Oxfam Report on Vietnam and WTO Entry

From dtsang@lib.uci.edu Sun Jan 9 01:59:20 2005

Date: Sun, 9 Jan 2005 01:58:05 -0800 (PST)

From: Dan Tsang <dtsang@lib.uci.edu>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Oxfam report on Vietnam and WTO entry

Oxfam UK has come out with a November 2004 report on Vietnam and WTO entry.

Extortion at the gate

Will Viet Nam join the WTO on pro-development terms?

As Viet Nam negotiates entry to the World Trade Organisation, the worlds most powerful countries are working hard to exact the onerous WTO-plus commitments which have become characteristic of accession proceedings. Membership could help Viet Nam to benefit from international trade, supporting its efforts to reduce poverty, but the demands from rich countries for excessive liberalisation of imports and foreign investment threaten to undermine this goal and to destroy livelihoods, particularly in rural areas. Available in English and in Vietnamese (two versions, pdf).

Link to page here: http://www.oxfam.org.uk/what_we_do/issues/trade/bp67_viet_nam_wto.htm

Press release:

http://www.oxfam.org.uk/press/releases/vietnam_wto011104.htm

d

Daniel C. Tsang

Bibliographer for Asian American Studies, Economics, Political

Science and Asian Studies (interim).

Social Science Data Librarian

Fulbright Research Scholar in Vietnam, 2003-2004

380 Jack Langson Library, University of California

PO Box 19557, Irvine CA 92623-9557, USA

E-mail: dtsang@uci.edu; Tel: (949) 824-4978; fax: (949) 824-2700

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From markustaussig@mac.com Sun Jan 9 08:59:15 2005

Date: Sun, 9 Jan 2005 23:56:05 +0700

From: Markus Taussig <markustaussig@mac.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

I find this report quite interesting... in a way. this surely reflects my naivite, but the report makes feel starved for substantial dialogue on the reports such organizations put out. Mostly I find it frustrating. From my background in economics, and perhaps more so from my experience living in Vietnam for a decade, the report seems far more informed by American/European morality/guilt than by any reality I know of in this country. "Excessive liberalization of imports and foreign investment threaten ... to destroy livelihoods, particularly in rural areas"????!!! In other words, rural Vietnam could suffer from too much trade and investment, not from having way, way, way too little?! The report is quite extraordinary in the strength of its convictions ... and its corresponding lack of reference to substantive proof.

While, of course, I have seen a good deal of chaos during Vietnam's reform process, the idea of Vietnam as an example of the overall negative impact of trade almost seems like it has to be a joke. Maybe trade in the context of a society with the unfair starting positions of many Latin American countries, but Vietnam? Similarly absurd is the suggestion that Vietnam's government is being bullied about by foreigners. Seems to me that if anyone's bullying anyone, it's Vietnam bullying the foreign donors who so want to attach themselves to Vietnam's success. In fact, though, I feel certain this report will garner a very wide readership and maybe even effect opinions. In some way it's a bizarre alliance between ideological Americans/Europeans, with their hearts (but not their minds) in the right place, and Vietnam's status quo-favoring governing elite. Pretty weird. I wonder to what extent organizations like Oxfam (and the World Bank, for that matter) are at all interested in any informed discussion/dialogue/debate of such reports. They certainly don't seem to do much about creating a venue for such exchange.

... excuse my ranting: not the best example of the dialogue i'm advocating!

markus

_______________________________

Markus D. Taussig

Private Sector Development Research

VoIP (Global Access) Tel: (202) 204 0963

Vietnam Mobile: (84) 903 25 8774

markustaussig@mac.com

http://homepage.mac.com/markustaussig/

From thjandl@yahoo.com Sun Jan 9 20:19:32 2005

Date: Sun, 9 Jan 2005 20:18:12 -0800 (PST)

From: Thomas Jandl <thjandl@yahoo.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

I agree to a large degree with Markus Taussig's comment -- Viet Na is a poster child of the successes of trade and investment, mainly because the government did not let foreigners push them around.

(Sometimes that insitence on a Vietnamese way has even gone too far, as the refinery project -- or non-project -- in dung Quat vividly shows.)

I think, though, that there are problems looming. Viet Nam has done very well with international trade, so much so that if it were to slow down, huge problems would occur. Hundreds of thousands of people have left the countryside to work in the footwear and textile industries and in export processing zones/industrial parks. If Viet Nam cannot make it into WTO, many will suffer, and they have no farm to go back to.

The problem is that thanks to its own success, trade and the need for it has become the dominant discourse in Viet Nam, a virtual necessity that the government MUST deliver. Hence the limited negotiating room for Viet Nam when it comes to accepting ridiculous conditions for membership that the few nasty hegemons who threaten their veto impose. I am talking of course about the United States and Japan, who are trying to impose conditionalities on Viet Nam that are in the interest of the wealthy countries, not Viet Nam's.

So I think that there is danger looming. Yet unlike some NGOs in the West, I am rather confident that Viet Nam willdo just fine in the future as well. Maybe the fact that I am sitting here in T.P. Ho Chi Minh, inhaling the incredible energy that emanates from the place and the people helps in coming to that conclusion.

