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Wednesday, 03 February 2016 10:27
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Vietnam - U.S. relations: 20 years’ journey and prospects

(LLCT) - In his return to Vietnam in early July 2015, former U.S. President Bill Clinton said that when the two countries normalized their relations, we understood each other and set ourselves free... The efforts by the two countries to replace conflict with reconciliation provided useful lessons for other countries as the world faced dramatic changes and conflicts. He quoted his teacher in saying that 50 years ago, “what we tried to do today was making our societies happy and moving closer together instead of retaliating against each other. We were holding out our open arms rather than our fists”.

At the Conference “Vietnam-United States Relationship: For 20 More Successful Years” on 26 January 2015 in Hanoi, the U.S. Ambassador to Vietnam Ted Osius said, “The United States’ goal is clear: we want to help Vietnam become a strong, prosperous, and independent country that respects the rule of law and man”. He emphasized that the two countries shared common visions of stability and development in the region. He said, “...the first twenty years were merely a prologue to a much longer and more profound story”. Bilateral cooperation has been based on mutual trust and nine pillars of a comprehensive partnership. Economic and trade cooperation has been identified as a priority. The two countries also aim to develop their political relations and personal diplomacy and promote multilateral cooperation within the frameworks of the ASEAN and APEC in order to jointly solve regional and global issues.

The two countries have both gone a long way to enjoy their current friendship and achievements in bilateral cooperation.

Economic cooperation between Vietnam and the United States began in February 1993, when the U.S. paved the way for Vietnam’s access to international loans, including those provided by the International Monetary Fund and World Bank. In 1994, the United States officially lifted its trade embargo against Vietnam. In 1995, the two countries announced “normalization of relations” and established  diplomatic relations. In 1998, the United States officially allowed its companies and organizations, such as the Overseas Private Investment Corporation (OPIC), Exim Bank, Trade and Development Agency, and Department of Agriculture and Maritime Administration, to operate in Vietnam. In 1998, the two countries signed the Bilateral OPIC Agreement. In 1999, they completed framework agreements allowing Exim Bank to do business in Vietnam. In 2001, they signed the Vietnam-U.S. Bilateral Trade Agreement. In 2002, the Joint Vietnam-U.S. Commission on Trade Relations was founded. In 2005, the two countries signed the Agreement for Economic and Technical Cooperation and agreements for international ratification, intelligence, and military cooperation. In 2006, the United States granted Vietnam the Permanent Normal Trade Relations status. In 2007, Vietnam became the 150th WTO member country and the two countries signed the Bilateral Maritime Agreement and Trade and Investment Framework Agreement. In 2008, the American Center, a one-stop source for up-to-date information about all aspects of the United States, was opened in Hanoi and Vietnam sent its first workers to the United States.

Bilateral trade between Vietnam and the United States increased sharply from $500 million in 1995 to $800 million in 2000 and $1.4 billion in 2001. It continued to experience even more positive changes after 2001, when the Vietnam-U.S. Bilateral Trade Agreement was signed. Since 2005, the United States has been Vietnam’s largest importer and Vietnam’s export to the United States has always been greater than its import. Bilateral trade turnover has been increasing by 20% annually. In 2000, the proportion of Vietnamese exports to the total export of the ASEAN countries to the United States was only 1%. In 2014, that figure climbed to 22%. This was the first time that Vietnam surpassed its regional rivals Thailand, Malaysia, and Indonesia as the largest ASEAN exporter to the United States. With this growth rate, Vietnamese export to the United States is expected to amount to approximately $57 billion and account for 34.1% of the total export of the ASEAN region to the United States in 2020, leaving the other countries far behind. Not only has Vietnam increased its export to the United States, but it has also exported more high-quality and added value goods to the market. According to the Vietnamese General Department of Statistics, in 2014, two-way trade turnover between Vietnam and the United States was worth roughly $36 billion, a 70-fold increase compared to 1995, when the two countries officially normalized their relations. In that year, Vietnam exported to the United States $28.5 billion worth of goods, a 19.6% rise compared to 2013. The export income earned by textiles and garments went up by 13.9%, footwear by 21.6%, timber and timber products by 12.8%, and electronic goods, computers and parts by 45%. In 2014, the export of shrimps to the U.S. market saw a dramatic increase, earning an income worth $820 million, a 51.2% rise compared to 2013. Vietnam is now the third largest exporter of shrimps to the U.S. market, behind only Indonesia and India. Vietnam’s main exports to the United States include seafood, footwear, garments, timber products, processed foods, handicrafts, tea, coffee and black pepper while its main imports from the United States consist of machinery, high-quality materials, plastic, raw materials for the production of textiles, garments and footwear, consumer goods and powder milk. D. Marantis, undersecretary of trade of the United States and once senior legal advisor to the U.S. - Vietnam Trade Council, believed Vietnam was a potential market and a great opportunity for the United States.

