What Phuc can teach Trump about free trade
When Vietnamese Prime Minister Nguyen Xuan Phuc visits the White House this week, he will bid to convince his US counterpart on the upside of more free trade
When Vietnamese prime minister Nguyen Xuan Phuc visits United States president Donald Trump this week at the White House, the two heads of state will offer a portrait in contrasts on issues related to free trade.
Donald Trump rose to power by lambasting international trade partners, including Vietnam at one point in his campaign, for anti-competitive behavior that has supposedly cost America jobs and lucre. Phuc, meanwhile, represents a country eager to expand its trade ties, having exited the poverty of wartime on a road paved with exports.
Vietnam was poised for greater trade and faster growth under the Trans-Pacific Partnership, a previously US-backed multilateral trade pact that Trump scrapped for nationalistic reasons soon after taking office in January. Soon thereafter Vietnam was put on a list of 16 global countries Trump identified as “cheaters” for running up the US trade deficit.
Still, Phuc will reportedly aim to advance the cause of a possible bilateral trade agreement with the US when he meets Trump. Bilateral trade was worth US$47 billion in 2016, up 16% year on year. The US accounts for around 14% of Vietnam’s trade and is currently its eighth largest investor, with over US$10 billion in registered capital allocated across 800 or so projects in the country.
Phuc said in an interview before his departure he plans to sign “billions of dollars worth” of deals with US firms during his visit.
Last month the American Chamber of Commerce in Vietnam and its Vietnamese counterpart agreed to create a US-Vietnam business leadership committee dedicated to pushing ahead a bilateral trade pact. Both sides have acknowledged it will be a long, arduous process.
The two leaders apparently opposed views on free trade are also revealing synecdoches for their regions at large: The advanced economies of the West are increasingly facing globalization fatigue, not sure where to turn after losing jobs to changes in technology and to a lesser extent offshoring.
Asia Pacific Economic Cooperation (APEC) researchers say trade has helped lift more than a billion people out of extreme poverty among its 21 members. A significant number of those hail from Vietnam, which has experienced a steady economic boom since joining APEC, the World Trade Organization and opening its doors to foreign direct investment.
“East Asia continues to be a rapidly growing and dynamic economic region in the world, with a consistent economic integration trend,” Vietnamese Minister of Industry and Trade Tran Tuan Anh said last week at a meeting of the grouping, of which the US is a member.
Vietnam, a country of 92 million people, sees growing integration with the global economy as key to the reasons it has recently surged in various development indicators, from personal income levels to literacy rates to access to clean water.
With more and more citizens punching away on tablets, or shopping for organic vegetables, Vietnam has come a long way from the war of the 1970s and the subsequent deprivation and starvation of the 1980s. In more recent times, Vietnam has become a poster child for how capitalism-driven globalization can help to rapidly alleviate poverty.
“We know there’s been a much stronger anti-global sentiment in the last year or so,” APEC policy support unit director Denis Hew said while in Hanoi earlier this month. He contrasted that sentiment with Vietnam, which by bucking the protectionist trend has one of the fastest-growing economies and stock markets in the region.
“Vietnam is one of the star performers,” he said.
It is thus fitting, perhaps, that Vietnam serves as chair of APEC this year, a time when the giant trading bloc is trying to convince certain of its members against closing their borders to free trade.
The nominally communist country’s cheerleading of trade stands in stark juxtaposition against the Brexiteers who want to do less business with the European continent, and with Trump’s trade officials whose latest move was to upend the two-decade-old North American Free Trade Agreement.
“The socialist-oriented market economy is gradually formed and evolved,” Vietnam President Tran Dai Quang said of the nation’s capitalist transition. The head of state added that his country is committed to cross-border trade and “deeply participating in the global supply chain.”
Some Vietnamese recognize that exceptionally low wages have until now prevented local jobs, including in manufacturing, from being outsourced to cheaper countries or eliminated by robotics. That has sheltered Vietnam from some of the shocks of globalization that have embittered blue collar workers in the US and Europe.
At the same time, Vietnam wants to lessen its current dependence on China for trade and investment by expanding ties with the US, European Union and within the Association of Southeast Asian Nations (Asean). China accounted for 21% of Vietnam’s international commerce last year, the highest percentage of all its trade partners.
Hew and other APEC officials believe the globalization backlash has been motivated in part by poor communication of the wider gains of trade. To avoid the pitfalls seen elsewhere, Vietnamese policymakers say economic growth must be more inclusive of laborers, women, small businesses and other groups that might have been overlooked.
There have been “conflicting and contradictory ideas” about trade, Anh said. “That shows that integration does not always bring about sustainable development all the time.”
Barring any major disruptions, Trump is scheduled to reciprocate Phuc’s visit by attending the APEC summit held in Vietnam in November. Whether Trump arrives in Hanoi later this year with the contours of a proposed bilateral trade agreement in hand, however, seems for now unlikely.