Thomas Jandl

From mchale@gwu.edu Mon Jan 10 07:39:07 2005

Date: Mon, 10 Jan 2005 13:37:53 -0200

From: Shawn McHale <mchale@gwu.edu>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Dear list:

I too tend to be sceptical of the Oxfam report, but I am also sceptical of the shameless boosterism for globalization and free trade that I see in Washington. More on that later. The Oxfam report does not seem to realize enough some of the benefits of WTO accession. Take telecommunications: what benefits do VIetnamese in general derive from ridiculously high rates to phone abroad? None. It is a government monopoly that deserves to be blown apart. WTO accession will force the opening of sectors that are, today, grossly inefficient and for which Vietnamese have to pay the costs. And it will *expand* Vietnamese Access to the US, etc. The Oxfam report focuses a bit too much of barriers to Vietnamese agriculture. This is odd, given that poor countries in general have a competitive *advantage* in agriculture. In fact, one hopes that in the years to come, Europe and the US will drop their protectionism vis a vis agriculture. The WTO is not perfect, that is for sure . . .

There is a discussion in the report about protecting the Vietnamese sugar industry. Why? That will just make sure, for example, that Thais or Filipinos or whoever can't sell sugar in Vietnam. . . And worry about the Vietnamese textile industry? Why? Vietnam is not going to suffer overall. One can assume that Vietnamese exports in this sector will increase. Higher cost producers --other countries like, perhaps, the Philippines -- will, however, suffer. I defer to others more knowledgeable to make the point though. . .

All that being said, there *is* a downside to WTO accession-- and more generally, to the drive to open markets and participate in globalization. Economists like Jagdish Bhagwati seem to think that there is little bad to come of such processes. And Bhagwati, snide as he is, is one of the more reasonable partisans of free trade globalization.

WTO accession is but a part of the larger process of gloabalization. (Sorry to invoke that buzzword). To partisans of globalization, free trade is good, and globalization has few down sides. But is it really possible to divorce these aspects of globalization from its darker side? The twentieth century was the most lethal in history. No other century comes close. The interconnected world is also a more violent world. I would not argue that free trade necessarily leads to more violence.

But I *would* argue that one lives in a fantasy world if one thinks one can completely divorce these darker aspects of modern global history from the sunnier ones.

My two cents worth!

Shawn McHale

Associate Professor of History and International Affairs

Associate Director, Sigur Center for Asian Studies

George Washington University

Washington, DC 20052 USA

From markustaussig@mac.com Mon Jan 10 08:28:55 2005

Date: Mon, 10 Jan 2005 23:27:36 +0700

From: Markus Taussig <markustaussig@mac.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Shawn mentions a number of the key points that frustrated me about the Oxfam report. The two core themes that are most important to a discussion of trade's impact on Vietnam's economy -- and especially its poor, who Oxfam is claiming to be looking out for -- are: 1.) the impact of globalized trade on the prices and availability of goods; and 2.) the fact that only about 15% percent of Vietnam's population is earns a wage salary. The number on the share earning a wage in the countryside is surely far, far lower. not a hint of either point in the report. yet there's no doubt about it: under such conditions, protectionism protects the haves, not the have nots.

Oxfam does make the point that North America and Europe really should drop their agriculture protection. Absolutely no argument there. The wealthy countries don't have a leg to stand on. Even their arguments that they are protecting their own small farmers are totally bogus. if only oxfam didn't undercut its own legitimacy and drown out this key issue with all the other nonsense.

Shawn mentions the mention of sugar, which I too found really remarkable. Funny, actually. I recently worked as an auditor for the World Bank, looking at state sugar companies. First, nearly all processed sugar is produced by state companies. There are far, far too many such companies, and nearly all produce way, way under capacity. Most are substantial loss makers even with huge amounts of credit and the country's protectionist regime. This has developed based on another flawed concept that a domestic sugar industry supposedly helps "the poor". But the processing companies I met with were all pissed off because these pesky poor people kept switching away from sugar cane to cassava or other cash crops, simply because they made higher margins on these other crops! this was further driving up the processors' losses, so they were actually looking to the local government to actually use land laws to force farmers to grow sugar cane! so much for helping the poor. all the while, to make it truly absurd, massive amounts of sugar are being smuggled in because Thailand both subsidizes production of sugar and is actually far more efficient at producing it (surprise, surprise: more efficient than state enterprises!). an unbelievable amount of money is being wasted on the sugar industry, but thanks to good old fashion smuggling, consumers still get sugar at a reasonable price. oh, and that price is below the production costs of nearly all of Vietnam's sugar producers!

Shawn introduces an interesting question about globalization/trade and its impact on conflict. I think that Shawn and I would be on different sides of this debate, but this is a real question that could be researched and debated. i'd argue, for example, that while globalization has seen far greater international violence, i'd caution against "fantasy" about how peaceful local communities were in more traditional times. the main thing, of course, that has happened -- and which globalization has certainly sped along -- is the development of horrible new weapons. but are humans actually warring against one another as much now as pre-globalization? and, with the exception of our fine US of A these days, I'd argue that there does seem to be validity to the theory that democratic market economies are more hesitant about going to war against other countries (or against their own people).

_______________________________

Markus D. Taussig

Private Sector Development Research

VoIP (Global Access) Tel: (202) 204 0963

Vietnam Mobile: (84) 903 25 8774

markustaussig@mac.com

http://homepage.mac.com/markustaussig/

From Chung.Nguyen@umb.edu Mon Jan 10 11:52:57 2005

Date: Mon, 10 Jan 2005 14:43:48 -0500

From: Chung Nguyen <Chung.Nguyen@umb.edu>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

I'll take another stand here: I am in full support of the Oxfarm report For I believe that it might help the little fish trying to make a little headway in a sea of big, and most of the time, profit-driven motorized fish.

