Among economists and medical professionals, there is cautious optimism that the pandemic could recede in 2022 as vaccination rollouts continue. This bodes well for U.S.-Vietnam trade relations since the arrival of the health storm, now in its second year, which disrupted supply chains, manufacturing and trade flows between former enemies and now global partners.
Vietnam’s 98 million citizens have experienced the rising tide of the benefits of globalization. Over the past three decades, through its economic reforms and integration into global markets, Vietnam has grown from one of the poorest nations to a middle-income economy in a single generation. The Communist Party’s shift to a socialist-oriented market economy provided the trajectory for this meteoric leap, and it was fueled by the jobs created by Vietnam’s booming export market, particularly with the United States.
U.S. foreign investment also helped propel Vietnam’s economic engine when the country first opened up its cheap labor market to investors. Over the past decade, Vietnam has become a major manufacturing center in Asia and is among the top ten trading partners of the United States.
The country is widely recognized as a major exporter of electronics and clothing. For example, Nike, a global brand, now produces nearly 50% of its footwear in Vietnam, followed closely by Adidas. Vietnam’s manufacturing base is not limited to textiles and garments alone. Exports of phones and components, at $45 billion, already exceed exports of footwear and textiles combined.
Low-cost, skilled Vietnamese workers, good infrastructure, a stable government, and free zones are exactly what American multinationals are looking for when looking for locations for factories. Vietnam’s exports to America totaled $77.07 billion in 2020, according to the United Nations’ COMTRADE international trade database, with mobile phones at $18 billion and integrated circuits at 15.5. billions of dollars.
This expansion of bilateral trade has resulted in a significant increase in America’s trade deficit with Vietnam. This deficit has grown to $56.6 billion in 2020, from a decade earlier it was just $9.4 billion. A year ago, when the Biden administration moved to 1600 Pennsylvania Avenue, Vietnam was accused of unfair trade practices, including an allegation of currency manipulation. In the summer of 2021, Washington determined that no tariff action against Vietnam was warranted after its Central Bank agreed with the US Treasury not to manipulate its currency for export advantage.
Michael Martin, a research associate at the Center for Strategic and International Studies (CSIS), an expert on economics and trade policy in Asia, sees opportunities for improving trade relations. “I see common ground in crafting a framework for trade relations between the two nations, and in the region, that moves international trade beyond the archaic Bretton-Woods system while offering an accord Comprehensive and Progressive Alternative Trans-Pacific Partnership (CPTPP) or the Regional Comprehensive Economic Partnership (RCEP) Whether through a bilateral trade agreement or a regional one, the status quo seems inherently unstable.
The CPTPP is made up of 11 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. All have pledged to maintain free trade in the Asia-Pacific region amid the US-China trade wars.
A CSIS report confirms that Vietnam benefited and recorded further export gains of 6% during this global recession. Of course, while Vietnam has become deeply integrated into the global economy, challenges remain.
The country has struggled to cope with the prolonged shutdowns of major economic hubs, namely Ho Chi Minh City and Hanoi, which caused its GDP to contract by more than 6% in the third quarter of 2021. As a result, the Bank world estimated that Vietnam’s overall GDP had increased. of only 2.58 in 2021.
According to reports from the Congressional Record Service, the US bilateral trade deficit with Vietnam is likely to continue to grow, especially as the effects of the CPTPP and RCEP alter regional trade flows. The Bilateral Trade Agreement (BTA) needs to be updated and this process would serve to resolve outstanding bilateral issues.
There is also an opportunity to launch a new bilateral initiative by strengthening the 2007 Trade Investment Framework Agreement (TIFA) which would serve to establish common goals and stimulate further trade engagement.
Meanwhile, Vietnam’s relationship with China remains complex and troubled. Beijing is making it clear through its actions and rhetoric that it finds the current global trade framework unacceptable. Since their efforts to make reforms have been rejected by the United States and others, they are actively developing an alternative they deem preferable. Although China has introduced major economic reforms, many political observers question Beijing’s support for liberal economic development.
Jennifer Lind, associate professor of government at Dartmouth in an article on foreign affairs, suggests that China stands outside the liberal international system and the transparent rules-based order in several respects, despite its ascendant role as a major trading partner of many countries.
Vietnam has so far called for peaceful responses to China’s failure to comply with the international arbitration award on the South China Sea, or what they call the East Sea, and illegal incursions into their own waters. However, with the United States promising to continue its freedom of navigation exercises and the Biden administration denouncing China’s reckless actions on the sea, it could serve to strengthen Hanoi’s position as a foothold for oppose China’s assertive position in the region, particularly in southern China. Wed.
This Chinese challenge creates an opportunity for Hanoi and Washington to discuss options. On economic and security relations, Vietnam is about to position itself better with Washington. The US trade war with China, coupled with Beijing’s continued assertive and illegal claims to the South China Sea, offers new opportunities for expanding bilateral cooperation between Washington and Hanoi.
James Borton is the author of Dispatches from the South China Sea: Navigating to Common Ground and Senior Fellow at the Foreign Policy Institute at the Johns Hopkins School of Advanced International Studies.
The opinions expressed in this article are those of the authors alone and do not necessarily reflect those of Geopoliticalmonitor.com