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Shut Out

The U.S. embargo on Vietnam does not prevent other countries from doing business there, but it does prevent the country from rebuilding itself

by James Fallows

THE U.S. attempt to starve Vietnam out, through a political and economic embargo, is senseless. Most Americans are not even aware that such a campaign is under way. After all, within the past year the U.S. government has re-approved most-favored-nation trade status for China, prepared to donate food to the Soviet Union, found a way to coexist with the brutal new SLORC regime in Burma, and applied a forgive-and-forget economic policy to most nations other than Iraq. But in Vietnam the U.S. embargo remains the central fact of economic life. It makes existence undeservedly miserable for many millions of people, while doing no visible good for anyone -- except, perhaps, for businessmen in Taiwan, Singapore, Australia, and Japan.

What the Vietnamese refer to as "the embargo" is really two policies. One is the U.S. government's attempt to prevent Americans from buying from, selling to, investing in, or otherwise having anything to do with Vietnam. Under prevailing Supreme Court rulings the government cannot prevent Americans from traveling to Vietnam, but it gums up other dealings with impediments large and small. AT&T and the other American phone companies will not place a call from the United States to Vietnam. (If you want to send a fax to a university or a government office in Vietnam, you send it instead to someone in Bangkok -- or, for that matter, Toronto -- and ask to have it passed on. The people most harshly affected by the phone ban are, of course, the million or so Vietnamese-Americans, many of whom have relatives in Vietnam.) Last year several thousand U.S. citizens, most of them Vietnamese Americans or U.S. military veterans, traveled to Vietnam -- but the Lindblad travel agency, in Connecticut, lost more than $500,000 in fines and legal fees for daring to organize such tours and subsequently declared bankruptcy. Tours are legally and profitably organized by several big agencies in Bangkok. Air Vietnam, which has a monopoly on flights within the country, carries passengers on a fleet of dirty and decrepit Soviet planes. Yet when the airline was angling last year to buy an Airbus from Europe, the U .S. government discouraged the sale, because the plane's engines are made by General Electric. Hotels and government shops in Ho Chi Minh City, the former Saigon, have bright new signs saying that Visa cards are accepted -- but not if you are a U.S. citizen, or if the card was issued in the United States, or if it is drawn on an American bank. In those circumstances the Vietnamese won't take the card, because U .S. Treasury Department regulations forbid the banks to pay. The U.S. dollar is in practice the legal tender of Vietnam. Trade contracts are denominated in dollars; hotel and restaurant prices are set in dollars; visitors from Japan, Italy, and even the Soviet Union must carry around wads of t U.S. currency with which to settle their bills. Yet under the charmingly named Trading With the Enemy Act, the U .S. government behaves as if every one of those dollars were there illegitimately. The United States was intimately involved with Vietnam for more than a decade. Now Vietnam is one of only a handful of countries with which the United States attempts to prevent all diplomatic and economic interaction.
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The second part of the embargo policy consists of U.S. pressure on the World Bank, the Asian Development Bank, and the International Monetary Fund to keep them, too, from dealing normally with Vietnam. Although the United States is the single biggest force in each of these organizations, on its own it cannot dictate their policies. But the Japanese representatives, who make up the second-largest voting bloc, have lined up behind the United States on this issue, and together the two countries have stonily kept most international organizations out of Vietnam. The United Nations operates a few small development-aid programs and an extensive refugee-processing system within Vietnam, but in general Vietnam must exist outside the network of loans, international credits, financial restructuring plans, and so forth that countries from Ghana to Peru to Bangladesh can participate in. (Technically, the IMF excludes Vietnam not because of the embargo but because Vietnam hasn't paid off some $140 million in old debts. Vietnam is hardly the only Third World country in arrears. Its problem could be cleared up with bridge loans, as has been done in many other countries, if Japanese and American banks could get involved.) Apart from the Soviet Union -- which has for the past decade subsidized Vietnam's economy, received tens of thousands of Vietnamese guest workers, and provided cut-rate shipments of fertilizer and oil -- Sweden and Finland are the only nations that have given Vietnam substantial amounts of foreign aid.