The Report gives a reason for every of its objections and recommendations, and I do not see any of the points brought forth invalidates the basis for its arguments.

Take the case of sugar: I am much enlightened by Markus' account of how Some state companies attempt to force poor farmers to plant sugarcanes Against their interests.

Initially with fewer sugar companies, sugarcanes brought a much better Price than other subsidiary crops (cassava, potato, etc.), and that got every willing farmer into the act, signing agreement to fulfill various quotas. When the rate of production rises, the price comes down, leaving many in an untenable position. I remember the case of a proposed sugar company in the ThuaThien area, giving hope to thousands of farmers with unproductive agricultural land. The deal was signed, the infrastructure was built, then came the time to field test the soil (which should have done at the very beginning). I remember standing in the midst of a large field in the outlying area of the province. The soil was so poor that there were only rows and rows of pitiful looking cassava plants, and no sugarcanes. Many more fields, after careful testing, fell into the same lot, leading to the collapse of the project.. But that does not change the facts there are a lot more fields in other provinces up and down the country that do grow sugarcanes, and lots of farmers' livelihood depend on it. government's unimaginative policies or officials' corruptions do not change the reality that most farmers do not have much of a choice (not an unfamiliar problem of developing countries).

There are, I think, two basic issues for poor countries:

1) On manufacturing/industrial products

Without adequate tariffs, their domestic industries would be completely crushed, with untold effects on hardships, social stability and possibilities for development. Oxfarm gives its reasons for not going any lower than what VN has offered without severely damaging its economy.

2) On agricultural products:

Being poor and undeveloped, their production methods are necessarily inefficient, leading to low yield and low quality results (ex. average of holding is 0.7 hectares, impossible to use mechanized means); their economic strategy would be shortchanged by lack of expertise, historical conditions, or poverty and corruptions.

With WTO ascension, highly focused, extremely efficient multinational companies would come in, with enough deep pocket for a long term strategy to dominate certain segments of the market, potentially the most productive segments, and completely absorb them, leading to thousands of farmers without a livable livelihood.

The issue is that the international companies might not help making the sugar market more efficient but aim at others with much more profit, leaving the farmers with the worst of both worlds. The invisible hand does not always work in the right direction.

This is not a theoretical problem. The suicide of Lee Kyung-hae during The emonstration against the WTO meeting in Cancun in Sept 2003 is a telling case. Former President of a South Korean farmers union, he witnessed his and thousands of his friends' livelihood disappear when imported rice and beef wiped out the domestic farming. Many were forced into bankruptcy. When he died, he was leading the chant ""Dismantle the WTO, conditions" and on his neck hang the placard "WTO Kills Farmers." According to estimate, 3.5 million Korean farmers were affected by WTO policies in South Korea.

This has led to the "Group 20+", including Brazil, China, India, China, Venezuela, etc.to represent poor countries to negotiate with the, as Thomas calls it, "hegemoms" of the WTO.

And if anyone has any doubt about how big companies play the game, a recent publication by John Lewis, "Confessions of an Economic Hit Man," might raise some serious questions. I am actually surprised that Oxfarm has taken such a progressive stand. The reality of international commerce and the impacts of WTO, World bank, IMF on poor countires are much darker (e.g. the firing of Joe Stiglitz, the cases of Venezuela, Argentina, etc.).

Nguyen Ba Chung

From mchale@gwu.edu Mon Jan 10 12:45:09 2005

Date: Mon, 10 Jan 2005 18:42:58 -0200

From: Shawn McHale <mchale@gwu.edu>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Chung,

You write: "I'll take another stand here: I am in full support of the Oxfarm report for I believe that it might help the little fish trying to make a little headway in a sea of big, and most of the time, profit-driven motorized fish."

My answer: what if proponents of greater WTO access as ALSO in favor of the little fish? I am. And what is wrong with being profit-driven? Vietnamese farmers are.

On sugar cane: I don't understand your argument. Sugar grows best in particular soils and with particular levels of irrigation or rainfall. Some regions are ecologically better suited than others. the point is not that some farmers now make their livelihood through sugar production. It is whether or not there are *better* alternatives which will make those farmers better off. Frankly, I don't know *anything about Vietnamese sugar growing to make any bright comments on that, so I should probably just shut up. :)

But I do know that the world sugar market has historically been skewed. Large subsidies by the European community, US, and so on depresses the world market price. so in effect, Vietnamese sugar exporters have to compete in an international market where prices are artificially low.

What this means, of course, is that the average Vietnamese sugar farmer will have to work extremely hard to get any profit. Now, if the so-called developed countries were willing to ditch their agricultural subsidies, then it would make more sense for Vietnamese to produce sugar. To me, it just seems a bit of a puzzle. It is not as if Vietnam is defending a historically robust sugar sector. Finally, I don't know if it is possible, but it seems obvious from an economic point of view that Vietnam would do better to find niche, high profit agricultural sectors.

On tarriffs: well, given that projected Vietnamese exports in textiles and other products are probably going to increase at a marked rate, I am not sure why Vietnam needs so much tariff protection!

On agricultural production: big does not always mean better, as rubber production in Malaysia showed. often, smallholders were more efficient than large firms.

