago, I heard this complaint from the Vietnamese repeatedly.

Let's take a closer look at some of the U.S. business members of the Gutierrez trade mission who have already demonstrated to the Vietnamese a seriousness of purpose, despite the signals to the contrary that America has been sending in recent years, and whatever the Commerce Department officials do, or don't do. At least, the exercise offers ample reasons to doubt the officially-stated premise that American businesses need the Commerce Department to open doors to their exports. There's something of a political kicker that suggests something about one of the signals that Gutierrez has been sending at the end of this article, for readers whose eyes might tend to glaze over at a recital of Yankee Traders in action.

Here's the run-down:

Marriott International is already in Vietnam, witness the Renaissance Riverside Hotel Saigon, which advertises a spectacular view of the Saigon River in what is now officially known as Ho Chi Minh City.

3M, which sells Post-its, Scotchgard and other life essentials to grateful consumers in more than 200 countries, could tell Commerce officials plenty about what it is like to do business in Vietnam. 3M Vietnam Limited has been operating in Ho Chi Minh City since December 1994. If U.S. officials want to know more about offering useful advice concerning Vietnam's investment laws, they could do worse than ask 3M about how to go about licensing products there.

It is also difficult to think of why Alcoa, with some 129,000 employees in 32 countries, would really need much assistance from the U.S. Commerce Department to establish good connections in Vietnam. Alcoa certainly knows Asia (five alumina operations in China, 8 in India), not to mention how to thrive in risky countries from Kazakhstan, Russia, Azerbaijan, and Bosnia Herzegovina. Alcoa's Alcoa World Alumina and Chemicals affiliate announced last year that it would participate in a joint venture to build and operate an alumina refinery in a bauxite deposit area in Dak Nong Province with its Vietnamese partner, the Vietnam National Coal-Minerals Industries Group (which is called by its acronym, Vinacomin).

Northwest Airlines has been flying to Vietnam since April 3, 1991, when the Minneapolis-based carrier became the first American airline to fly to Vietnam since the Vietnam war ended in 1975.

Cummins Inc., the venerable U.S. engine manufacturer based in Columbus, Indiana, announced on Sept. 28, 2007 that it has signed a memorandum of understanding for a 50-50 joint venture with Vietnam Motors Industry Corp.(called Vinamotor) to produce diesel engines in Vietnam. Prime Minister Nguyen Tan Dung, representing Vinamotor, flew to New York for the signing ceremony with Steve Chapman, Cummins' group vice president for emerging markets.

Baxter International, which boasts of being a "$9.5 billion global market leader" in medical devices, pharmaceuticals and biotechnology, has 67 manufacturing facilities in 28 countries -- including 11 in India, the Philippines, Singapore, Japan and China. Last year, Baxter announced that it planned to put in $60 million into expanding its four facilities in China, where it's 2006 sales amounted to $100 million. It appears like Baxter has already given the Vietnamese ample incentives to give the U.S. health-care giant a warm welcome, official U.S. trade mission or not.

Eaton Corp., the industrial manufacturer of electrical systems and power systems,, has been providing hydraulic cylinders for the Thao Long Dam project in central Vietnam. Last month, Kevin McLean, the vice president and general manager of Eaton's Electrical Asia-Pacific Operations, stated that his company hoped to expand its presence in Vietnam. Sounds like Eaton is capable of working its own connections without the help of the U.S. federal bureaucracy.

Gannon International, Ltd., has a Gannon Vietnam subsidiary, which is busy distributing L'Oreal brands in Vietnam, cosmetics for Esprit Holdings, and sports flooring for a new Southeast Asian Games Sports Center in Ho Chi Minh City. Gannon's going fine in Vietnam.

There's a lot more. AES, the American power company, announced in Feb. 2006 plans to participate in a consortium that is to build Vietnam's biggest thermal power plant in Quang Ninh Province. Richard Darman, a former cabinet officer in the first Bush administration, is chairman of the AES board. Darman is famously not a man with a reticent persona who wouldn't know how to make his own connections. The Ford Motor Co. has been well-connected in Vietnam since 1995, when it first broke ground for an assembly plant in that country. Terex Corp. has a Chinese Terex Corp. subsidiary, which is busy expanding its Vietnam presence by selling mining trucks in the northern province of Quang Ninh. And Rockwell Automation Southeast Asia, part of a global network across 80 countries, has a representative office in the Me Linh Point Tower in Ho Chi Minh City, where it provides sophisticated software services to its customers. But perhaps the most interesting company that has participated in this week's official trade mission is Gerber Scientific, Inc.

From its headquarters in Tolland, Conn., Gerber Scientific runs a $530 million corporation that develops and manufacturers integrated software and hardware automation systems for what the company's website calls "the sewn products and flexible materials industries." The high-tech mumbo-jumbo easily translates into textile politics, at least for trade aficionados. On May 2, 2007, the Gerber Technology subsidiary announced that it was setting up its Vietnam headquarters in Hanoi. Additionally, Gerber said it was also planning a branch office in Ho Chi Minh City, which would "house state-of-the-art automated spreading systems and multi-ply cutting systems," and so forth. Translation: Gerber is going to help Vietnam's clothing manufacturers to expand their exports -- including exports to the United States, regardless of U.S. protectionist leanings in this industry. "With Vietnam's membership in the WTO in December 2006, textile and apparel industry exports are expected to increase from US$5.8 billion in 2006 to US$10 billion in 2010," said James Arthurs, Gerber Scientific's Asia-Pacific president. Added John Hancock, the president of Gerber Technology: "Vietnam continues to be a growing resource for brands and manufacturers in the U.S. and around the world who are looking for options in sourcing."

From the view of protectionists in the U.S. textile lobby and their allies in Congress, who fear Vietnamese competition, those are certainly fighting words. Could it be that Carlos Gutierrez -- formerly the respected CEO of Kellogg Co. and an internationalist in good standing, notably before he entered government service and found he was expected to cater to the domestic textile lobby and take political directions from junior White House know-it-alls -- wanted Gerber on this trip to send a signal? That signal being: whatever his current, often-awkward political obligations, the cabinet secretary gets it?