Indochinese Union

The Indochinese Union is an economic union of three states in mainland south-east Asia: the Republic of Vietnam, the Kingdom of Cambodia and the Kingdom of Laos. It was founded by the Treaty of Phnom Penh in 1977, is seated in Phnom Penh, and comprises a free trade area, a customs union with a common external tariff, and free movement of workers between the three.

It is a union of one communist republic and two monarchies, and it functions because it has no opinion about that. The Treaty’s founding rule is that the Union does not touch the internal politics of a member. It holds no defence competence, no foreign policy, no common currency, no jurisdiction over the Mekong and no political authority of any kind. A general secretary and two kings meet twice a year and discuss tariffs.

Its most unusual feature is arithmetical. Each member has one vote. Vietnam holds roughly four fifths of the Union’s population and a similar share of its economy, and cannot outvote the other two. That was the price of the Union’s existence in 1977, it has never been altered, and every condition that made Vietnam accept it has since expired.

Etymology

The name is inherited and the inheritance is awkward.

French Indochina was the colonial federation that governed Vietnam, Cambodia and Laos from the 1880s until the Japanese occupation broke French control in the Second Great War. Indochine was a Frenchman’s word, describing the region by what lay on either side of it: the ground between India and China, defined by two civilisations that were not its own and by a metropole that was neither.

The founders in 1977 considered several alternatives in each of the three national languages and adopted none of them. The reason given at the time was practical rather than sentimental and has been quoted since: the three states had no shared word for themselves that was not either French or Vietnamese, and a Vietnamese word would have said something about the Union that the Union had been carefully built not to say.

So the colonial term survives, used by three states that expelled the power which coined it, in an organisation founded to be the opposite of the federation that bore the name. This is remarked on in all three capitals, has been the subject of two formal proposals for renaming, and has never been thought worth the argument.

In the working languages the Union is Liên hiệp Đông Dương, សហភាពឥណ្ឌូចិន and ສະຫະພາບອິນດູຈີນ, each of which is a rendering of the French rather than a name of its own.

History

French Indochina

The three states were assembled into a single colonial federation between 1862 and 1893, and the assembly was not among equals. Vietnam was divided into three parts under three different legal regimes; Cambodia and Laos were protectorates whose monarchies were retained and hollowed out. Administration, education, capital and appointment flowed through Hanoi and Saigon, and Vietnamese officials staffed the colonial services in Cambodia and Laos in numbers that both kingdoms remembered afterwards.

This is the origin of the equality rule of 1977 and cannot be understood without it. Cambodian and Lao objections to a Vietnamese-weighted union in the 1970s were not abstract concerns about voting mathematics. They were the memory of a federation in which the same three states had been joined before, on terms that had made two of them administrative provinces of the third.

The occupation and the French return

Japanese occupation during the Second Great War broke French control. What rose against the occupation was a national resistance, and in Vietnam it was led and organised by the political current that would afterwards govern the country.

The French return after 1945 produced a long war, fought principally in Vietnam and spilling continuously into Laos and Cambodia. It ended with French withdrawal, and the settlement that followed left Vietnam divided and the two kingdoms independent under their own crowns.

The Indochina war

The war that followed drew in the United Kingdom of America by degrees rather than by decision.

Kennedy expanded advisers, material and covert support while refusing a large ground war. Johnson turned that into a large air and ground war using broad parliamentary authority while understating the cost, and Indochina remains the largest judgment against his ministry. The war extended into Cambodia and Laos, which were bombed heavily and are not treated in either capital as incidental to somebody else’s conflict. Nixon campaigned on a negotiated end, conducted a controlled disengagement while extending the bombing, and secured a ceasefire and withdrawal framework in 1973. Ford managed the final collapse of the allied government in 1975, the evacuation and the refugee programme.

The war cost the Realm its moral authority abroad for a generation and cost the three states of Indochina considerably more. Unexploded ordnance from the bombing of Laos and Cambodia is still being cleared and still kills people, and the clearing programmes are among the few things the three governments have ever asked the Realm for directly.

The revolution that did not spread

Vietnam became the world’s only communist state, and its neighbours did not follow it.

