obama-vietnam

Source: abc.net.au

President Barack Obama identified Vietnam as one of the partners to be developed under the President’s “rebalancing strategy“, directly linking to Vietnam’s role in the “Trans-Pacific Partnership” (TPP), an important regional trade agreement involving 12 Asia-Pacific countries. If fully implemented, the TPP would eventually cover 40% of the world’s GDP. This would allow Vietnam access to the US market and foreign direct investment. In return, Vietnam’s position as the fifth-largest US trading partner in the TPP group means that it is a key destination for US exports and capital. TPP is set to encourage more regional integration between countries.

Evaluating how the US-Vietnamese relationship may change under Democratic nominee Hilary Clinton or likely Republican nominee Donald Trump is not only important for Hanoi and Washington stakeholders, but for the international community as Vietnam plays a prominent role in issues such as territorial disputes in South China Sea.

The impact of US-Vietnam relations on trade: Clinton as President

In keeping consistency with President Obama’s economic policies, Hilary Clinton will seek to expand US Trade agreements in the Asia-Pacific region. In her role as the Secretary of State, Clinton vocally supported the TPP on numerous occasions and highlighted the potential for TPP to lower barriers and drive long term growth across the region. Most recently, Clinton stressed the important role of American’s network of allies in the Asia-Pacific. President Clinton should be expected to expand trade relations with Vietnam and promote the institutionalization of the South China Sea. However, investors should not be too optimistic as Clinton has expressed her concern in wanting to see changes in the agreement which might lead to negotiations.

The impact of US-Vietnam relations on trade: Trump as President

The unconventional Republican candidate has always been strong about his ‘America First’ policy evident from insisting on a wall between the United States and Mexico, its third largest trading partner and his vocal opinion on the TPP as a ‘horrible deal‘. Trump has also been very skeptical of the United States’ role as guarantor of the liberal international order, which sees the nation as the purveyor of global public goods and maintaining the freedom of the seas.

Vietnam’s ecommerce potential

Ho Chi Minh City is a hotbed of startups. In 2015, the country’s economy grew by 6.7%, boosted in part by investments from Samsung Group and Intel Corp. If the TPP is actualized, Vietnam could benefit the United States and eventually further open the market for clothes and electronic gizmos exports. There is also a shared concern over China’s dispute over territory control of the South China Sea, as $5 trillion US in trade passes through water every year, and China has began building artificial islands on the atolls.

The US-Vietnam partnership shows a lot of potential but the TPP agreement needs to be put into action. Even if Clinton wins the race, it is likely that the agreement will be modified and passed through congress for approval, a process that could take longer than a year. However, the United States should not overlook the strategic importance of Vietnam’s location.

A version of this story was published in The Diplomat on June 11th. Read the article here.