Vietnam seeks preferential Trump treatment

While the Southeast Asian nation seems a likely target for new US trade sanctions, recent revelations indicate a special deal could be on the cards

Phnom Penh, April 10, 2017 3:12 PM (UTC+8)
Vietnam is seeking preferential US treatment under the Donald Trump administration to sustain a warming trend in relations consolidated under the previous Barack Obama government. Photo: Getty Images
Vietnam is seeking preferential US treatment under the Donald Trump administration to sustain a warming trend in relations consolidated under the previous Barack Obama government. Photo: Getty Images

Before US president Donald Trump met his Chinese counterpart Xi Jinping for a summit meeting in Florida, the American leader reached out to Vietnam in search of common ground. US-Vietnam relations were on an upswing under outgoing President Barack Obama, but have been cast into doubt since Trump’s rise on a protectionist ticket.

Trump’s meeting with Xi reportedly addressed mounting tensions in the South China Sea, a key issue for rival claimant Vietnam, though details of the discussions were not disclosed. Trump officials, including Secretary of State Rex Tillerson, had earlier threatened to challenge China’s expansionism in the contested waters but have since seemingly adopted a more pragmatic stance.

There are certain regional concerns that Trump may sacrifice the US’ balancing role, including the primacy it has given to maintaining freedom of navigation in the maritime region, in quid pro quo exchange with China on economic matters.

That could include China’s potential financial support for US infrastructure development, on which Trump has vowed to spend as much as US$1 trillion, and investments in US-based job-creating factories.

Although Vietnam has recently softened its stance on what it believes to be China’s illegal occupation of islands in the South China Sea – both nations agreed to more formal, less impassioned discussions in January – Hanoi still needs US support to lessen its economic dependence on Beijing.

US support on the South China Sea issue was key to the bilateral rapprochement achieved under Obama, a warming trend that arguably brought the two countries’ closer together than at any juncture since the Vietnam War.

That trend cooled when Trump, on his first day in office, withdrew the US from the Trans-Pacific Partnership (TPP), a multilateral free trade agreement that promised to buoy Vietnam’s economic fortunes.

US President Donald Trump holds up an executive order withdrawing the US from the Trans-Pacific Partnership after signing it in the Oval Office of the White House in Washington, DC, January 23, 2017.Trump signed the decree Monday, effectively ending US participation in a sweeping trans-Pacific free trade agreement negotiated under former president Barack Obama. / AFP PHOTO / SAUL LOEB
US President Donald Trump holds up an executive order withdrawing the US from the Trans-Pacific Partnership at the White House on January 23, 2017. Photo: AFP/Saul Loeb

According to certain independent estimates, the TPP would have boosted Vietnam’s gross domestic product by 11%, or almost US$36 billion, and increased exports by up to 28% over the next decade.

While Trump has threatened to impose border taxes on certain Asian countries’ exports to the US, it is not immediately clear that Vietnam is in his sites. In the recently revealed letter to President Tran Dai Quang, sent in February, Trump affirmed his “wishes to promote cooperation on economics, trade, regional and international issues.”

Quang made the letter public on March 31 after meeting with US Ambassador to Vietnam Ted Osius, just days before Trump’s summit with his Chinese counterpart. Osius said during the meeting that Trump may personally attend the Asia-Pacific Economic Cooperation (APEC) summit, which will be held in November in Vietnam.

Vietnam’s Communist Party leaders, though, apparently do not want to wait that long. Prime Minister Nguyen Xuan Phuc announced last month that he would like to visit Washington as soon as possible, though it’s not clear that the February letter extended or hinted at a possible official meeting with Trump.

Hanoi’s urgency is likely explained by a desire to win assurances on trade. Vietnam’s exports to the US were worth US$38.5 billion last year, accounting for almost 20% of all shipments and making America the biggest importer of Vietnamese goods.

Hanoi might also hope to start negotiations towards a bilateral free trade agreement to replace the scrapped TPP. Trump has made clear he prefers to deal with trade partners on a bilateral rather multilateral basis, one of his stated chief reasons for withdrawing from the Obama-led TPP.

US President Barack Obama (L) puts his drink down and shakes the hand of Vietnam's President Tran Dai Quang before an economic leaders' meeting at the Asia-Pacific Economic Cooperation Summit, at Lima's Convention Centre on November 20, 2016 in Lima. Asia-Pacific leaders are expected to send a strong message in defense of free trade as they wrap up a summit that has been overshadowed by US President-elect Donald Trump's protectionism. / AFP PHOTO / Brendan Smialowski
Warming trend: US President Barack Obama (L) shakes hands with Vietnam’s President Tran Dai Quang (R) at the Asia-Pacific Economic Cooperation Summit held on November 20, 2016, in Lima, Peru. Photo: AFP/Brendan Smialowski

US and Vietnamese officials met in late March in pursuit of a Trade and Investment Framework Agreement, a dialogue mechanism some have speculated could provide a ready framework for negotiating a bilateral trade deal.