Cambodia and Laos remained kingdoms. Their royal houses were intact, their governments were changed by the war and not overthrown by it, and no revolutionary movement took either capital.

The consequence for Cambodia is stated plainly, because it is a fact about several million people. No revolutionary movement took Phnom Penh in 1975. The cities were not emptied, the currency was not abolished, the educated were not killed for being educated, and no mass killing followed.

Cambodians are aware of what happened elsewhere in the century and of how narrowly the shape of their own decade turned on decisions taken in Hanoi and New Westminster rather than in Cambodia. It is not treated in Cambodia as a deliverance, and nobody there regards the country as having been lucky in a war that bombed it. It is treated as a thing that did not happen, which is a different feeling and a harder one to commemorate.

Vietnam alone

Vietnam won in 1975 and discovered immediately that there was nowhere to belong.

Its communism had grown from anti-colonial resistance rather than being franchised from a foreign revolution, and there was no Soviet Union to sponsor it, no Comecon to trade within, no bloc to join and no international to answer to. Its isolation was not a policy choice and was chosen by nobody: it was the absence of an international to join.

The practical position in 1976 was severe. A state emerged from thirty years of war with a ruined infrastructure, a very large army it could not afford and could not demobilise into an economy that did not exist, a divided country to reunify administratively, no creditors, no partners, and a currency nobody wanted. The two neighbours it had were monarchies which had just been bombed by the same power Vietnam had defeated, and which regarded a victorious communist neighbour with entirely reasonable alarm.

The Treaty of Phnom Penh, 1977

Negotiations opened in Vientiane in 1976 and the difficulty was apparent in the first session.

Cambodia and Laos wanted trade with the largest economy on their border, and both needed it: Laos is landlocked and its access to the sea runs through Vietnam, and Cambodia’s manufacturing had nowhere else to go. Neither wanted a Vietnamese sphere of influence with a treaty attached, and neither had any means of preventing one if the arrangement were weighted by size.

Vietnamese negotiators conceded the point, and conceded it completely.

The Treaty of Phnom Penh was signed in 1977. It gave each member one vote, with no weighting by population, economy, territory or contribution. It required unanimity for every decision. It seated the institutions in Phnom Penh rather than Hanoi. And it wrote in the rule that has governed the Union since.

Vietnamese negotiators were criticised at home for the terms and the criticism has never entirely stopped. The answer given then and repeated since is that a union Cambodia and Laos would not sign was worth nothing, and that a country with no partners does not get to set the price.

The first decade

The Union’s first ten years were unremarkable and its trade volumes were small, because Vietnam’s economy was closed, centrally planned and had very little to trade. A free trade area is worth what its members can sell each other, and in 1980 that was not much.

What the Union did achieve in that period was the thing it was actually for: it ended the isolation. Vietnam had partners, treaty relationships, a standing forum and a reason to be in the room, and the two kingdoms had secured a legal relationship with their large neighbour on terms they had written.

Liberalisation

From the late 1980s Vietnam liberalised its economy while remaining a one-party state: private enterprise, foreign investment, market prices, land reform and integration into world trade, with no corresponding change to its politics.

By Article 3 this was none of the Union’s business, and no organ of the Union had any say in the most consequential thing that ever happened to it. The effect was transformative. A free trade area with a stagnant partner became a free trade area with the fastest-growing economy in the region, and Cambodian and Lao exporters gained tariff-free access to a market of a hundred million people next door.

Relations with the United Kingdom of America normalised across the same period and are now complete. Trade, investment, education and travel run freely in both directions, and the Realm is among the Union’s largest export markets. That a country the Realm bombed for a decade is now an ordinary trading partner is remarked on more often outside the region than inside it. The unsentimental character of the Union extends to this: the war ended, the states involved went back to business, and nobody in Hanoi, Phnom Penh or Vientiane presents that as forgiveness.

Members

The Republic of Vietnam

Vietnam is the largest, richest and fastest-growing member by a very wide margin, and the only one whose government would be unrecognisable to the other two.