As much as I am for WTO accession, I do think, as I indicated, that some of its strongest partisans don't want to examine the downsides of greater globalization. Globalization is here to stay: but it is not always pretty. It leads to social dislocation. It can lead to skewed incomes and an increase in social inequality. A focus on the aggregate benefits can lead some to forget about the stories of individual "losers" in this game. So yes, it is important to remember this downside, and in that sense, the Oxfam report is welcome. But what is the alternative to WTO accession? Vietnam is unlike so many countries that have undergone globalization. It probably has a bright economic future. It is not, for example, the Philippines, which has a sorry track record of economic development thanks in part to its obtuse leaders and entrenched economic social and political elites. But that is another story. . .

Shawn McHale

(who once lived surrounded by sugar cane fields in the rural

Philippines. . . )

From markustaussig@mac.com Mon Jan 10 20:21:57 2005

Date: Tue, 11 Jan 2005 11:19:43 +0700

From: Markus Taussig <markustaussig@mac.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Shawn makes the key point relating to Vietnam and the WTO when he says, related to sugar: "It is not as if Vietnam is defending a historically robust sugar sector." Vietnam, despite the aims of central planning, has very, very little mature industry. But this is specifically a situation where open trade policy is best. The pain of trade liberalization has to do with the fact that one loses out in industries one has no comparative advantages in. The pain comes from the adjustment where people in those industries lose their jobs. But Vietnam barely has any such industries! The example of sugar: Vietnam opened up about 60% of its 50 or so sugar processing plants in a couple of years during the late 1990s. And while, yes, moving back out of sugar would be painful for some farmers, many are doing so on their own in search of higher income. And I know I've actually found it pretty amazing to come to realize how NOT risk averse farmers in Vietnam are, as they're constantly dealing with change!

Key is, for sure, the subsidies that the Western countries pay. But this is a reality and politically is unlikely to change. These countries, however, are rich enough to practice such unwise economics.

The best thing for Vietnam to do would be to allow its people to buy subsidized sugar from the US, Europe, and Thailand, while focusing production in other more market-oriented industries where the country's great advantageous in smart and low cost labor could better pay off. Instead, Vietnam tries to compete with countries like the US to create its own separate industry, which can't even get its costs down as low as the smuggled price (which equals other countries costs + profit + payment for the risk of smuggling), and where most of the income benefits have gone to managers who've overseen the big construction projects of building dikes and processing factories.

No doubt at all about the trauma of this all and the increased disparities. of course, when you're transitioning from communism, there's nowhere to really go but increased disparity. i think a key factor that worsens the psychological impact of globalization in Vietnam is the lack of clear rules. vietnam's lack of institutions makes change feel less fair to many, i'm sure. but when searching for practical solutions, i think it's always key to be focused on "optimal" solutions. i.e., the specific problem needs to be identified and then addressed. when this is done, i think one usually finds that it's pretty hard to ever show that underpaid bureaucrats can make better decisions than markets. bureaucrats, instead, should use their time to do what they are better equipped to do, which is to soften the fall for the losers and find ways to better equip people to perform their best.

lots of foreign investment can lead to lots of tax revenues that could be used for improving education and public health. way better use of time and VERY limited resources than the old import substitution sink hole.

markus

_______________________________

Markus D. Taussig

Private Sector Development Research

VoIP (Global Access) Tel: (202) 204 0963

Vietnam Mobile: (84) 903 25 8774

markustaussig@mac.com

http://homepage.mac.com/markustaussig/

From jmdelane@yahoo.ca Tue Jan 11 02:49:17 2005

Date: Tue, 11 Jan 2005 05:48:08 -0500 (EST)

From: Jim Delaney <jmdelane@yahoo.ca>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

I for one found the Oxfam report to make many good and valuable arguments. It is a breath of fresh air in a Vietnamese environment that offers little discussion of the potential trade-offs involved in WTO accession.

I did not read the report to be anti-trade at all. In fact, it says over and over that Vietnam will likely benefit in many sectors, and on the aggregate, from increased trade that will come with WTO accession. It also references the added benefits that increased transparency could bring to Vietnam. This is not an argument about whether trade is good or not, but instead an argument about how multilateral trading regimes should be negotiated and enforced. Oxfam make the good point that those who are advising Vietnam on the accession are for the most part the same countries that are attempting to impose perhaps unwarranted restrictions on Vietnam. Oxfam is simply trying to fill a major advice gap by bringing up some touchy issues of the potential downsides of accession.

Whether sugar is a strategic product deserving of protection or not is irrelevant. The key question is whether there are any sectors that deserve short-term protection because the poor depend on them for their livelihoods? Protection of a limited number of strategic sectors can be useful policy tools for government, and the WTO recognizes this by allowing for the transitional protection of some areas for developing countries. Vietnam is being pressured to renounce some of these rights and accept extra restrictions in order to quickly enter the WTO. There was once a time (I am told) when trade policy was considered a relevant area of development strategy. The South Koreans and Taiwanese knew this, as does Vietnam today. Vietnam should not be forced to make concessions that existing WTO members wouldn't even consider for themselves.

The potential reduction or elimination of some subsidies for uplands communities in rice, maize and forestry could have negative implications for the poor. I have yet to see many long-term benefits from subsidized inputs for poor farmers, but they do offer short-term support to many of the poor, if not the poorest. There is also a learning process that comes with subsidized inputs, as poor farmers learn to adapt new production techniques and take risks that they may not normally take. Markus makes the good point that most Vietnamese farmers are great risk takers and experimenters. This is not necessarily the case for the poor and vulnerable, and for ethnic minorities in the uplands.

