A Disappearance in Berlin Clouds a Trade Deal in Vietnam

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HANOI, Vietnam — A Vietnamese businessman named Trinh Xuan Thanh disappeared off the streets of Berlin in July, one day before he had an appointment with German officials to seek political asylum.

Germany blamed his country’s government, saying Mr. Thanh had been abducted by agents linked to Vietnam and demanding an apology for an episode it called “wholly unacceptable.”

None came, at least in public. And today, Mr. Thanh’s continued detention is complicating the prospects of a smooth completion to a long-awaited free-trade deal between Vietnam and the European Union.

Vietnamese business leaders and experts believe the two sides will reach a face-saving deal over Mr. Thanh, who is accused by Vietnamese officials of enriching himself while running a state construction firm.

But the episode illustrates Vietnam’s quandary. It’s a rising Southeast Asian power under growing pressure to seek new alliances as China’s rise and America’s shifting politics reshape the global trade order. But Vietnam’s secretive, authoritarian government, and its checkered history with human rights and worker protections, can make striking those alliances tricky.

Vietnam could lose more than a beneficial free-trade agreement if it does not improve ties with Germany, said Doan Xuan Loc, a research fellow at the Global Policy Institute in London who studies the European Union’s relations with Southeast Asian countries.

“It will also weaken Vietnam diplomatically and strategically,” he said.

Like China, Vietnam is fusing capitalism with its own brand of communism. The effort has produced impressive growth but also jitters among trading partners who fret about the government’s harsh treatment of domestic dissidents and labor activists.

Worries about China’s growing dominance underlie much of the drive to strike trade deals. Many Vietnamese fear their country will become more dependent on China as Beijing — which is also in trade talks with the Europeans — deepens its economic presence across Southeast Asia.

Partly as a result, Vietnam is aggressively prospecting for new partners in an already crowded chessboard of global trading alliances. In 2015 alone, it signed trade deals with South Korea and with a group composed of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia.

The effort gained new urgency after the Trans-Pacific Partnership, the proposed free-trade agreement led by the United States, stalled earlier this year amid opposition from President Trump. Vietnam would have been a member and likely one of its biggest beneficiaries.

The European deal is especially attractive for Vietnam because the European Union, which imported $39 billion in Vietnamese goods last year, is the country’s largest non-Asian investor and largest trading partner after China.

A prolonged tiff with Germany, analysts said, could have repercussions for Vietnam’s economy that far outweigh any domestic political benefits from apprehending Mr. Thanh. The businessman was grabbed as part of an ongoing corruption crackdown by Nguyen Phu Trong, a functionary in the Communist Party who became its general secretary last year after a bruising internal power struggle.

Nguyen Xuan Dien, a political blogger in Hanoi, the capital, likened Vietnam’s predicament to that of a frog sitting in a soup pot. “The frog is already feeling the heat,” he said.

Vietnam could make some sort of apology, or concessions on human rights or labor issues. Several Vietnamese executives said in interviews that they were confident the standoff would somehow be resolved, even if they were not sure how.

“It’s a trade agreement,” said Nguyen Chanh Phuong, the secretary general of the Handicraft and Wood Industry Association of Ho Chi Minh City, whose members have exported furniture to Europe since the 1990s. “They’ll trade something.”

Le Hoai Anh, the chairwoman of Hal Group, a company in Ho Chi Minh City that distributes and sells European cosmetics, said she worried about trade disruptions or punitive measures that might lead to higher import tariffs.

“We don’t know exactly how it will be,” she said of Vietnam’s trading relationship with Europe. “But we are expecting a bad situation.”

The German Foreign Office said in an email that the Vietnam trade deal would need to win approval in both the German and European parliaments, and that members of both bodies clearly saw the political implications of Mr. Thanh’s disappearance.

Vietnam’s Foreign Ministry did not respond to emailed questions.

The deal is the European Union’s second effort at a trade pact in Southeast Asia, after one with Singapore that is nearing ratification. The largest benefits for the E.U. would be in Germany, which last year imported $8 billion in goods from Vietnam — including footwear, textiles, coffee and seafood — and sold it $2.3 billion in machinery, equipment, motor vehicles, chemicals and other products. The deal would also create arbitration mechanisms aimed at giving European manufacturers, many of them German, more legal security here.

For Vietnam, the upshot would be private-sector growth in an economy that has long been top-heavy with state-owned enterprises and overdependent on development aid. Beneficiaries would likely include companies in both established export industries, such as fisheries and textiles, and also in emerging ones like scooters, smartphones and furniture.

Mr. Thanh, 51, had been a senior official in the southern province of Hau Giang and the chairman of PetroVietnam Construction, a subsidiary of the state oil giant PetroVietnam. He was accused of mismanagement that resulted in losses of about $147 million.

In late July, he was abducted outside a Sheraton Hotel in Berlin’s upscale Tiergarten district, his lawyers said, and bundled into a car with Czech plates. More than a week later, he was shown pleading for his government’s forgiveness on Vietnamese state television.

“George Orwell reloaded” is how one of his Berlin lawyers, Petra Isabel Schlagenhauf, described the episode in a telephone interview.

“Nobody expected this,” she said. “Nobody.”

Top Vietnamese officials had asked their German counterparts to extradite him, according to Germany’s Foreign Office. But Ms. Schlagenhauf said Mr. Thanh was convinced he would not receive a fair trial.

Germany responded to the abduction by expelling two Vietnamese diplomats, suspending high-level bilateral visits and demanding an “assurance that the law will not be violated again in this way in the future.”

The episode is “absolutely unacceptable, and the case will certainly have to be taken into account” in order for the trade deal to be ratified, said Marko Walde, the chairman of the German Business Association in Vietnam, whose members include the Vietnam subsidiaries of Audi, Bayer and Deutsche Bank.

But Alicia Garcia-Herrero, an economist in Hong Kong who advised E.U. officials on the trade deal, said she believed it would go ahead so long as Hanoi found a scapegoat to blame — its ambassador to Germany, for example.

Germany cannot afford to ignore the potential benefits for its manufacturers, Ms. Garcia-Herrero added, or the leverage that a signed deal would give E.U. negotiators in their ongoing trade talks with China.

“You spend years negotiating stuff you can’t ratify?” she said. “The Chinese will laugh at them.”