New motivation and prospects for Vietnam-US economic relations

Growing comprehensive co-operation in various fields

Vietnam-US economic co-operation was initiated in February 1993, when the US paved the way for the resumption of international loans, including loans from the International Monetary Fund and the World Bank, for Vietnam.

In 1994, the US formally lifted the trade embargo against Vietnam and in 1995 the two sides announced the "normalisation” of relations, establishing diplomatic relations. 

In 1998, the US formally opened the way for companies and organisations to operate in Vietnam, such as the Overseas Private Investment Corporation, the Export-Import Bank, the US Trade and Development Agency, the US Department of Agriculture, and the US Maritime Administration.

In 1998, the two countries signed an OPIC bilateral agreement, a year later completing the agreement framework for Ex-Im Bank operations in Vietnam. 

In 2001, they signed a bilateral trade agreement and in 2002 the Joint Commission for Development of Vietnam-US Trade-Economic Relations was established. 

In 2005, the two countries reached a deal on economic and technical co-operation, as well as agreements on international approval, intelligence and military co-operation.

In 2006, the US adopted the status of permanent normal trade relations (PNTR) with Vietnam. 

In 2007, Vietnam became the 150th member of the World Trade Organisation and the two countries signed a bilateral maritime agreement as well as a Trade and Investment Framework Agreement (TIFA).

In 2008, the US established its first American Centre in Hanoi, which is considered a ‘one-stop-shop’ office providing updated information on all areas related to the US. Also in the same year, Vietnam sent its first labourers to the country.

Since the Bilateral Trade Agreement (BTA) was signed in 2001, trade relations between Vietnam and the US have seen positive advancements. 

In 2001, bilateral exports and imports between the two countries reached US$1.4 billion. Since 2005 the US has been the largest exporting country to Vietnam. 

Two-way trade has increased on average by 20% a year; Vietnam has consistently enjoyed an export surplus. In 2014, trade between the two sides was estimated at US$35-36 billion (more than 130 times in 1994), of which Vietnam exported to the US more than US$28 billion, up 19% from a year earlier.

In particular, 2015 recorded an increase in bilateral trade turnover as the figure reached over US$45 billion, increasing by nearly 50% compared to 2014, of which Vietnam exported US$38 billion to the US and received US$7 billion worth of imports from the country, enjoying a US$31 billion trade surplus.

Products exported to the US from Vietnam mainly include seafood products, footwear, apparel, furniture, food processed products, handicrafts, tea, coffee, and pepper, while importing mainly equipment, machinery, high-quality supplies, plastics, textile and footwear materials, consumer goods, flour, and milk powder from the US. 

Of particular interest is the contract to purchase 100 aircrafts worth more than US$11 billion signed between the Vietnamese private airlines VietJet Air with US aircraft manufacturer Boeing, the landmark in economic and trade relations of the two countries.

The US is among the top ten countries and territories investing in Vietnam, with a total capital of over US$11 billion, excluding US business investment via third countries. US investment into Vietnam mainly focuses on hotel, restaurant and catering services and industrial processing and manufacturing.

The number of US tourists to Vietnam is also increasing, the second most after China accounting for about 11% of the total number of foreign visitors to Vietnam (in 2009); and for 2015 alone reaching around 491,000 (10.7% increase compared to the same period in 2014), ranked No. 4 after China, the Republic of Korea, and Japan. 

The number of tourists from Vietnam to the US is also increasing after the two parties granted each other open entry processing.

According to the former chief adviser on legislation for the US-Vietnam Trade Council, Vietnam is a potential market and a big opportunity for the US.

Vietnam-US co-operation is not only limited at bilateral but also at the regional and global level, including promoting the establishment of ASEAN-US strategic partnership, consolidating and promoting the central role of ASEAN in regional affairs of the East Sea, Mekong river water resource security, peacekeeping, counterterrorism, and information security, as well as responding to epidemics, disasters, and climate change, contributing positively to peace, security, stability and socio-economic development of each country social and the whole community.

Increasingly strengthened co-operative motivation

The comprehensive partnership established during former President Truong Tan Sang’s visit to the US in July 2013 is the framework for the two countries co-operation, in which economic co-operation is the foundation and motivation for the two countries to continue further their relations to a new height.

Economic co-operation is an objective demand that the two sides are looking forward to fully making use of comparative advantages. Both sides have an interest in effective co-ordination at regional and international forums, especially APEC, ARF, EAS, and ADMM+.

Motivation for Vietnam-US economic co-operation development primarily stems from such factors as Vietnam's economy growing steadily and comprehensively, abundant labour force, rich natural resources, socio-political stability, and its proper renovation and integration policies with multiple preferential mechanisms for foreign investors including those from the US. 

Vietnam has made significant progress in improving the transparency of information, legislation and foreign investment encouragement, creating a favourable environment to attract more US investors.

More than two million Vietnamese-Americans are crucial to promoting good relations between the two countries.

Information and traffic systems, along with entry procedures between the two countries have been improved. Direct airline routes have been established, facilitating travel for businessmen, tourists, students and scientists.

Especially, Vietnam and the US join ten other countries, including New Zealand, Australia, Canada, Mexico, Japan, Malaysia, Brunei, Singapore, Peru and Chile, who are members under the Trans-Pacific Partnership (TPP) Agreement officially announced the end of TPP negotiations on October 5, 2015 and formally signed the agreement, authenticating the deal on February 4, 2016.

TPP is considered as a step forwards and the highest peak in the process of elevating Vietnam’s multilateral foreign policy for active participation and contribution to building and shaping the general rules, protecting and promoting the effectiveness of Vietnam’s strategic interests in security and development, and expressing the spirit of a responsible member of the international community, while positively contributing to the expansion and diversification of export markets, enhancing the attraction of foreign investment and international tourists, combating fraud and imposition of trade barriers, maintaining security and external economic development, facilitating international integration and solidifying Vietnam’s position in the region and the international community.

The TPP is the first FTA that Vietnam and the US have co-joined and the 12th FTA (outside the WTO), which Vietnam has signed, thereby, establishing extensive free trade relations with over 50 countries including 15 out of 20 nations in G20, which account for more than two-thirds of the total GDP and over 50% total trade of the world.

The recent visit made by President Barack Obama from May 23-25, the third US president to visit Vietnam since the two countries restored diplomatic relations in 1995, along with the announcement of completely removing the ban on lethal arms sales to Vietnam, is positive step to overcoming the final barrier in the normalisation process of bilateral relations, while opening up new motivation for economic and trade development and comprehensive bilateral co-operation towards a more strong and balanced direction.

In the context of global economic instability, policy crisis and changed relations among major countries, in addition to the favourable economic relations with each other, the two sides could not avoid certain trade disputes that obstruct co-operation. 

To further facilitate trade and economic relations, Vietnam is asking for the US recognises of its Market Economy Status (MES) and Generalised System of Preferences (GSP).

Overall, it could be said that Vietnam-US co-operation has been and would continue to receive more and more positive impetus for development in various fields for the mutual benefit of the two peoples, for peace, stability and development of Asia-Pacific and the globe.

An interesting point is that in his speech at the National Convention Centre in Hanoi on May 24, President Obama delivered a meaningful message as he expressed his strong support for the TPP as it will help Vietnam to export more goods to the US. 

The US president also stressed that Vietnam and the US should put more efforts in strengthening dialogues between the two sides. He also expressed his optimism for the future of bilateral relations.