The poor in particular could be adversely effected by TRIPs impositions of intellectual property protection in agricultural and health sectors. In order to meet its own WTO accession requirements, the Philippines has been pressured by donors, and USAID in particular, to implement plant IP protection along the lines of the international UPOV, which protects northern plant breeders often at the expense of small farmers, restricting many of their rights to save seed and to experiment on their own farms. This has been difficult to enforce, but the legal system has been gradually moving to charge even smallholders for appropriating the intellectual property of large American plant breeders.

Vietnam negotiators and those such as Oxfam who would offer independent advice should not be ridiculed into accepting the spurious free-trader vs. protectionist arguments. Any trade regime includes a mix of policies, and Vietnam should be supported to manage its own way through the accession process.

Jim

From markustaussig@mac.com Tue Jan 11 03:43:25 2005

Date: Tue, 11 Jan 2005 18:42:03 +0700

From: Markus Taussig <markustaussig@mac.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

i'm all for debate: that was actually my original point! i was complaining that oxfam had produced a document that has a lot of rhetoric in it and was not offering a forum for discussion of its individual points. this is a general complaint against all of the development agencies (including the bank, as i mentioned in my first email on the subject).my main points are:

1 - in reality, protectionism does not serve the poor. same for the generalized concept of "strategic" industries. it is often justified in the name of the poor by the connected groups that are pushing for it, but the benefits do not go to the poor. sugar is an excellent example, with government officials and SOE managers making large sums of money off of the large construction projects. the subsidies in america and europe are another: if you ever watched the sunday talk shows in the US, you see commercials by a soy bean multinational, which thrusts a pretend small farmer at you, explaining, in effect, that it is entirely appropriate that the government is subsidizing the corporation. the only certain thing from these policies is that the poor, as well as all the downstream industries that use whichever "strategic" product is being protected, will be paying higher prices.

2 - direct solutions to problems are better than pretend market solutions. if a poor community is going to be effected by a policy that will have an overall positive effect on the economy, why not take a chunk of money and improve roads and schools in that particular community? or perhaps the community would have a better idea about what the money could be spent on. again, the sugar case is a great example of how protection generally doesn't work anyhow when it's facing global forces. the sugar comes through anyhow. it's just that a whole lotta money has been wasted (i.e., as above: transfered to SOE managers and local officials) in the futile effort to stop it.

3 - evidence doesn't show support of "strategic" industries helps the poor. The examples of East Asian countries such as South Korea have led to a great deal of debate regarding what they say about industrial policy. In general, in the academic writings, the financial crisis seemed to finish off the people claiming that East Asia had discovered a unique model that flew in the face of standard economic theories and showed that governments could pick winners. Even before the crisis, though, the literature supporting the idea of an East Asian industrial policy model struggled to establish a causal link between the economies' successes and specific industrial policies. Even more to the points that Oxfam tries to make, protectionism has definitely not been linked in the literature to improved conditions for the poor. The qualified successes tend to be more in higher margin, high tech areas that employ few and mostly just the higher educated elements of

society.

given that we all say our positions are aimed at helping the poor, couldn't we agree that the best policy would be one that was maximizing government revenues available to build better roads and better schools in the poorest communities? the other point i think we see in all of our messages, is an agreement that our own home country governments should not be maintaining their random, and politically motivated, protectionist regimes, because that's what really reduces opportunities

for the poor in countries like vietnam.

markus

_______________________________

Markus D. Taussig

Private Sector Development Research

VoIP (Global Access) Tel: (202) 204 0963

Vietnam Mobile: (84) 903 25 8774

markustaussig@mac.com

http://homepage.mac.com/markustaussig/

From thjandl@yahoo.com Wed Jan 12 00:48:35 2005

Date: Wed, 12 Jan 2005 00:47:14 -0800 (PST)

From: Thomas Jandl <thjandl@yahoo.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

This is a great debate, and I'll throw another bit of fuel in.

Agriculture: Sure, with globalization he small farmers will have to consolidate -- no way to be efficient with less than 4 acres or so on average. But is that only so under globalization? No. The issue is one of average income. You can produce a labor-intensive product for your domestic or an international market as long as your labor is extremely cheap. Anybody who argues for maintaining these tiny farms in fact argues for continued extremely low wages.

Ask any Vietnamese you find whether they want to earn more money. The response will be roughly 100% yes. Can't do it if you maintain a system that by its own design only works as long as manual labor is dirt cheap.

Second, with populationon the rise and no new land available, the traditional system of cultivating new land for the various sons no longer works. Hence the traditional system will not continue --globalization or not -- because there is no land to sustain it. Of course we can stop providing Vietnamese peasants with medical care, and nature will take care of that. Hmmm?!?!

Vietnam has brought down its poverty rate from over 70% to around 20 since it joined the global economy. Even allowing for some statistical propaganda here, that's pretty remarkable. And the social acceptance of doi moi and globalization throughout society is truly remarkable -- because it has worked for broad parts of society.

BUT: Change brings with it winners and losers, especially in the short run. Rather than ranting, I recommend re-reading of a great clasic: Karl Polanyi's "Great Transformation." In the end, he says, we're all better off, but we need to help the weak in the period of transition. I think unlike other places, Viet Nam has a fairly good record with that so far.