Its communism is native. It was not installed by a foreign army, did not answer to a foreign party, and never had a sponsor to obey or to fall out with. That has left it without the characteristic features of the franchised communisms of another history: no imported vocabulary, no purges conducted on somebody else’s schedule, and no collapse when a distant patron collapsed, because there was no patron.

It is called simply the Republic of Vietnam, without a socialist or people’s qualifier, and the plainness is a consequence of the same fact. Those naming conventions travelled with Soviet influence, and Vietnam had none to receive.

Its politics remain closed. It is a one-party state with restricted press, restricted association and a substantial security apparatus, and the Union has no view about that and is forbidden to have one.

The Kingdom of Cambodia

Cambodia is a constitutional monarchy under the House of Norodom, with an elected national assembly, a prime minister answerable to it, and a king who reigns. The incumbent is King Norodom Rithyvong.

It is the middle member in size and the senior member in ceremony, since the Union sits in its capital, its officials staff a disproportionate share of the Secretariat, and the Secretary-General’s residence is in Phnom Penh regardless of nationality.

Its economy is manufacturing, agriculture, construction and tourism, and it is the member most dependent on Union labour mobility in both directions: Cambodians work in Vietnam in large numbers, and Vietnamese capital and technicians are heavily present in Cambodia.

The Kingdom of Laos

Laos is a constitutional monarchy under the House of Luang Prabang, whose survival is the clearest single marker of how this century differed. The incumbent is King Sisavang Khamsouk.

It is the smallest member, the poorest, the least densely populated and the only landlocked one, and that last fact governs its relationship with the Union entirely. Lao goods reach the sea through Vietnamese ports under Union transit arrangements, and the value of that access is difficult to overstate: it is the single largest benefit any member derives from membership, and it is the reason Lao governments of every complexion have defended the Union without qualification for fifty years.

Its economy is hydroelectric power, mining, timber, agriculture and, increasingly, transit itself.

Institutions

The Union’s machinery is deliberately, almost aggressively, small. Its permanent staff is smaller than that of a mid-sized city government.

The Council of the Union

The Council is the only decision-making organ. It comprises the heads of government of the three members, meets twice a year in Phnom Penh, and takes every decision unanimously, one vote each.

Where unanimity fails, nothing happens. This occurs regularly and is regarded by all three members as the system working rather than failing, since the alternative would be a member being bound by a rule it voted against, and the Union exists precisely because none of the three would accept that.

The Council’s agenda is set by the Secretariat from proposals lodged by members. It cannot consider a matter no member has raised, and it cannot consider a matter Article 3 excludes.

The Secretariat

The Secretariat sits in Phnom Penh under a Secretary-General who rotates between the three members on a fixed cycle, so that a Lao official holds an office in a Cambodian city administering a customs union whose traffic is overwhelmingly Vietnamese.

It administers the tariff schedule, customs classification, the labour-mobility arrangements, the rules of origin and the Union’s small budget. It has no power of initiative: it cannot bring a proposal the Council has not asked for, which is the single sharpest difference between it and the commission of a federalising union.

The Customs Board and the Tribunal

The Customs Board resolves classification, valuation and origin disputes between members’ customs services, which is technical, constant and the bulk of the Union’s actual work.

The Arbitral Tribunal hears commercial disagreements between members arising under the Treaty. It sits rarely, has no jurisdiction over member law, cannot review a national measure for compatibility with Union rules, and cannot be approached by a private party. Its awards bind the governments before it and nobody else.

There is no court with jurisdiction over member law, no parliament, no commission, no central bank and no common budget beyond the Secretariat’s running costs.

Compared with the Concert

The comparison usually made is with the European Concert, and it is instructive chiefly for the differences.

The Concert has a parliament, a commission, a court that may bind a member to a rule it voted against, qualified-majority voting across most business, and a phased free movement of persons. The Union has none of these and does not want them. The Concert was built to lower great-power tensions among states that broadly share a political order. The Union was built so that three states which do not share one could trade.

The Concert’s members disagree about how far integration should go. The Union’s members agree completely that it should go no further, which is why it has not moved in fifty-one years.

Competences

Held

A free trade area in goods, with tariffs between members eliminated by 1985 and non-tariff barriers reduced progressively since.

