Onetime
foes look to close economic, political cooperation
Vietnamese and Americans joined together in
Hanoi last December for a happy celebration, commemorating the 10th anniversary
of the entrance into force of the US-Vietnam Bilateral Trade Agreement signed
in December, 2001.
The gathering of current and former trade negotiators,
diplomats, and business leaders exchanged witty anecdotes about who had been
the toughest negotiator. However, the main focus for both American and
Vietnamese participants was on the positive prospects for future US-Vietnam
relations across the spectrum of trade and strategic common interests.
For those of us who served in Vietnam during
the war years, this celebration was the latest reminder of the remarkable
transformation of a relationship from one of bitter foes to strategic partners.
Ties between the United States and Vietnam have steadily improved since they
were formally normalized in 1995, but the pace has accelerated during the past
three years, motivated in part by shared concern over China’s aggressive
maritime claims in the South China Sea.
Washington views Vietnam as a rapidly
developing mid-sized country of some 90 million people, and Hanoi has been
increasing its leadership role in Southeast Asia, a region that has America’s
renewed attention. In turn, the Vietnamese leadership seeks regional stability,
global integration, new foreign investment, and markets for its export
industries, goals that require good relations with the United States.
America’s
Asia-Pacific “Pivot”
The Hanoi commemoration of the Bilateral Trade
Agreement came soon after President Barack Obama’s mid-November hosting of the
Asia-Pacific Economic Cooperation (APEC) summit in Honolulu, followed a few
days later by his attendance at the East Asia Summit in Bali. President Obama
and Secretary of State Hillary Clinton used these summit meetings to announce
America’s “pivot” back to Asia as the United States withdraws from its two long
wars in Iraq and Afghanistan. The administration has made clear that while the
U.S. overall defense budget is reduced, it will not affect the U.S. forward
deployment throughout the Asia- Pacific region.
An important component of the Obama
administration’s Asia “pivot” policy has been its championing of the
Trans-Pacific Partnership (TPP) free trade agreement, which was a major topic
of interest at the APEC summit. Nine Asia-Pacific countries, including the
United States and Vietnam, are now engaged in negotiating this agreement. A
major objective for the United States has been to counter the trend of recent
years in which China has signed trade agreements with its Asian neighbors that
have excluded the United States.
Vietnam
Joins Trans-Pacific Partnership Talks
In November 2010, the United States and other
negotiating parties welcomed Hanoi’s decision to join the TPP negotiations,
though both Vietnam’s interest and the welcome extended by other countries were
somewhat surprising. Vietnam is the least developed economy among the
prospective TPP members, and also by far the most “mixed” economy—market and
non-market— among the nine. State-owned enterprises (SOE), are subsidized by
generous loans from state-owned banks, and are an important feature of
Vietnam’s economic system, which closely resembles China’s “state capitalism”
model. One of Washington’s major goals for the TPP is a trade agreement in
which private and state-owned companies compete on a level playing field. This
goal reflects the serious American frustration with what it sees as unfair
advantages that Chinese SOEs have in world trade.
This state enterprise issue will complicate
Vietnam’s ability to negotiate successfully the country’s entrance into the
TPP. Because of frustration with Chinese SOEs—and not just on the part of the
United States—there will be less tolerance than there might have been five
years ago for Vietnam retaining the advantages it gives to its state companies.
Our
Strategic Partnership
The administration’s “pivot” or “rebalancing”
policy is fundamentally about giving the world’s most economically dynamic
region the attention it deserves. But U.S. refocus on the Asia-Pacific region
includes cooperation with China’s nervous neighbors in hedging against how
Beijing might use its increased power and influence. With a long history of
troubled relations with its huge neighbor, Vietnam is a logical partner. Many
activities in the last three years, particularly naval, have signaled
U.S.-Vietnamese strategic convergence.
This convergence between the United States and
Vietnam, including welcoming Hanoi into the TPP negotiating group, is a
significant piece of the “pivot” policy. During the 10th Anniversary
Commemoration last December, both American and Vietnamese officials commented
that Vietnam’s entrance into the TPP negotiations was a “strategic decision” by
both Hanoi and Washington. While these are trade talks, they are made possible
by joint strategic alignment and mutual trust.
A common interest in regional peace and
security could help to smooth the way toward agreement, but tough negotiations
lie ahead. Vietnam’s negotiating partners will insist on a high-quality trade
and investment agreement that will require transparency, protection of
intellectual property rights, labor rights, and environmental protection as well
as restraints on advantages given to SOEs.
For Vietnam, requirements to liberalize and
modernize its economy come at a time of serious economic problems and heated
internal political debate regarding the country’s direction. Inflation in
Vietnam has repeatedly surged into double digits in the past few years, twice
spiking well above 20 percent. Vietnam’s stock markets in 2011 were the worst
performing in Asia, pledges of foreign direct investment declined, and all
three major ratings agencies downgraded the country’s sovereign credit rating.
Vietnam’s top leaders recognize that these are
serious problems, but have sharp disagreements about how to deal with them. A
major issue of debate is how much to reform the system of SOEs. State banks are
burdened by bad loans to these enterprises and many are performing poorly. The
multi-billion dollar default of Vietnam’s shipbuilding industry
group—Vinashin—in 2010 intensified the SOE debate.
Some are asking if Vietnam’s internal debates,
along with US concerns about Vietnamese SOEs, will prevent both countries from
reaching agreement in the TPP talks. Vietnam’s successful conclusion of the TPP
negotiations will require concessions by Hanoi as well as its negotiating
partners, including the United States. Success will require that both give
priority to the strategic partnership that has been forged in recent years.
The United States has identified Vietnam as
one of its important new strategic partners in Asia. Vietnam sees America as
the key to maintaining strategic balance in Southeast Asia. Many of us who have
witnessed the bilateral relationship go from war to partnership within 35 years
hope that that this strategic shared vision will give trade negotiators the
incentive needed to find common ground.
Raymond Burghardt
Asia Sentinel
Business & Investment Opportunities
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