Thomas Jandl

From thjandl@yahoo.com Wed Jan 12 01:02:31 2005

Date: Wed, 12 Jan 2005 01:00:45 -0800 (PST)

From: Thomas Jandl <thjandl@yahoo.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Sorry, one more: Coffee, textiles and seafood

Vietnam does not have a traditional coffee sector to defend. Viet Nam has created a coffee industry by government plan when there was money to be made. Now Viet Nam produces about 13 mio bags a year. Global coffee surplus: roughly 13 mio bags. So prices have slumped and the many farmers who were "coaxed" into coffee -- and the government knows how to coax, when it is the only provider or loans etc – are now in any amount of trouble.

Would the globalzied market have done that better? I don't know. But it would not have wasted billions in planting (the wrong sort of) coffee, would not now waste more re-panting to higher-quality coffee stands and potentially then have to absorb heavy losses by having to buy and burn coffee as Brazil is already doing. This is money that is sucked out of a national economy, with no benefit to anybody. Markets traditionally do these things better.

And once you have a market, the best will be able to sell their products. Viet Nam could sell much more of its textiles if it was a WTO member. It's the quote system the first world has set up that keeps Viet Nam at a certain level (and again, the government seems to provide a lot of the existing quota to state companies, when private ones claim they are more efficient -- but that I cannot ascertain.

Seafood: Anybody followed that descicable debate over Vietnamese catfish. Under US law you can't call a catfish a catfish any longer unless it's raised (and conceived, I suppose, knowing my Republicans) in U.S. waters. Protectionism of the most despicable kind. Couldn't happen under a strong WTO with teeth, and 300,000 catfish farmers in the Mekong who have sold their farms to get into this promising business would not fear for their existence.

WTO is good for the small countries because it provides a framework within which disputes can be resolved. In a bilateral dispute between the U.S. and Viet Nam, what do you list subscribers all think who will prevail. I admit that the rules of WTO are still too much skewed in favor of the big guys, but it's better -- much better -- than no rules at all, but bilateral dispute settlement with power as the only determinant.

Thomas Jandl

From Chung.Nguyen@umb.edu Wed Jan 12 11:39:02 2005

Date: Wed, 12 Jan 2005 14:28:32 -0500

From: Chung Nguyen <Chung.Nguyen@umb.edu>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Hi Shawn,

Sorry for the late response. I was waylaid into something else for the last few days. Other postings have clarified the issues but I'll try to respond to the points you raise below.

My take is that the Oxfarm report supports VN's entry but strongly objects to the kind of terms and conditions that are being sought to constrain it - "Extortion" is the term being used. Jim Delaney has explained the issues very well, much better than I could.

In general (not to duck the issues, but I only understand the Report "generally," and most of the more detailed stuff are beyond my competence), I support its stand. If VN isn't careful, it can be saddled with the most onerous terms and conditions that would make its WTO entry a disaster. Once you get in, the rule says, you can't get out.

The records of WTO-IMF-WB policies for the last 20 years (WTO was founded in 1995) had been mostly negative. Walden Bello, executive director of Focus on the Global South, succinctly summarizes the results on poverty reduction as follows:

"Structural adjustment programs imposed on over 90 developing and transition economies in the last 20 years have institutionalised economic stagnation,increased poverty, and exacerbated inequality in these areas. A recent World Bank study, in fact, admits that poverty worsened in the 1990's in Eastern Europe, Subsaharan Africa, Latin America and the Caribbean, and South Asia-all regions which have come under the sway of World Bank-IMF adjustment programs. ... So devoid of success was the structural adjustment approach that Larry Summers, the US Treasury Secretary, who, as chief economist of the Bank in the early 1990's, was a partisan of adjustment, admitted to the US Congress last year that it was time to shelve the "IMF-centered" macroeconomic approach because it just was not working."

Nevertheless, the issue for VN at this juncture is not to join or not to join, but how to join with the least unfavourable terms and conditions.

I think we would agree here: the little fish needs all the help it can get.

The major objections to the WTO-IMF-WB policies are the fact that they put the the highest priority on free trade and the free movement of capital across national boundaries, and very low priority on anything else - not on the environment, not on sustainable development, not on the long-term interests of the local community or country. In terms of dispute resolution, the process is controlled by the most wealthy countries with very little protection for the rest. It's the financial world's equivalent of "My way or highway."

I have no problem with "profits." But we are not talking of the kind of ordinary profits gained by fair and reasonable means here. It's the kind of profits made by multinationals that could drive even resource-rich countries to bankruptcy or the poor houses (Brazil, Argentina, Venezuela, etc.).

Yes, the main issue is the enormous subsidies by US, Europe, Japan, etc given to the agriculture sectors which not only deny but also take away markets for the only exportable products from poor countries, their only means of earning foreign exchange. Estimates put the total subsidies at hundreds of billion dollars a year, dwarfing the combined GDPs of dozens of developing countries.

If South Korean farmers have problems because of beef and rice imports, imagine what might happen to Vietnam. South Korea, with a much more Powerful economy, can afford measures that would be beyond what VN could muster.

The problem with "finding a niche" is that it's easily said than done. Every country wants to find a niche, hence there aren't many niches left. The reason the Oxfarm Report wishes to initially protect sugar price is, I suspect, that it would be difficult for VN in the short run to come up with a passable solution.

