Vietnam: Why The Pivot Towards The US Can Elicit A Positive Response 2

Pivot towards the US

Vietnam (VNM) has been working hard to infuse greater warmth into its relations with the US. Prime Minister Nguyen Xuan Phuc was recently in the US, where he met President Trump. This meeting was quite successful with deals worth $8 billion being signed between the two nations. The agreements included big names like General Electric (GE), Honeywell International (HON), and Caterpillar (CAT).

The background of this meeting had witnessed a massive lobbying effort by the country. According to Reuters, Vietnam’s case was led by its ambassador to the US, Pham Quang Vinh. It also included its formal lobbying firm – the Podesta Group. Vietnamese business leaders in the US and contacts in the Congress were tapped to drum up support before Phuc’s visit.

This effort was undertaken before Trump had been sworn in as President, and gathered steam after the US withdrew from the Trans-Pacific Partnership (TPP) trade deal.

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Vietnam has been somewhat negatively impacted with the US pulling out of the TPP as it was expecting increased market access – hopes that have been sidelined for now. Hence, it is maneuvering to woo the US on more specific bilateral trade deals.

Warming up to Vietnam

Even though Vietnam maintains close business ties with China, its exports to the US are nearly twice the volumes that go to the Asian giant, as shown by the graph above. This makes the US market crucial to the country.

However, the US is yet to reciprocate Vietnam’s efforts for a bilateral trade deal because it is allegedly not comfortable with the $32 billion trade deficit – its sixth largest overall – that it has with Vietnam.

The US was pleased with Phuc’s recent visit and the trade deals signed on the heels of the trip. Commerce Secretary Wilbur Ross has said that these deals would result in production in the US amounting to $3.4 billion and are expected to support 23,000 jobs.

Though the US will be pushing for a better deal in any possible bilateral trade pact with Vietnam, there’s another reason, beyond business, which may result in Washington building bridges with Hanoi.

The US has a growing need for allies in South Asia who share displeasure in China’s increased presence and territorial claims in the South China Sea. The Philippines, which itself disputes some of China’s claims, has been pivoting away from the US – a historical ally – and towards China. China also currently has a friend in Malaysia.

In such a scenario, Vietnam can be a potent ally for the US in order to check China’s increased influence in the region. Such alignment may help swing the pendulum in Vietnam’s favor when it comes to a trade deal.

Increased trade and investment with the US will also help the country as it makes a case for an upgrade to an emerging market classification. Let’s look at this closely in the next article.

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