Deepening Bilateral Trade Ties with Vietnam Is Mutually Beneficial
In the wake of the United States’ abrupt exit from the Trans-Pacific Partnership (TPP) during the first days of the Trump Administration, the strategy for economic relations in Southeast Asia has become less rather than more clear. Strengthening trade ties with America’s former TPP negotiating partners should be prioritized and few are more important than the budding relationship with Vietnam. The United States and Vietnam share a complicated past. However, in recent years Vietnam’s rapid development combined with the Obama Administration’s “Pivot to Asia” has resulted in closer ties as Vietnam has become a more attractive environment for American trade and investment. The Trump Administration would do very well to nurture and deepen U.S. – Vietnam relations – a partnership that is likely to grow in value due to the Southeast Asian nation’s continued development, large pending public projects and strategic location.
According to the International Trade Administration (ITA) and U.S. Census Bureau, U.S. Exports to Vietnam have increased significantly over the last five years. Between 2012 and 2016, total exports to Vietnam rose from $4 billion to more than $10 billion with especially pronounced gains in certain sectors where the U.S. directly competes with China. These sectors include the primary metal manufacturing sector, which has increased exports in Vietnam from $34.5 billion to almost $1.3 billion and computers and electronic product exports which jumped from $917 million to $2.4 billion over the same time period. With this increased trade, Vietnam has become the United States’ ninth largest trade partner for primary metal manufacturing, one spot behind China in that category, as well as America’s 19th largest trading partner for electronics and seventh largest partner for agricultural products. These figures illustrate the rapid increase in interest in Vietnam in recent years and the potential for additional growth that could be realized with increased trade ties.
One major factor in this rapid increase in trade, particularly in the electronic and manufacturing sectors, has been Vietnam’s recent commitment to several large-scale public projects, the most dramatic of which is the development of Long Thanh International Airport. This airport project will service the Ho Chi Minh City metropolitan area, which has until this time lacked a major modern transit and shipping hub despite a rapid increase in development, investment and tourism in the area. Long Thanh International Airport, which is estimated to have a construction budget of $7.8 billion for its first phase alone, is set to expand in three phases from 2019 until roughly 2050, making this a valuable long-term project. The project will require heavy machinery, construction equipment and electronics systems, all of which are already profitable trade sectors for the U.S., and once again, sectors where the U.S. would be in direct competition with China. In addition, several Vietnamese air carriers have begun enlarging and modernizing their fleets during this period and American companies are already benefitting from this. Boeing negotiated a 100 aircraft deal with local carrier VietJet worth $11.3 billion, and Pratt and Whitney secured a further $3.08 billion deal for the engines demonstrating Vietnamese enthusiasm for U.S. investment. When combined with other major projects such as highway construction and overhaul, Vietnam becomes a fertile locale for both direct and portfolio investment which benefits the economy of Vietnam and helps create capital for more modernization projects.
Investment in Vietnam and deepening of ties is strategically and mutually beneficial for both nations. U.S. withdrawal from the TPP limited potential to serve as an effective competitor to China. While it would be a stretch to say that Vietnam could become a direct competitor and counterbalance to China, increased investment and trade would allow it to compete in certain markets. In addition, this course of action would help set a trend of strong bilateral relations for other former TPP countries, and in doing so the U.S. can establish a trend to strengthen relations bilaterally with some more TPP states. This has the dual benefits of allowing the United States to position itself strategically in the region, while giving Vietnam both influence as a local ally and wealth from new American investment.
ALEC is in favor of increased international trade as it benefits American economic and strategic interests. ALEC has always promoted free trade and decreased barriers to market access and establishing close ties with a state with such a favorable economic climate promotes these objectives. Previous work on international trade, as well as model policy dealing with the subject can be found on its website here, and represents a strong strategic outlook on the development on international trade.