In Vietnam rice is the farmers' main crop, but as that won't bring in enough income to service on, they have to do a 2nd, sometimes a 3rd, crop. They have probably tried everything their soil could support, as long it could bring in a better price. Right now, it's sugarcanes. It won't be easy to find a substitute. And living from hand to mouth, they are in no position to wait or to experiment. With 69% of the labor force in agricuture, and almost half of them living under the poverty line, it's a huge risk to destabilize their meager income.

I think we all agree that solutions will have to be found, but all the Report asks for is a temporary respite, not a permanent injunction.

I'll leave this to the experts. If the calculation proves that VN does not need it, then by all means. Oxfarm certainly, I hope, has their experts.

Perhaps in some specialized crops, but not the kind, for example, of US macro-farming. And hundreds of billion of dollars in subsidy can go a long way in offseting any manual advantage. And there is no point in hoping that these subsidies will go away because there is very little chance that they will. If only 200M worth of catfish from a few states could cause the US to throw the domestic book at Vietnam, let's not indulege too much in hope.

We agree here. It's not the alternative to WTO ascension but its terms and conditions that need to be negotiated. And Oxfarm makes clear that the current terms and conditions are not acceptable. It's reasonable, I think, to support Oxfarm's view in this.

Nguyen Ba Chung

(whose family has grown coffee, losing a bundle, now converted to

cashew plants, watching the rains every season with immense interests ...)

From markustaussig@mac.com Wed Jan 12 18:38:44 2005

Date: Thu, 13 Jan 2005 09:37:12 +0700

From: Markus Taussig <markustaussig@mac.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Chung, Jim and Oxfam have all mentioned something that I think we're all uncomfortable with: the "extortion", the fact that small, poor countries are likely to not get treated as well as the big rich ones within the WTO. As a means of moving the debate further, I wonder if someone might respond to Thomas' very relevant point: in a pre-WTO world, an unfair relationship between rich and poor nations is GUARANTEED by their differences in raw power, whereas the WTO is actually an effort to introduce a basic structure that would level, in relative terms, the playing field. In other words, it is easy for us to critique the efforts of the WTO designers and to say it's still unfair, but the de facto reality IS unfair and that does not change when we insist and wait for the perfect solution.

Related to this line of argument, Oxfam does NOT offer an alternative means of addressing the reality that small, poor countries have no recourse in trade disputes, while rich countries always have a way to directly punish poor countries. The question for Oxfam is then whether it is satisfied to simply be a gadfly, a devil's advocate, that points out problems. I think to many sensitive people who admirably see the wrongs of the world are indeed satisfied to play this role. I don't mean to demean such critique, because debate is valuable and the points made can be taken into account by those trying to think of better systems. But the critiques would carry much more weight if they were part of a larger argument for a particular type of global economic SYSTEM that offered greater opportunities for poor countries.

The problems with the IMF approach, as applied in Africa and Latin America (as well as in East Asia, during the crisis of the late 90s), is I understand them, related chiefly to the IMF's macro economic prescriptions regarding interest rates and budgetary policy. Especially budgetary policy. In East Asia, the IMF made the mistake (and the IMF itself has admitted this mistake, so it shouldn't necessarily be assumed that a monolithic IMF still stands for all of its past mistakes) of insisting that governments balance their budgets. In retrospect, in such a time of crisis, it would have been entirely appropriate to run a deficit for a number of years. The IMF had not taken all of the information into account that it needed to and reached into its bag and pulled out the wrong economic policy tool. Unfortunately such human mistakes will never be eliminated, though improved systems can minimize them.

_______________________________

Markus D. Taussig

Private Sector Development Research

VoIP (Global Access) Tel: (202) 204 0963

Vietnam Mobile: (84) 903 25 8774

markustaussig@mac.com

http://homepage.mac.com/markustaussig/

From mchale@gwu.edu Thu Jan 13 07:38:43 2005

Date: Thu, 13 Jan 2005 13:35:12 -0200

From: Shawn McHale <mchale@gwu.edu>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Dear list,

I have found this an interesting debate (and unusual for VSG, which does not usually touch on these issues). The debate is interesting to me for personal reasons. (I'm the son of a person who was, at one point, a development economist.) I think the critiques of the WTO are partly based in a critique of First world development prescriptions, ones that sometimes went disastrously wrong. Sometimes these critiques may apply to the WTO; sometimes not. For example, at a basic level, we have to remember that the WTO is about trade. It is also about competitiveness. But it is not, directly, about industrial policy, or a raft of other issues.

We can look around the world and see numerous examples of where development prescriptions have gone wrong, or where the promise has not been realized. Take the Philippines. It never has realized its potential. Indonesia -- it grew from 1966 to 1997, but who reaped the most benefits? Market dominant minorities -- growth did not spread benefits to all. (Amy Chua has an interesting book where she argues that in countries where there are market dominant majorities, pushing democracy and free markets at the same time is a recipe for violence. Chua is a lawyer, and the case is argued a bit like a lawyer's -- that is, exclude all nuance to make your case stronger -- but it is an intriguing, lively, and irritating book all at the same time.)

That being said, not all countries are alike. As a general rule, it seems to me, those countries which did not break the back of their landlord class have had difficult times adjusting to opening markets. Entrenched rural elites, whether in Pakistan, Nepal, Pakistan, or the Philippines, don't like change. They are often risk averse, because they have a great deal going: they sit back as a rentier class and rake in the benefits of the labor of others.