A customs union, with a common external tariff, shared classification and a revenue-sharing formula for duties collected at the external frontier. The formula was renegotiated in 1994 and again in 2016, on both occasions by unanimity and both times with difficulty, since a customs union in which one member imports four fifths of everything has an obvious distributional problem.

Free movement of workers, with recognised right of residence and employment across the three states, portable social security, and mutual recognition of a defined list of qualifications. This is the provision ordinary people notice and the one that would be hardest to remove.

Not held, and expressly excluded

Defence. The three states have no mutual guarantee and conduct their own military relationships. They have on occasion held opposite positions on regional security questions with no Union consequence whatever.

Foreign policy. The Union has none, conducts no diplomacy, holds no seat in any international organisation, and does not speak for its members abroad.

Monetary policy and a common currency. Three currencies float independently. The proposal has never been formally made.

Competition law, harmonisation of domestic law, and any political competence whatever.

The Mekong, which is dealt with below and is the most-criticised of the exclusions.

The exclusions are not gaps awaiting completion. They are the design, and every member says so publicly.

Free movement of workers

This is the provision that reaches furthest into ordinary life and the one most often described, wrongly, as a step toward deeper union.

Several hundred thousand people work across the internal frontiers. The largest flow by far is Cambodian and Lao labour into Vietnam, into construction, manufacturing, fisheries and agriculture, drawn by wages that are a multiple of what is available at home. The reverse flow is smaller and differently composed: Vietnamese technicians, traders, engineers and small business owners throughout Cambodia and Laos, present in numbers that both kingdoms watch carefully.

That asymmetry is the arrangement’s permanent political difficulty. In Vietnam it produces the ordinary complaints of any free labour market about wage undercutting in the sectors where migrant labour concentrates. In Cambodia and Laos it produces something older and sharper: a suspicion that Vietnamese commercial presence is the colonial federation returning in a different suit.

No organ of the Union has competence to address either complaint, which is by design, and which both sides find unsatisfactory in the same way and for opposite reasons.

The provision is nonetheless the most popular thing the Union does, because the remittances it generates are a substantial share of household income in the Lao and Cambodian countryside, and because a great many families in all three states now have members in another.

The Mekong

The Mekong rises in China, runs the length of Laos, crosses Cambodia and enters the sea through the Vietnamese delta. It is the region’s central resource, its principal fishery, the water supply of tens of millions of people, and the shared interest that most obviously ought to be the Union’s business.

The Union has no competence over it at all.

The interests are directly opposed and everybody knows it. Laos builds hydroelectric dams because power is its principal export and its principal route out of poverty. Cambodia depends on the Tonle Sap’s reversing flood, which the dams alter, for the fishery that feeds much of the country. Vietnam depends on the delta, where reduced sediment and reduced flow interact with salt intrusion and subsidence to threaten the rice production of a very large population.

Upstream of all three sits China, which built its dams first, is not a member of anything the three belong to, and is the largest investor in Lao hydropower.

Water is managed, where it is managed at all, through a separate river commission that predates the Union, includes states outside it, has advisory powers only, and is generally acknowledged to be inadequate.

That the Union’s most obvious shared interest lies wholly outside its powers is the standard criticism of its design, made continuously by economists, environmental organisations and a substantial current of opinion in Cambodia. The standard answer is short: a Union with power over the Mekong would not have been signed in 1977, because a Union with power over the Mekong would have been a Union with power, and the two small members joined precisely on the understanding that it would have none.

Proposals to bring water into the Union’s competence are made at intervals. They require unanimity. Laos has never supported one.

Economy

The Union is not a large economy by world measures and is among the fastest-growing regions anywhere.

Its combined product is dominated by Vietnam, whose manufacturing base, electronics assembly, textiles, footwear, coffee and rice exports account for the great majority of the Union’s trade with the outside world. Cambodia contributes garments, footwear, agriculture and tourism; Laos contributes power, minerals, timber and agriculture.