The United States now ranks 9th among 63 countries and territories receiving investment returns from Vietnam. According to the Vietnamese Ministry of Planning and Investment, by 20 March 2015, the United States had 735 operational foreign direct investment (FDI) projects in Vietnam with total registered capital of $11.06 billion, ranking 7th among 101 countries and territories with investment in the country. In the first quarter of 2015 alone, eight FDI projects with U.S. investment were licensed and two existing projects increased their investment capital. In total, these ten projects were worth nearly $70 million. American investors have been present in 17 out of 21 sectors of the Vietnamese national economy. On average, an investment project with U.S. capital is worth $15 million, higher than the average of all other FDI projects in Vietnam, an average of $14.3 million. In 2014, 33 American corporations visited Vietnam to get to know the local business environment, whereas that same figure for 2013 was only 22. This attention is likely to intensify as Vietnam becomes a member of the Trans-Pacific Partnership (TPP) Agreement.

According to the American Chamber of Commerce in Hong Kong, Vietnam’s TPP membership makes the country even more attractive to foreign investors, including those from the United States, and distinguishes the Vietnamese market from other regional non-TPP markets. Vietnam is now a priority of Hong Kong-based American firms who have plans for moving their investments out of China such as Nike, Mast Industries, P&G, etc. Besides their usual areas for investment, real estate, distribution of goods, logistics and education, American businesses have recently paid attention to infrastructure projects in Vietnam. It is this attention coupled with the introduction of Decision 15/2015/ND-CP, a legal framework concerning public-private partnership in investment, that promises a shift of American FDI into Vietnam.

Vietnam has also invested in the United States. By August 2014, there were 124 Vietnamese investment projects in the United States with newly registered and increased capital worth $426.74 million.

Addressing a conference on the Vietnam-U.S. relationship, held on 24 March 2015 at the Center for Strategic and International Studies (CSIS), U.S. Ambassador to Vietnam Ted Osius expressed his support of the idea that it was time for Vietnam and the United States to take a further step towards regional and global cooperation. To that end, the two countries needed to prioritize trade cooperation. The TPP would provide Vietnam with a huge opportunity to penetrate into the global economy even deeper and realize its dream of doubling two-way trade turnover.

It should be reiterated that Vietnam in 2009 held an investment forum in the United States. Hundreds of Vietnamese and American businesses attended the forum, which was part of the Meeting Vietnam event in San Francisco. Of more than 20 participating American corporations, there were IBM, Microsoft, Intel, Apple, Dell, Oracle, Lockheed Martin, Harley Davidson, General Electric and Levis Strauss. In 2009, there were 43 new American investment projects in Vietnam with total capital of $5.9 billion, equivalent to 36.4% of all newly registered FDI in the country and an increase of 291% compared to 2008. The United States’ newly registered capital in 2009, when the country was faced with a serious economic and financial crisis, was worth more than $5 billion, greater than that for the entire period of 1988-2008. Compared to 2008, the country’s newly registered capital in Vietnam was equivalent to 118% of its effective capital in the 1989-2008 period. While FDI in Vietnam decreased by 70% compared to 2008 and investment from most of its major partners including the EU, ASEAN, Japan, Republic of Korea and China also decreased, the increase in American investment was a remarkable sign. In 2009, American investors focused on the hospitality industry and manufacturing. Besides newly registered projects, the United States ranked first in terms of increased capital for existing projects, which was worth $3.4 billion, accounting for 75% of all increased FDI capital in Vietnam in 2009.

Also in 2009, the number of American visitors to Vietnam reached 404,000 people, accounting for 10.7% of the total number of foreign visitors to the country and behind only the number of Chinese visitors.

In 2014, the number of American visitors to Vietnam continued to rise, at 443,000 people, and the United States ranked 4th among countries with the most tourists to the country. The number of Vietnamese visitors to the United States also saw an increase, which was a positive sign despite the global economic downturn that resulted in a sharp drop in tourism in most world countries.

The comprehensive partnership, which was established during Vietnamese President Truong Tan Sang’s visit to the United States in July 2013, was an important framework that covered politics, external relations, economics, trade, investment, education, science and technology, defense and security, among others. However, economic cooperation was considered to be a central area that would lay the foundation and provide the motivation for a stronger bilateral relationship between Vietnam and the United States.

In 2014, the two countries began to promote all of the nine prioritized areas of their comprehensive partnership. The bilateral political and diplomatic relations continued to strengthen from a series of visits to each other. Vietnamese President Truong Tan Sang and Prime Minister Nguyen Tan Dung met U.S. President Barack Obama at the Asia-Pacific Economic Cooperation (APEC) and East Asia Summit (EAS). Leaders of the American Congress, including President pro tempore of the Senate Patrick Leahy and Senators John McCain, Benjamin Cardin and Bob Corker, paid 13 visits to Vietnam. Member of the Politburo and Secretary of the Hanoi Party Committee Pham Quang Nghi, Deputy Prime Minister Vu Van Ninh and Deputy Prime Minister and Foreign Minister Pham Binh Minh visited the United States. In addition, there were exchanges of visits between the two countries’ ministries, industries and local authorities, who were tasked with initiating talks about politics, security, defense, economics, development, democracy, human rights and labor. Bilateral educational cooperation and people-based exchanges continued to improve. At the time, there were 16,000 Vietnamese students taking courses in the United States, the highest number among the ASEAN countries and 8th largest number among all world countries.