Similarly, if a country has an entreched commercial minority --like the Chinese in various countries in Southeast Asia -- WTO accession would, one assume, probably just increase, in the short run, their market position, which would, in turn, lead to resentment on the part of the majority UNLESS benefits started trickling down to the majority.

The Philippines was saddled, in some parts, with a landed elite AND an entrenched minority commercial class. Political power is still overwhelmingly in the hands of this socio-political class. The Philippines had a sugar market protected via government monopolies and via guaranteed access to the US market till the late 1960s. It was a big export industry in the 1960s. Today, the Philippines is an also-ran. Who benefitted in the long run? Kleptocrats. Certainly not the average worker. The management of Victorias Milling Company (sugar milling) looted the worker pension fund -- one of these managers absconded to Florida. (And, given the Philippine legal system, he got away with the plunder.)

Landed elites in the Philippines have often been risk averse. They have often liked protectionist schemes that benefit them and shift risk on to the poor. As for the Chinese and Chinese mestizo minority, they are more open to risk. But they have sometimes minimized or sharply lessened their risk through crony deals with government etc. But neither the landed elites nor the minority commercial classes have really allowed the benefits of economic activity to flow downwards much. They've just entrenched themselves as social and political classes. This is a case where greater access to the world economy without fundamental social restructuring (e.g. breaking the back of rural landed elites, e.g. on Negros Island. .) and without political change might just lead to an increasingly skewed economy.

But Vietnam is different. The communist party in Vietnam broke the back of the rural landlord elites. Brutal, yes: but in the long run, this will probably be good for Vietnam's economic development. As for the re-emergence of a market dominant minority: it seems to me (correct me if I am wrong!) that the re-emergence of Chinese economic power in Vietnam simply has not lead to a situation similar to the Philippines or Indonesia. And at a more basic level, while all sorts of people complain about Vietnam's education, the fact is that compared to other poor countries like, say, Nepal, it has a far more literate work force. That counts! In short, Vietnam is far better positioned to take advantage of the WTO accession than so many other coutries. I'd be more concerned about Nepal and Laos than Vietnam.

My speculation!

Shawn McHale

Associate Professor of History and International Affairs

Associate Director, Sigur Center for Asian Studies

George Washington University

Washington, DC 20052 USA

From xuanzhixuan@yahoo.com Fri Jan 14 01:49:29 2005

Date: Fri, 14 Jan 2005 01:47:50 -0800 (PST)

From: Fredrich Kahrl <xuanzhixuan@yahoo.com>

Reply-To: vsg@u.washington.edu

To: Vietnam Studies Group <vsg@u.washington.edu>

Subject: Re: Oxfam report on Vietnam and WTO entry

Apologies for potentially beating to death what has been a tremendously interesting discussion, but briefly chiming into to make a couple quick points:

It's important to look at the implications of this whole VN WTO accession process vis-a-vis other trade initiatives, and it seems to me that in the grand scheme of things the primary supply-side threat to the Vietnamese economy, and esp. to agricultural and forestry sectors, is China rather than WTO entry. This China-AFTA scheme that came into being in January of last year via something creatively dubbed the "Early Harvest Program" will reduce agricultural tariffs on a fixed schedule and eliminate many of them (484 product cats. for VN, with exceptions for sensitive products like fisheries, pepper, cashews, etc.) by end 2007. WTO accession will entail bound tariffs (as the Oxfam report notes), but will not eliminate them.

Common wisdom says that China is a "developing country" and that CN and VN will be competing in third-country markets, but a quick glimpse at China's own structural shifts under WTO suggests that China is going to become a major agricultural exporter in the next few years (FEER made some comment about China becoming the "world's greenhouse as well as its warehouse"), and will no doubt be exporting in large doses to VN. Incipient signs of this are found in outdoor markets in Ha Noi, where all of the temperate fruit and some of the vegetables are from China (though few will admit to it). On the border I would guess that 30-40% of the veggies in vegetable markets (at least in Lang Son) are from China. In general, I would venture to say that the vast majority of traders in China see VN as an *export* market, regardless of whether that's for electronics, agricultural products, etc. (with the exce! ption of crude oil, coal, rubber, seafood and tropical fruit). Officially, China is VN's largest source of imports and that would increase exponentially if you include all the smuggling along the border.

The intermediary/processing sector in VN is an interesting puzzle. As Adam has noted several times on this list, the convoluted system of ownership means that it's nearly impossible to effectively implement policy across the board; border measures tend to be in response to specific requests for protection rather than based on strategic, pro-poor decision making. As with China, WTO entry for VN may have the effect of breaking up monopolies that would be impossible for the government to break without external intervention. So while shocks to agriculture might have negative repurcussions on farmers when filtered through the SOE system, a more effective processing sector in the wake of monopoly breakups/collapse (with modern management, marketing, and the like) might actually raise farmgate prices as near monopsony pricing theoretically comes to an end?

There are some good, soul-searching questions that arise from all of this: Are resources better invested in supporting VN's WTO negotiation process, or in improving markets and market infrastructure (esp. in the northern uplands) to help small-scale farmers develop products, reduce production costs and/or transition out of agriculture/forestry? Is the priority role of donors and NGOs in WTO/policy debates, or in playing a the "assisting the weak during transition" role that Thomas mentions? If the latter (in one/both cases), what's the most effective way to go about doing this in a way that incorporates the urgency that greater commercial exposure to China adds to the equation?

- Fritz