Trump-Phuc rekindle US-Vietnam warming trend

Vietnamese leader Nguyen Xuan Phuc appeared to win over his US counterpart with deals and offers to narrow the two sides’ yawning trade imbalance

Originally published by Asia Times (June 1, 2017)


The Vietnamese government had much to celebrate after Prime Minister Nguyen Xuan Phuc met on Wednesday with US President Donald Trump in the White House. Business deals were signed and America appeared to offer Vietnam new strategic support in its defense against a perceived as expansionist China.

“The relationship between Vietnam and the United States has undergone significant upheavals in history, but today we have been able to become comprehensive partners,” Phuc said after his meeting with Trump.

This comes as many of America’s historic Southeast Asian allies, chiefly the Philippines and Malaysia, and to a lesser degree Thailand, appear to be pivoting their allegiances towards Beijing.

Trump irked Vietnam in January when, on his first day in office, he withdrew the United States from the Trans-Pacific Partnership (TPP), a multilateral free trade agreement that promised to bolster Vietnam’s economic fortunes.

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

Trump, known for his preference of bilateral over multilateral trade agreements, however, offered a lifeline when he sent Hanoi a letter in February affirming his “wishes to promote cooperation on economics, trade, regional and international issues.”

The following month, US Ambassador to Vietnam Ted Osius met with officials in Hanoi for trade talks, and to announce that Trump would attend the Asia-Pacific Economic Cooperation (Apec) summit, which will be held in November in Vietnam.

As many predicted before Phuc’s three-day visit to Washington, America’s large trade deficit with Vietnam, its sixth largest, was foremost in discussions.

The bilateral trade deficit stands at US$32 billion, a result of heavy US imports of low-cost Vietnamese manufactured electrical goods and apparel. Hanoi’s agreement to narrow that gap is widely seen as paramount for new negotiations towards a bilateral deal to take place.

Phuc said before meeting Trump that he would sign deals worth up to US$17 billion for American goods and services, which if signed and sealed could reduce the current trade deficit by more than half.

In the end, however, the US Commerce Department later confirmed that only 13 new transactions worth US$8 billion were officially agreed. This includes a US$5.58 billion deal with General Electric for power generation, aircraft engines and services.

Trump was clearly impressed with Phuc’s offers. “They just made a very large order in the United States – and we appreciate that – for many billions of dollars, which means jobs for the United States and great, great equipment for Vietnam,” he told reporters.

Vietnam is thought to be one of the fastest-growing global markets for US imports, worth US$4.4 billion last year and up 77% since 2014. Phuc is the first Southeast Asian premier to visit the White House since Trump’s inauguration in January, a sign that Trump aims to continue the close relations fostered under the previous US administration.

America’s rapprochement with Vietnam was strengthened by former president Barack Obama, who visited Hanoi last year and withdrew a decades-old ban on sales of lethal military equipment to Vietnam.

It remains unclear, however, whether Phuc’s invitation was made before or after Trump personally invited Thai Prime Minister Prayut Chan-o-cha and Philippine President Rodrigo Duterte to Washington in April. Trump has also invited Singapore leader Lee Hsien Loong to visit the White House this year.

The three countries are erstwhile US allies in the region.

Phuc’s visit was the result of heavy lobbying. The Prime Minister made it clear in March that he wanted to visit the White House and Vietnam’s ambassador to the US, Pham Quang Vinh, has worked tirelessly to build connections in Washington by reportedly doubling the size of his diplomatic team when Trump won the presidential race in November.

Vietnam also invested heavily in the Trump meeting. Podesta Group, a Washington-based lobbying firm, has been retained eight times by the Vietnamese government since 2013. Two recent contracts were signed in January and another in May, reportedly worth US$90,000 each, both with the express aim of building closer ties between the two nations.

The engagement has delivered certain strategic gains. Trump announced that a decommissioned American naval cutter would be transferred to the Vietnamese Coast Guard, a sign that the US still supports Vietnam’s opposition to China’s territorial ambitions in the contested South China Sea.

Reciprocally, Vietnam clearly wants a more assertive US in the Asia-Pacific. Referring to Trump’s prospective attendance at November’s Apec summit in Hanoi, Phuc said that it would be “an important occasion for the United States to assert its positive role.”

Most likely, Phuc would have also left the Oval Office pleased that Trump did not publicly bring up issues of human rights, which analysts and advocates say are on a downswing with recent ramped up arrests of dissidents.

Trump also failed to openly discuss such issues with Xi Jinping of China and Recep Tayyip Erdogan of Turkey, though White House press secretary Sean Spicer contends that the president raises such issues privately.

More publicly, the US State Department bestowed its “International Women of Courage Award” in March to imprisoned Vietnamese activist Nguyen Ngoc Nhu Quynh, a popular dissident blogger and environmental campaigner.

Phuc’s visit to Washington was always expected to be Vietnam’s initiation of dialogue with the Trump administration, not the conclusion. While as many questions were raised by the meeting as answered, many will no doubt become clearer in the months to come.

Murray Hiebert, a Southeast Asia expert at Washington’s Center for Strategic and International Studies, told Reuters that the new business deals with Vietnam were “nice, but not enough” for the Trump administration. Indeed, it appears that Washington wants to see more actions and initiative to further reduce the trade deficit.

Moreover, what Vietnam can take economically from the meeting remains up in the air. Clearly, TPP’s promised end to trade barriers and tariffs, including on Vietnamese catfish and fruits, were not on offer during Phuc’s visit.

The two sides will aim to hammer out agreements on US anti-dumping and anti-subsidy measures that been imposed in the past on Vietnamese imports for alleged anti-competitive trade practices. Vietnam can take some solace in the fact that bilateral negotiations on the issues are now underway.

When Trump withdrew from TPP in January, there were some fears that Vietnam would have to pivot its economy far away from the US – which accounts for around one-fifth of its global exports – and tether more tightly to strategic rival China. That worst-case scenario, at least for now, seems unlikely to come to fruition.

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