Internal trade

Internal trade is smaller than external trade and matters more politically than commercially. Cambodia and Laos send agricultural produce, timber, minerals and hydroelectric power into Vietnam, and receive manufactures, fuel, machinery and, in the Lao case, the thing that matters most.

Transit access to the sea is the single most valuable provision the Union supplies to any member. Lao exports reach world markets through Vietnamese ports under Union arrangements, and the road and rail corridors east from Vientiane and Savannakhet to the Vietnamese coast are the country’s economic lifeline.

External trade

The Union’s members trade far more with the outside world than with each other, principally with China, the United Kingdom of America, the European Concert, Japan and the wider region.

The common external tariff is therefore the Union’s most economically significant instrument and its most contested, since a tariff schedule suited to protecting Vietnamese manufacturing is not necessarily suited to a Lao economy that manufactures very little and imports nearly everything.

The distributional problem

A customs union in which one member accounts for four fifths of the imports collects four fifths of the duties at Vietnamese ports, including duties on goods destined for the other two. The revenue-sharing formula exists to correct this and has been renegotiated twice, each time with difficulty, and it is the single subject on which the equality rule most visibly costs Vietnam money.

Vietnamese officials point this out privately and do not press it, which is the pattern of the whole arrangement.

The equality question

This is the Union’s unresolved question, and it is arithmetical rather than ideological.

Vietnam holds roughly four fifths of the Union’s population and a similar share of its economy, and it has one vote of three. It accepted that in 1977 because it was isolated, ruined and had nothing else on offer, and because Cambodia and Laos would not have signed anything else.

None of those conditions still obtains. Vietnam liberalised, grew at rates among the highest in the world for three decades, normalised with the Realm, and now trades globally. It is no longer isolated, no longer poor by the standards of 1977, and no longer without alternatives. The specific reason it agreed to be outvoted has expired, and everybody in all three capitals knows this.

Nothing has been proposed. No Vietnamese government has sought revision of Article 3 or of the voting rule, and Vietnamese officials asked about it say, accurately, that the Treaty has served Vietnam extremely well and that the question is not before anyone.

The Cambodian and Lao position is that the equality rule is the Union, that it was the consideration for which they signed, and that a weighted Union would be a different organisation which they would have to consider joining afresh.

The Vietnamese domestic criticism is old, persistent and has never gone away: that a country of a hundred million is bound by the votes of twenty-five million, that no other state in the world accepts such terms, and that the Union collects Vietnamese duties, uses Vietnamese ports and employs Vietnamese capital while Vietnam cannot carry a single measure over its partners’ objection.

The answer given in Hanoi, when the question is pressed, is that the Union is worth more to Vietnam as a settled arrangement its neighbours trust than as one it could dominate, and that the value of a small state’s confidence is not measurable in duties.

The article does not predict what happens. The rule has held for fifty-one years, its original justification has gone, and nobody has tested it.

Enlargement

No member has been admitted since 1977, and the obstacle is the equality rule rather than any objection to a particular applicant.

With one vote each, admitting a fourth member reduces every existing member’s share of the Union’s decisions by a quarter, and the two small members are precisely the ones with most to lose: a Union of three in which Cambodia holds a third is a different thing from a Union of five in which it holds a fifth. Any enlargement also requires unanimity, which gives each of them a veto over its own dilution.

Interest has been expressed from the wider region at intervals, most persistently by Siam, and no application has ever been formally lodged, because the answer is understood in advance by everybody concerned.

A minority current in Vietnam argues that enlargement is the way out of the equality problem, since a larger Union would eventually have to weight its votes. This is not government policy and its proponents are aware that saying so out loud would make enlargement harder rather than easier.

External relations

The Union has no foreign policy and conducts no diplomacy. Its members do.

China

Relations with the Empire of China to the north are the region’s permanent condition, and China is at once a threat, a market and a patron, in different proportions in each capital and often in the same week.

It is the largest economy on the border and the largest single trading partner of all three members. It is the largest investor in Lao and Cambodian infrastructure, and Lao hydropower in particular is substantially Chinese-financed. It is the upstream power on the Mekong, having built its dams first and consulted nobody. And it has maritime disputes with Vietnam in the South China Sea that neither side expects to resolve and both have contained for decades.