TPP promised to provide international cover for politically difficult economic reforms, including a badly needed overhaul of its many hidebound state enterprises, several of which are known to be sources of patronage and corruption for influential Communist Party members.

Some already speculate a bilateral free-trade agreement, implemented along the lines of the TPP’s liberalizing agreements, would have the same affect, though few if any believe such a deal could be hammered out within the next year. The US currently shares bilateral FTAs with just 20 nations. Others suggest the desire to improve ties is felt more strongly in Hanoi than Washington.

While Trump has threatened to impose border taxes on certain Asian countries’ exports to the US, it is not immediately clear that Vietnam is in his sites. In the recently revealed letter to President Tran Dai Quang, sent in February, Trump affirmed his “wishes to promote cooperation on economics, trade, regional and international issues.”

Last month, Trump ordered officials to identify anti-competitive trade practices that are contributing to the US’ massive trade deficits. The US imported around US$29 billion more goods and services than it shipped to Vietnam last year, according to official statistics.

Trade deficit reduction is listed as second out of 24 elements the Trump administration envisions for future “model” trade agreements, according to a White House document.

With Vietnam listed as sixth on the list of global countries with the highest trade surpluses with the US, Trump could yet single out Hanoi as one of the countries contributing to the decline of US manufacturing. A free trade agreement would likely increase Vietnam’s trade surplus with the US, though there are certain indications that the current surplus is starting to narrow.

In January, imports from the US increased 14.6% driven by technology imports facilitated by new deals with US companies Apple and Dell. In the same month, US energy giant Exxon Mobil and state-owned PetroVietnam agreed to develop Vietnam’s largest natural gas-fired power generation project, a US$10 billion joint venture known as “Blue Whale.”

Exxon Mobil’s former chairman and chief executive, Rex Tillerson, is Trump’s secretary of state.

While some have speculated the US’s earlier trade and geopolitical support for Vietnam are set to decline under a more protectionist administration, one hint of continuation under Trump might be the decision to leave Ted Osius as ambassador, despite a Trump-issued mandate for all politically-appointed ambassadors installed under Obama to vacate their posts before his January inauguration.

This handout photo from USAID Vietnam taken and received on October 18, 2016 shows US Ambassador to Vietnam Ted Osius (L) talking with Vietnam's Deputy Defense Minister Gen. Nguyen Chi Vinh (R) as they attend a ceremony marking the start of the clean-up of dioxin contaminated-soil in central Danang city.Vietnam and the United States on October 18 launched the second phase of a dioxin clean-up in Danang, where millions of litres of Agent Orange were stored during the war between the former enemies. / AFP PHOTO / USAID Vietnam / STR / RESTRICTED TO EDITORIAL USE - MANDATORY CREDIT "AFP PHOTO / USAID VIETNAM " - NO MARKETING - NO ADVERTISING CAMPAIGNS - DISTRIBUTED AS A SERVICE TO CLIENTS
Diplomatic continuity: US Ambassador to Vietnam Ted Osius (L) talking with Vietnam’s Deputy Defense Minister General Nguyen Chi Vinh (R) in October 2016. Photo: AFP/ USAID Vietnam

Osius, who helped to establish the US consulate in Ho Chi Minh City in 1997, was appointed to the ambassadorship by Obama in 2014. While trade and security ties improved substantially under Obama, Washington maintained pressure on Hanoi to improve its poor rights record, through a carrot-and-stick strategy that ultimately failed to influence meaningful change.

Some analysts have suggested, without much evidence, that Trump may jettison the US’ focus on human rights and democracy promotion in its foreign relations. Yet on March 29, the US State Department bestowed its “International Women of Courage Award” to imprisoned Vietnamese activist Nguyen Ngoc Nhu Quynh, a popular dissident blogger. The presentation was made by US First Lady Melania Trump.

Vietnamese foreign ministry spokesman Le Hai Binh rebuffed Quynh’s award, saying that it was “not suitable and beneficial to the development of the two countries’ relationship.” But as Trump threatens potential trade sanctions against yet unspecified nations, his government may oddly already have more negotiating leverage over such matters than his Obama predecessor.

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