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The US-Vietnam relationship’s recent upgrade to a “Comprehensive Strategic Partnership” highlights a crucial step in their economic ties. Vietnam’s ascent as a manufacturing and tech hub adds weight to this partnership, promising increased trade and investment opportunities. Challenges like geopolitical dynamics and regulatory disparities persist, but the shared vision for economic growth and prosperity underscores the potential for a strong and resilient collaboration. 

I. The Rise of a Strategic Partnership 

1. The normalization of US-Vietnam relationship 

Following a period of tension after the Vietnam War, a process of normalization in the 1990s lifted the relationship between the US and Vietnam. Since then, the two countries have partnered in numerous areas, leading to a significant increase in trade over the past decade.  

From Wartime Foes to Economic Partners: The Rise of the US-Vietnam Strategic Partnership
Figure 1: The US-VN relations from the beginning

Trade turnover between the two nations has multiplied five times in the last 10 years from 2012 to 2022. With cooperation in trade, security, and cultural exchange, both countries have demonstrated a desire to foster a more constructive relationship. 

2. The Strategic Partnership and the effects on the US-Vietnam relations 

In September 2023, the two countries took their relationship to the next level by signing a US–VN Comprehensive Strategic Partnership. This significant step opened up new opportunities for cooperation, particularly in the field of science.   

The expected outcomes include economic growth, particularly through increased foreign investment, technology sharing, and diversification of supply chains. This, in turn, is expected to fuel development across various sectors, including diplomacy, science, culture, and education.  

The partnership stemmed from shared economic interests and regional goals, with the United States aiming to diversify its supply chains away from China, while Vietnam seeks to enhance its technology capabilities. However, reaching the partnership was a result of extensive behind-the-scenes discussions, as Vietnam weighed concerns about potential repercussions from China and worked to minimize any potential fallout. 

II. Economic benefits for both sides 

The US-Vietnam Strategic Partnership exposes the United States to a variety of opportunities. Vietnam is currently one of the fastest-growing economies in the world, driven by the se a potential market with diverse consumption due to the rise in income.   

From Wartime Foes to Economic Partners: The Rise of the US-Vietnam Strategic Partnership
igure 2: The booming middle-class in Vietnam (McKinsey)

The partnership facilitates higher levels of American involvement in the Vietnamese market. This presents considerable prospects for American corporations to contribute capital and investment to infrastructure initiatives in Vietnam. 

Following the agreement, the US-Vietnam Strategic Partnership amplifies export opportunities for Vietnamese businesses in the US market. Strengthened ties foster smoother trade channels, granting Vietnamese enterprises increased access.    

Foreign Direct Investment (FDI) is expected to rise in Vietnam, with Nvidia, Microsoft, and Marvell preparing for projects in Vietnam, while the US funded $2 million for semiconductor workforce development initiatives between the two countries. Additionally, the US government will increase support for US firms investing in Vietnam.  

Spillover effects are anticipated, including formal technology and knowledge transfer, helping Vietnam achieve its goal of becoming a high-income country by 2050 by replacing low-value-added industries with high-tech and high-value-added ones.

III. Key Areas of Cooperation in Vietnam-US relations

The elevation of ties between the United States and Vietnam to a Comprehensive Strategic Partnership signals a profound transformation in their relationship, with significant implications for economic cooperation. Here are the key areas of collaboration between the two nations: 

1. Forging Stronger Economic Bonds: Commitments to Trade, Investment 

The US-Vietnam Strategic Partnership reaffirms commitments to existing agreements like the Trade and Investment Framework Agreement (TIFA). Both nations pledge to maintain favourable conditions for completing and staffing diplomatic facilities, while also striving to open markets for goods and services.  

There is a shared intent to bolster cooperation in areas such as intellectual property rights and aviation, with negotiations underway to amend the U.S.-Vietnam Air Transport Agreement under Open Skies principles, indicating a broader scope for collaboration beyond traditional trade agreements. These efforts underscore a deeper collaboration aimed at fostering economic growth and prosperity for both countries.  

2. Advancing Infrastructure and Digital Connectivity: United States’ Support for Vietnam’s Development 

In the arena of infrastructure development, the United States has reaffirmed its commitment to supporting Vietnam in various key areas, highlighting its assistance in manufacturing, high-quality digital and physical infrastructure, sustainable agriculture, and participation in global supply chains. Notably, the U.S. International Development Financial Corporation (DFC) aims to continue financing private sector projects, focusing on infrastructure, climate resilience, healthcare, and small businesses, with a particular emphasis on the Mekong Delta region. 

