White House

Trade pitch turns Obama into salesman for Vietnam shoes

President Obama lands in Vietnam

President Obama is the third U.S. President to visit Vietnam since the normalization of relations just over 20 years ago. Deputy National Security Advisor Ben Rhodes outlines what's on deck for this historic visit.
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President Obama is the third U.S. President to visit Vietnam since the normalization of relations just over 20 years ago. Deputy National Security Advisor Ben Rhodes outlines what's on deck for this historic visit.

Each year, tens of millions of pairs of shoes made in Vietnam find their way into stores in the United States, from Macy’s and Nike to Target and Walmart.

And if President Barack Obama uses his first trip to Vietnam to sell a sweeping 12-nation trade pact – slashing tariffs on products imported to the United States – Americans could see even more Vietnam-made shoes in their local stores, kicking up concerns by those already uneasy about the still sluggish American economy.

Though Japan has received much of the attention, it’s actually Vietnam, with one of Southeast Asia's fastest-growing economies, that has the most to gain from the Trans Pacific Partnership. The deal would allow Vietnam’s manufacturing industry – already booming because of low labor costs – to export more products to the United States, primarily clothes, textiles and shoes.

For Americans looking to buy a new pair of shoes, that could mean lower costs and more options as companies stop making design decisions based on the 436 ways shoes are classified for tariffs, some as high as 40 percent.

“The tariffs are just a tax on consumers,” said Matt Priest, president of Footwear Distributors and Retailers of America, which is pushing the trade agreement. He estimates U.S. companies in Vietnam could save $500 million in footwear import taxes in a year.

In recent years, the U.S. and Vietnam have engaged in increasingly close political and military ties, but it’s on economic issues where the two countries see the biggest potential.

The bilateral trade between the two countries has enormous potential to grow, particularly once the TPP enters into effect.

Vietnamese President Tran Dai Quang

Obama has spoken about trade several times on his trip, including Tuesday in a speech with young entrepreneurs in Ho Chi Minh City. The city, formerly known as Saigon, is now a manufacturing hub.

“What TPP does is it takes 12 countries along the Asia Pacific region that represent a huge portion of the entire world’s marketplace, and it says, ‘We're going to create standards for trade and commerce that are fair; that create a level playing field; that have high standards; that encourage rule of law; that encourage protection of intellectual property,’ ” Obama said. “Not only do all the countries who are participating stand to gain from increased trade, but Vietnam, in particular, I think economists who have studied it believe would be one of the biggest beneficiaries.”

In this 2015 video, the Obama administration says the Trans-Pacific Partnership has the strongest environmental and labor protections of any U.S. trade agreement. American businesses have greater opportunities to sell products outside the nation's

Already, trade between the U.S. and Vietnam has surged nearly a hundredfold in the past two decades. On Monday, Obama and Vietnamese President Tran Dai Quang attended a ceremony where companies in the two countries inked new commercial deals, involving planes, engines and wind energy, worth more than $16 billion.

“This is the fastest-growing part of the world,” Obama said at a news conference in Hanoi Monday. “This represents an enormous market for the United States.”

President Barack Obama is traveling to Vietnam and Japan this week on his 10th trip to Asia. His first visit to Vietnam includes stops in Hanoi and Ho Chi Minh City. He will participate in his final G-7 Summit in Ise-Shima, Japan, before becoming the first U.S. president to visit Hiroshima, the site of the world’s first atomic bombing.

Vietnam is the least-developed country and the only communist nation in the TPP trade deal. To be included, the government has agreed to implement dozens of regulations that would raise labor standards, including eliminating child labor and forced labor, allowing workers to form unions, protecting against employment discrimination and adopting minimum wages.

“We are already working with the countries in the region on the various steps that they’ll need to take to bring themselves into compliance with TPP,” said U.S. Trade Representative Michael Froman, who accompanied Obama on his trip. “And that includes Vietnam. We’ve already had teams out in Vietnam over the last couple of months talking to them about the array of obligations that they have under the agreement.”

But Rep. Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, said he’s concerned the administration had not pushed the Vietnamese government, which he said continues to subject labor activists to to monitoring, intimidation, harassment and assault.

“No positive changes have been made in Vietnam,” he wrote in a recent blog post. “And where changes are occurring, they appear to be moving in the wrong direction.”

The World Bank estimates that Vietnam would be the biggest beneficiary of the trade pact, with its gross domestic product growing nearly 10 percent additionally over a decade.

“There’s plenty that is controversial about Vietnam here, whether it’s labor, environment or human rights,” said Matthew Goodman, former director for international economics for the National Security Council who is now a senior adviser for Asian economics at the Center for Strategic and International Studies.

“There are a lot of things that are going to cause problems, but from an administration point of view here, I think Vietnam was the real prize.”

Negotiators agreed to a deal in February. Since then only one country, Malaysia, has ratified the agreement. Others are waiting for the United States Congress, which has not scheduled a vote.

Everything, everyone is on hold. They are looking nervously, anxiously at us.

Joseph Liow, a senior fellow at the the Center for East Asian Policy at the center-left Brookings Institution

Republican Donald Trump and Democrat Hillary Clinton, the leading presidential candidates, oppose the deal, making the possibility of implementation after Obama leaves office less likely. Some supporters remain hopeful that Clinton, who supported the agreement as secretary of state, would change her mind if elected.

TPP “is a huge deal,” said Tyson Barker, who served as a senior adviser in the Obama State Department and is now a senior research fellow at the Brandenburg Institute for Society and Security at the University of Potsdam in Germany.

Critics of the deal, including many Democrats and unions, worry companies would manufacture products in other countries, moving jobs from the United States, or set labor standards that are not high enough. “The grim conditions facing workers in TPP partner countries were not effectively addressed in the TPP text or the side agreements,” the AFL-CIO wrote in a statement.

But Dan Christman, a senior vice president for international affairs at the U.S. Chamber of Commerce, which supports the deal, said products from Vietnam will not likely replace those made in U.S. but rather those made in other countries in the region not part of TPP that will still face high U.S. tariffs, including China.

Priest said virtually all shoes sold in the United States are made overseas. In 2015, 77 percent of the 2.5 billion pairs of imported shoes came from China while 13 percent came from Vietnam, an increase of 18 percent over 2014.  

“We remain focused on getting it done,” he said. “We can’t afford to lose this opportunity.”