There was a breakthrough in bilateral cooperation in science and technology as the Civil Nuclear Energy Agreement (the 123 Agreement) took effect on 10 September 2014, which offered promising opportunities for the two countries to promote cooperation in civil nuclear energy. The United States maintained its commitments with Vietnam on the resolution of issues caused by the war and ensured its active cooperation in the process. The two countries conducted $15-million projects aimed at detoxifying dioxin contaminated areas and a $7.5-million project which provided support for disabled people as a consequence of the war.

Bilateral cooperation in defense and security was further promoted based on the Memorandum of Defense Cooperation, which was signed on September 2011. The United States’ official announcement about the partial removal of its weapon embargo against Vietnam was regarded highly by the public, and Vietnam have since asked the United States to completely remove the embargo in conformity with the comprehensive partnership between the two countries. The United States and Vietnam have also exchanged a number of visits about defense, including the first Vietnam visit by Chairman of the Joint Chiefs of Staff Martin Dempsey in August 2014. Bilateral cooperation in terms of marine police has since strengthened. The United States granted Vietnam with a $18 million support pack to strengthen its maritime building capacity. In addition, the two countries have closely coordinated in multilateral regional and international forums, particularly the ASEAN Region Forum (ARF), EAS and APEC. It is noteworthy that the U.S. - ASEAN Defense Ministers’ Meeting was held for the first time in 2014.

Through negotiations, the two countries have made substantial progress on the Trans-Pacific Partnership (TPP) Agreement. Countries participating in the agreement discussed how to ensure the TPP matches their respective levels of development and serves their interests.

The United States and Vietnam also have shared interests in coordinating effectively at regional and international forums, especially the APEC, ARF, EAS and ASEAN Defence Ministers’ Meeting+ (ADMM+).

The motivation for Vietnam-U.S. economic cooperation originated, first of all, from the fact that the Vietnamese economy has been growing steadily and relatively broadly. Also, the country’s human and natural resources are abundant, its politics and society are stable, its renovation and integration policies are appropriate, and it has offered a number of incentives for foreign investors, particularly American investors and especially in areas of United States’ strength. Vietnam has made remarkable progress to increase the transparency of information and laws, encouraging foreign investment by means of its open financial law. Its investment protection policy has been made stricter, but also more liberal than before. Over two million Vietnamese Americans are expected to provide more resources to strengthen relations between the two countries.

These achievements are of great significance and have intensified bilateral relations.

Secretary General Nguyen Phu Trong’s visit to the United States in July 2015 was a particularly important step forward in the development of the comprehensive partnership and improvement of mutual understanding and strategic trust between the two countries. The people of both nations believe and hope that the bilateral relationship will be further strengthened for the sake of mutual benefits and peace, stability and development of the Asia - Pacific and the rest of the world.

Due to the global economic turmoil, policy crises and changes in relations between superpowers, trade disputes are inevitable, which has caused certain obstacles to bilateral cooperation. Take the cases of the shrimp and catfish lawsuits starting in 2000 and the U.S. Department of Commerce’s decision to increase anti-dumping taxes on Vietnamese seafood from 36.48% to 63.88% in 2003 for example. The United States usually imposes taxes on Vietnam, but its decisions are politically influenced and required by its law enforcing bodies rather than being assessed by equal competition on the market. The United States has yet to recognize Vietnam as a full market economy. Accordingly, when calculating costs, U.S. trade bodies do not fully consider the Vietnamese market, but compares its production costs to another country that does not have similar production conditions, often with distorted costs, prices, and market mechanisms.

In general, the bilateral cooperation between Vietnam and the United States has flourished in many areas including politics, economics, science and technology, education and training, defense, security and humanitarian work. The two countries have closely coordinated with each other at regional and international forums when it comes to issues of common concern. Although obstacles remain for the future development of bilateral relations, there exist many opportunities for cooperation and the above-mentioned achievements have created momentum for further development of the relations in 2015 and beyond.

Vietnam believes that the United States, as one of the leading superpowers of the world and a member of the United Nations Security Council, should be considered one of its most important partners in foreign policy, as it has major interests and responsibilities in the East Sea and has a voice and takes appropriate actions to peacefully resolve disputes in the sea in accordance with the international law so as to ensure peace and stability in the Asia - Pacific and the rest of the world.

 

Dr. Nguyen Minh Phong

The People Newspaper

Nguyen Tran Minh Tri

Institute of World Economics and Politics

 

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