Both countries have acknowledged the importance of promoting secure and reliable digital infrastructure in Vietnam, recognizing its potential to spur growth in the digital economy. Efforts will be directed towards enhancing digital capabilities for Vietnamese innovators, with initiatives such as ensuring secure 5G networks. These endeavours aim to provide new opportunities for digital upskilling, subject to congressional notification.  

3. Driving Technological Advancements: US-Vietnam Collaboration in Key Sectors 

The US-Vietnam Strategic Partnership targets key sectors like semiconductors, digitalization, and clean energy. President Biden urges investment in science and technology, emphasizing digital transformation and green growth. The US pledges support for Vietnam’s development in these areas, advocating for closer collaboration between Vietnamese businesses and sectors like the semiconductor industry and climate change response.  

Specific areas of focus include the semiconductor industry, green transformation, climate change response, and human resources training, aimed at facilitating deeper participation in regional and global value chains.  

4. Nurturing Talent and Collaboration: US-Vietnam Initiatives in Education and Workforce Development 

Both countries are embarking on initiatives aimed at enhancing skills and fostering collaboration between universities. Toward this goal, semiconductor workforce development initiatives have been launched, supported by initial seed funding of $2 million from the U.S. government, in conjunction with future Vietnamese government and private sector support.  

Leaders from both nations emphasize the significance of ongoing collaboration between leading academic institutions in the United States and Vietnam. Joint research initiatives, training courses, fellowships, and exchange programs focusing on science, technology, engineering, and math (STEM) fields are prioritized to nurture talent and drive innovation. 

Approximately 300,000 Vietnamese individuals engage with American education programs annually through various avenues such as online courses, summer camps, short-term exchange programs, and university collaborations.  

Significant educational projects that have been executed in Vietnam past years: 

  • Peace Corps program: Americans come to teach English in the past year in Hanoi, and will soon be established in Ho Chi Minh City 
  • Fulbright University of Vietnam in Ho Chi Minh City became a real hub of learning with the American style education.   
From Wartime Foes to Economic Partners: The Rise of the US-Vietnam Strategic Partnership
Figure 3: The Vietnam-US Strategic Partnership – Key Area of Cooperation

IV. Challenges and Opportunities for US-Vietnam Strategic Partnership 

1. Challenges: Navigating Economic Power Dynamics 

Economic power wielded by China presents a significant challenge to the United States, requiring strategic navigation within the Indo-Pacific region. While Vietnam seeks to balance relations with China without provocation, its multidirectional foreign policy approach underscores the complexity of regional dynamics. China’s dominance as ASEAN’s largest trading partner and primary development partner underscores the strategic implications of its economic influence.  

These realities pose formidable challenges for the United States as it endeavors to compete with Chinese economic power while recognizing the limits of alignment with regional partners. 

2. Opportunities: Strengthening Bilateral Relations 

Despite challenges, opportunities abound for further collaboration between the United States and Vietnam within the framework of the Comprehensive Strategic Partnership. President Biden’s pledge to promote internal US consensus in support of the Vietnam-US relations signals a commitment to enhancing ties. Economic innovation and cooperation in science and technology form a central theme of the partnership, offering opportunities for mutual advancement and diversification away from Chinese supply chains.  

Additionally, the United States’ commitment to assisting Vietnam with finance and advanced climate technology underscores opportunities for collaboration in addressing shared challenges such as climate change and renewable energy infrastructure development. Through strategic cooperation, both nations can capitalize on these opportunities to further strengthen their partnership and advance mutual interests. 

V. Advancing Together in the Enhancement of US-Vietnam Relations 

The elevation of US-Vietnam relations to a Comprehensive Strategic Partnership marks a significant turning point in their journey from former adversaries to economic allies. While challenges persist, particularly in navigating China’s economic influence, opportunities for collaboration remain. 

The great potential for collaboration across trade, investment, infrastructure development, and technological innovation are experiencing promising mutual growth and prosperity. Commitments to education and workforce development further underscore the partnership’s depth, laying the groundwork for future talent exchange and innovation-driven growth. By fostering dialogue, promoting mutual understanding, and pursuing shared goals, they can chart a course toward sustainable development and prosperity for both nations and the broader region. 

Source of Asia can help US businesses expand operations in VN with our tailored Sourcing and Supply chain services, Market Expansion and Corporate Services, drawing on insights from our expertise in the region. Contact us for more consultancy and tailored-made services, we are here to get you there.