Of the two components of the embargo, the pressure on international organizations is the more important. Vietnam has what is politely referred to as an "infrastructure problem." The roads, the telephones, the electrical-power network, and the water and sewage systems are terrible or nonexistent. I asked Vo Dai Luoc, of the Institute for World Economy, in Hanoi, "which problem is most urgent? Transportation? Communications? Power?" He answered, "yes" -- and not because he misunderstood me. The amount of money needed to create a telephone system for 6 million people, rebuild roads not maintained for twenty years, and renovate antique seaports and airports is more than any private investor will put up. Since the end of the Second World War mammoth infrastructure projects in many parts of the world have typically been sponsored by the World Bank or other international lending organizations; this is how Japan built its Bullet Train system in the 1960s. Other countries throughout Asia draw constantly on World Bank and Asian Development Bank advice and loans. Vietnam cannot, because the United States says no. Thailand, Cambodia, Laos, and Vietnam are inching toward cooperation on several Mekong River projects, to cope with the environmental ruin of the Southeast Asian forests. The Mekong committee's office in Hanoi has a thick folder of requests for funding: so much to monitor water quality, so much to restock fish, so much to offset the intrusion of salt water into the Mekong Delta region. None of this can go anywhere so long as Vietnam is classified as a pariah.

Americans might say that they just don't feel like subsidizing the reconstruction of Vietnam. The U.S. government's policy goes further than that: it is an attempt to keep Vietnam from rebuilding itself. Vietnam's population is very young, and most people can barely remember when U.S. troops were in their country. It is hard to see how today's Vietnamese children bear responsibility for the wounds the United States suffered during those years. Yet policies left over from the bitter 1960s and 1970s help keep them poor.


WHAT is the point of it all -- of the small-minded restrictions on Americans and the serious limitations on Vietnam? There are two ways of judging America's policy: on the basis of what it's supposed to do, and on the effect that it actually has.

The stated rationale for the embargo has shifted over the years. The Trading With the Enemy Act, enacted in 1917 as an anti-German tool, was applied to North Vietnam in 1964, when that country was in fact the military enemy. The law was extended to the country as a whole after the North Vietnamese conquest of the South (or, to put it in the terms that are officially used in Vietnam these days, after the "Liberation" that eliminated the "puppet forces"), in 1975. Since 1979, when the Vietnamese completed their invasion of Cambodia, drove out Pol Pot's Khmer Rouge regime, and established their own dependent government, U.S. policy has been tied to events in Cambodia. For ten years the United States insisted that Vietnam withdraw its occupying forces. In the opinion of most foreign governments, Vietnam did exactly that late in 1989 -- as Secretary of State James Baker officially acknowledged last summer. Baker acknowledged the withdrawal, however, less as an occasion for U.S.-Vietnamese rapprochement than as evidence that the hard-line policy was working: because of American implacability, the Vietnamese had finally given in.

The negotiations over Cambodia's future are of hopeless, Middle East-like complexity. The essential point is that the United States is ostracizing Vietnam for the sake of a bargaining position -- not because Vietnam has outraged international standards of decency. Vietnam did invade Cambodia, and does continue to prop up and manipulate the People's Republic of Kampuchea (PRK), the nominal government of Cambodia. But China continues to prop up the Khmer Rouge, which is still directed by the same people who wrought genocide in the 1970s, and which continues to take over Cambodian territory with Chinese guns and supplies. If the United States felt inclined to get moralistic (again) about Southeast Asia, the most appropriate target for its wrath would be not Vietnam but China, without whose sustenance the Khmer Rouge could not survive. But the Bush Administration seems to act on the assumption that ancient, mighty China cannot be swayed by outside pressure. Therefore the United States continues to squeeze Vietnam.

In a way the years of squeezing have paid off. Vietnam has grown weary enough of its exile that it has compromised on some points, especially by withdrawing its troops. But its officials have consistently made clear that they can never, ever countenance the return of the Khmer Rouge. This is not so much because they are squeamish about what might happen inside Cambodia as because when the Khmer Rouge was in power, its army kept attacking villages in Vietnam. As best I could judge from two weeks of interviews with officials in Vietnam, the emotional and logical content of their position is comparable to what Soviet leaders would now feel if Hitler were still alive and had a panzer force threatening to take control of Poland. Officially, the U.S. policy, too, is designed to keep out the Khmer Rouge. But until the Vietnamese are sure that some other, still unspecified arrangement will provide sure protection against the Khmer Rouge, they will stick with their pet PRK.