That a constitutional Qing empire rather than a revolutionary one sits to the north has made the relationship commercial rather than fraternal, and most people in the Union regard this as an improvement. There is no ideological affinity to complicate it and no shared party to appeal to, so the relationship is conducted in the ordinary vocabulary of a large neighbour and three smaller ones.

The United Kingdom of America

Relations are fully normalised and extensive across all three members: trade, investment, education, tourism and development cooperation, including the ordnance-clearance programmes.

The war is not raised by any government, is commemorated in all three states, and is treated by both sides as concluded rather than as forgiven. The Realm’s own historiography on the war is severe, which the three governments note and do not press.

Elsewhere

The three states are individually members of the League of Nations and of the regional organisations of mainland and maritime south-east Asia. The Union has never sought a seat in any of them, and its constituent instrument gives it no capacity to hold one.

Language and everyday life

The Union has three working languages in three unrelated scripts, and a French treaty text that governs.

Vietnamese is written in a Latin alphabet, Khmer in the Khmer abugida and Lao in the Lao script, and the three languages belong to two different families. There is no common vernacular, no lingua franca among ordinary people, and no serious prospect of one; cross-border business is conducted in whichever language the parties share, which is increasingly English among the young and was French among the old.

That the French text governs is a residue of 1977, when French was the only language all three delegations could draft in with precision and the only one in which the relevant legal vocabulary already existed. It is periodically proposed that a member language should govern instead, and the proposal fails on the obvious question of which.

The Union confers no citizenship, issues no passport, and gives no person any status except the right to work. There is no Union day, no anthem, no flag protocol and no Union institution that an ordinary resident of the three states would encounter in a lifetime except at a border post or in an employment record.

This is deliberate. A union that wanted to be loved would have to stand for something, and standing for something is precisely what the Treaty of Phnom Penh forbids.

Criticism and assessment

The Union is criticised on four grounds and answers three of them.

That it is too weak to matter. Answered by the trade figures, by the labour flows, and by the fact that Lao exports reach the sea because of it.

That its Mekong exclusion is absurd. Answered by the observation that a Union competent over the Mekong would never have existed, which is true and is not a defence so much as an explanation.

That the equality rule is unsustainable. Not answered, and the subject of the section above.

That it is a Vietnamese sphere of influence with better manners. This is the criticism heard most often in Phnom Penh and Vientiane and the one the Union’s design was specifically built to prevent. Its defenders point to the voting rule, the seat, the rotating secretariat and fifty-one years without a single measure carried over a small member’s objection. Its critics answer that formal equality does not describe where the capital, the ports, the technicians and the market actually are, and that a state does not need votes to be dominant if everything else runs through it.

Both are right, which is the ordinary condition of small states next to large ones and is not a thing a treaty can fix.

The considered view, in all three capitals and among most outside observers, is that the Union has been a modest and durable success at a narrowly defined task, and that its durability is a direct function of how narrowly the task was defined.

Symbols

The Union has a flag, adopted in 1977: three horizontal bands of equal width in the colours of the three members, on which nothing is charged.

The equality of the bands is the point and was the subject of the only symbolic argument the founders had, which concerned their order and was settled by taking the members alphabetically in French. No emblem, star, wheel, map or device appears, because any device would have had to mean something, and the Union had been built not to mean anything.

There is no anthem, no Union day, no motto and no citizenship. The Secretariat building in Phnom Penh carries the flag and the three national flags at equal height, which is the whole of the Union’s ceremonial life.

Chronology

Trivia

See also

• The European Concert, the other supranational union in the world, and instructive chiefly for the differences
• The League of Nations, of which the three members are individually members and the Union is not
• The Empire of China, the neighbour that is at once threat, market and patron, and the upstream power on the Mekong
• The United Kingdom of America, which fought the Indochina war and is now among the Union’s largest export markets
• The Second Great War, whose Japanese occupation broke French control and produced the movement that governs Vietnam
• The Republic of Cuba, the other communism that grew without a foreign sponsor

Indochinese Union · Vietnam · Cambodia · Laos · World Institutions · Unresolved Questions