US-Vietnam Pledge Increased Trade, Cooperation Despite Lackluster US-ASEAN Summit
Vietnam Briefing highlights Vietnam’s Prime Minister Pham Minh Chinh’s visit to the US for the US-ASEAN Summit from May 11 to 27. The visit reiterates further growing ties between the US and Vietnam on the sidelines of the summit. While ASEAN members are looking for concrete commitments from the US, the Vietnam-US relationship is like to continue to grow as the US looks to counter China’s global influence presenting opportunities for US businesses.
Vietnam’s Prime Minister Pham Minh Chinh concluded his US tour from May 11 to 27 attending the ASEAN-US Summit as well as visiting the UN. Chinh was accompanied by a Vietnamese delegation which included several government ministers and dignitaries. The event marked the first visit by a Vietnamese PM since the 13th National Party Congress.
The ASEAN-US summit covered key topics such as maritime security, pandemic preparedness, clean energy, and economic recovery. US President Joe Biden described the partnership as critical and hailed a ‘new era’ in relations. Both sides reiterated their intentions to lift the current relations from a strategic partnership to a ‘comprehensive strategic partnership’ in November of this year.
Specifically, PM Chinh and Biden held talks related to health, climate change, renewable energy, sustainable development, and the Indo-Pacific Economic Framework (IPEF). PM Chinh noted four pillars of the IPEF which include supply chain stability, digital economy, climate and labor, tax, and corruption but needed time to study its details.
Relations between US and Vietnam have been on an upward trajectory with the US taking active interest in developing the ecosystem of health, human security, and developing maritime security architecture. High-level visits have involved US Vice President Kamala Harris, Secretary of Defense Lloyd Austin, as well as former US presidents.
As per the Indo Pacific Strategy, released by the US, the US wants ASEAN to remain a leading regional institution, with larger security dynamics. The Biden administration wanted to demonstrate that ASEAN is vital to the US’ Indo-Pacific policies. However, ASEAN members are looking for more concrete commitments from the US, particularly surrounding trade and investment, which have thus far been lacking.
Nevertheless, PM Chinh’s visit is seen as a success in forging a stronger partnership including US-ASEAN ties. Vietnam has maintained its balanced position on the Russia-Ukraine crisis and reiterated its stance on territorial integrity and free passage in the South China Sea.
PM Chinh was also the only ASEAN leader to deliver a speech at the Center for Strategic and International Studies (CSIS) – a think tank based in the US and became the first Vietnamese leader to speak at Harvard University.
The US has remained one of Vietnam’s largest trade partners and the latter looks to the former for bilateral trade and investment. Bilateral trade between both countries reached US$111.56 billion in 2021 rising from US$90.8 billion the previous year. As per Vietnam’s Foreign Investment Agency (FIA) the US currently has 1,145 projects with a total registered capital of US$10.3 billion. PM Chinh however reiterated that this does not reflect the true potential and this is more room for growth.
Vietnam’s main exports to the US include textiles and garments, footwear, smartphones, computers, and wood, while exports from the US to Vietnam include Computers, electronics, cotton, machines, plastic, and animal feed.
|Vietnam’s Trade with the US and China in 2021|
|Total trade with US||Total trade with China|
|Vietnam||US$112 billion||US$133 billion|
Source: Census.gov, trademap.org
During his visit, PM Chinh also met with several US businesses in energy, infrastructure, finance, science, and technology. A significant visit was to the HQs of Intel and Apple in Silicon Valley. After the development, the Wall Street Journal reported Apple told its contract manufacturers that it wants to boost production outside of China to countries like Vietnam and India due to China’s strict pandemic protocols.
Investment in tourism, electronics, agriculture, and renewables
During PM Chinh’s trip, Vietnam’s Saigontourist Travel Company signed an MoU on a comprehensive strategy with the US and Vietnam Airlines to promote tourism. The company is also promoting a program called ‘Vision Destination to US from 2022 to 2025’ to promote two-way tourism as the US is a favorite destination of Vietnamese travelers. An MoU was also signed to promote the exports of agricultural products, particularly lychee fruits to US consumers. Vietnam is currently the eighth largest market for US agricultural products and food.
In terms of hi-tech industries, apart from investments from Intel and Apple suppliers earlier, solar energy corporate First Solar invested over US$1 billion to produce solar panels. PM Chinh held meetings with several US business leaders and reiterated that Vietnam is open for business and that US businesses should look for opportunities in the country.
Vietnam has prized itself on prioritizing a favorable business environment, infrastructure, and administrative reforms for US businesses as well as focusing on climate change and commitments to net-zero. USTR representative Katherine Tai said that her agency wants to boost cooperation in the digital economy and sustainable agriculture systems.
The two sides have also pledged to cooperate in post-pandemic recovery, supply chains, digital transformation, energy transition, and green sustainable development. These are sectors that US businesses can further invest into Vietnam.
FTAs in the making?
Vietnam is a party to several free trade agreements and has been banking on these to further its economy while developing its industries. Recently Vietnam signed the EU-Vietnam free trade agreement (EVFTA), the Regional Comprehensive Economic Partnership (RCEP), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, formerly TPP, which the US was part of) but a deal with the US has so far not come to fruition. The US meanwhile is attempting to develop a wide range agreement related to digital economy and e-commerce. Vietnamese and ASEAN officials still hope that the US would return to the CPTPP and further trade in the region.
But the US does not have Congress’ support and convincing US labor companies will be a hard ask. Without any concrete statement, it’s difficult to see the situation changing any time soon. In the absence of any substantial FTA negotiations between the two countries, the IPEF is the second-best option. However, analysts have called for the IPEF to be strong in terms of trade, while including stronger labor and climate change commitments.
Officials say that only two ASEAN members – Singapore and the Philippines are in the initial group to sign up for negotiations under the IPEF.
US-Vietnam ties continue to strengthen but concrete commitment necessary
The US is likely to continue former President Trump’s confrontational approach towards China to counter its global economic influence. US businesses have further noted that Vietnam is an important link in global supply chains, and this is only expected to strengthen despite the pandemic.
Vietnam is an important partner of the US in the Indo-Pacific and this relationship is expected to continue and even strengthen. When Vietnamese manufacturer VinFast announced that it will build an electric vehicle and battery factory in North Carolina, the White House issued a statement acknowledging this development underlining the economic strategy and two-way trade between both countries.
US Ambassador to Vietnam Marc Knapper stated that he will make bigger effort to beef up US-Vietnam ties particularly in trade, investment, education, defense, and security while bringing US investors and goods to Vietnam.
With Vietnam’s economic strategy, approved by the 13th Party Congress, on shifting foreign investments to hi-tech industries with provisions on environment protection, opportunities exist for both US and Vietnamese businesses to expand cooperation in trade, knowledge, and strategic partnerships.
Further, official state visits are likely to continue into 2022 as both countries build on their bilateral relationship and with scheduled events such as the G20 Summit, and the Asia Pacific Cooperation Economic Leaders Conference in Cambodia and Thailand.
Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Hanoi, Ho Chi Minh City, and Da Nang. Readers may write to firstname.lastname@example.org for more support on doing business in Vietnam.
We also maintain offices or have alliance partners assisting foreign investors in Indonesia, India, Singapore, The Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.
- Previous Article What Makes Thua Thien Hue a Favorable Destination for Investment? We Examine 3 Key Factors
- Next Article Vietnam’s Blue Economy Potential and Opportunities for Investors