The strongest argument for continuing the embargo is that some agreement among the many squabbling Cambodian factions has seemed through the past year to be in sight. Why relax the pressure on the Vietnamese as the Soviet Union cuts back on its subsidies? But Americans could just as easily argue that now is the time to reward Vietnam for the steps it has taken, and to encourage it to take more. This is exactly the logic we have applied to China and the Soviet Union within the past year. Nguyen Co Thach, the Vietnamese Foreign Minister, is known to have argued internally that Vietnam would be rewarded for withdrawing from Cambodia and undertaking its ambitious doi moi program of economic liberalization. As long as the embargo continues, he is proved wrong.

There is, of course, a reason why Vietnam seems less lovable and forgivable than the Soviet Union of Gorbachev's reformers or the China of the Tiananmen Square demonstrators. Although U.S. policy does not explicitly link the embargo to the MIA issue, the suspicion that the Vietnamese are still locking up American prisoners, or hoarding their bones, generates considerable ill will. The Vietnamese government has not exactly helped its own cause by doling out remains two or three at a time and seeming to treat the bodies as useful bargaining chips. In 1980 a mortician who had fled Vietnam told a congressional committee that he had seen the bones or bodies of several hundred American soldiers stored in a warehouse outside Hanoi. Although the North Vietnamese Communists seemed to understand American psychology very well during the war years, the case can be made that they barely understand the United States at all. During the Carter years the Vietnamese government queered a chance for normalization by demanding reparations; only recently has the emotional power of the MIA question sunk in. Members of the American "reconciliation team" working on the POW/MIA issue say that their Vietnamese counterparts have been more cooperative in recent months.


EVEN if it made sense on its own big-think strategic terms, the embargo would have a serious practical limitation: it doesn't scare away anyone but the Americans. The embargo has succeeded in stunting and distorting the Vietnamese economy, and in keeping American businesses out of Indochina; but it is more and more obviously failing to keep out businesses from other countries, or to bring the Vietnamese government to its knees.

Although many nations condemned Vietnam's invasion of Cambodia in 1979, almost no one agrees with America's embargo anymore. All other major nations have embassies in Hanoi. None imposes Trading With the Enemy-style limits on its citizens or businesses who want to trade with Vietnam. The Japanese government, with its down-the-line support of the embargo in international organizations, illustrates how shallow the enthusiasm for the embargo is. Officially it will not let Japanese firms invest in Vietnam, to avoid offending the United States. In some cases, however, Japanese banks and corporations have channeled money through front organizations in Indonesia or Hong Kong, which then invest in Vietnam. And there is no visible restriction on Japanese trade with Vietnam. This year Japan should overtake the Soviet Union as Vietnam's leading trade partner, Japanese firms sold $.300 million to $400 million worth of manufactured products to Vietnam last year, mainly in exchange for Vietnamese crude oil. (Although Vietnam is potentially a large oil producer, it has only a few working oil wells now, and virtually no refineries. Therefore it exports crude oil to Japan, in exchange for machinery, and has until recently relied on the Soviet Union for refined oil. The end of the Soviet-subsidized oil supply is the most immediately pressing economic problem.) All the vehicles on Vietnam's streets which are not Soviet-made are from Japan. All the refrigerators, TVs, and VCRs that are not Japanese are Korean. In Saigon's major hotels -- the Rex, the Caravelle, the Majestic, and the Continental -- blocks of rooms are on long-term lease to Japanese trading firms such as Nissho Iwai and Mitsubishi. One of the malicious delights of traveling in today's Vietnam is watching Germans, Soviets, Italians, and even incredulous Frenchmen being made to conduct their business in English. The Japanese businessmen and travelers I saw were doing their business largely in Japanese.

Most other countries don't even bother to keep up appearances. The Taiwanese, who have cultural and linguistic ties to the Chinese community in southern Vietnam, see no reason to abide by the American policy. After all, the United States does not even classify Taiwan as a real country anymore. (The United States has in Taipei not an embassy but an "American Institute." U.S. diplomats who are assigned there must temporarily resign from the foreign service.) Of the foreign firms with whom Vietnam has set up some 200 joint ventures since liberalizing its foreign-investment law three years ago, the most enthusiastic seem to be from Taiwan. One of the largest, called Pan Viet, is building new apartment blocks, producing ceramic tile and paint, running an agricultural-experiment station, and even planning to develop a suburb for foreign residents with a golf course and an international school to be ready for Americans when they decide to come back. Companies from France, Australia, Holland, and Italy participate in other joint ventures. In all, foreign firms have invested more than $2.2 billion in new capital.

Australia enjoys a trade surplus with Vietnam, importing fish and grains and having sold, among other things, three large satellite dishes to handle international phone calls. ("Now I can call Paris and Bangkok," an official of the Ministry of Commerce told me in Hanoi. "The problem is calling Haiphong.") There are huge billboards from the Korean corporate giants Daewoo and Samsung near the entrances of the airports in Hanoi and Ho Chi Minh City. During my stay I met technicians from Ireland working on the telephone system, a pharmaceutical salesman from Italy, a handicrafts dealer from Holland, and a French engineer working on Vietnam's offshore oil fields. The manager of a Vietnamese shipping line guilelessly explained to me how Vietnamese handicrafts reach customers in America: first the ship goes to Vancouver, then all the documents are changed, and then it goes on to the United States. The prize for hypocrisy regarding the embargo goes easily to Singapore. Its official policy toward Vietnam is, if anything, more ferocious than that of the United States, but most of the Coca-Cola, EverReady batteries, and other Western goods stacked in markets in virtually every Vietnamese city come through merchants in Singapore. Each week passengers fly between Ho Chi Minh City and Singapore, although the flights are not listed on any schedules. Whenever an article appears describing the commercial involvement of Singapore in Vietnam, the Singapore government declares that it is simply shocked by the news.

Vietnamese officials have recently figured out that they can play on American age-of-decline insecurity in their arguments against the embargo. Shortly before the "Liberation," Mobil discovered the sizable "White Tiger" oilfield in Vietnamese waters in the South China Sea. Last year Vietnam assigned exploration rights for several sites to companies from Canada, France, Kuwait, and elsewhere, but not to U.S. firms. Mobil and Texaco, along with Citibank, have sent exploratory missions to Vietnam. The American chambers of commerce in Bangkok and Hong Kong, representing U.S. companies operating there, last year formally recommended that the embargo be lifted, to end "the continuing loss of U.S. business opportunities in Vietnam to global competitors." Raymond Eaton, an Australian businessman based in Bangkok, has become famous locally for speeches arguing that non-U.S. companies should seize the "golden opportunity" that the embargo creates and "do your very utmost to capitalize on the total inability of American companies to compete against you." (Eaton also urges the United States to eliminate the "golden opportunity" by lifting the embargo.) The manager of a building project in Hanoi told me, "We hoped very much to use American elevator equipment in our building, but, you know ... " Vo Dai Luoc, of the Institute for World Economy, told me, "In the past the United States spent billions of dollars to establish its influence in this part of the world. It was not possible that way, but simply by permitting business relations the United States may succeed in obtaining a role in this region."

The real reason the embargo persists, of course, is that we lost the war. That is also the reason that, although we can forgive the Soviet Union and Nicaragua, we can't forgive Vietnam -- even though it is a relatively well-behaved country now, with economic-reform plans as impressive as most in Eastern Europe. Shortly before I left for Vietnam, I talked with an American politician who agreed that the embargo no longer made sense. But it might continue, out of inertia, for a long time. "It's all up to the war heroes," he said. When politicians like the senators John McCain, Robert Kerrey, and John Kerry -- men who fought and suffered in Vietnam -- say it is time to forgive their former enemies, he told me, then others can safely go along. But until then, he said, it is not safe or sensible even to mention the name Vietnam.

It's natural that we would prefer never to think about Vietnam again. Being involved there did us great harm. So with a kind of unconscious spite we continue a policy that hobbles an entire nation and helps us not at all, mainly because a generation ago we came to grief there. In decency we should stop.


Copyright © 1991 by James Fallows. All rights reserved.
The Atlantic Monthly; March 1991; Succeeding Castro; Volume 267, No. 3; pages 42 - 45.

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