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High-tech supply chains and the US-Vietnam upgrade

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The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners and strategic thinkers across the globe for their diverse insights into U.S. Asia policy.

This conversation with Dr. Alexander Vuving  –  professor at College of Security Studies at the Daniel K. Inouye Asia Pacific Center for Security Studies and editor of “Hindsight, Insight and Foresight: Thinking about Security in the Indo-Pacific” (APCSS 2020)  – is the 384th in “The Trans-Pacific View Insight Series.”

In 2021 you predicted that the U.S. and Vietnam would become strategic partners. What surprised you most about the outcome of the recent bilateral relations upgrade? 

It was not a “normal” upgrade, but a double upgrade from a mere “comprehensive partnership” to a full “comprehensive strategic partnership,” skipping the mid-level “strategic partnership” in between. Most observers think the United States and Vietnam strengthened their ties as a counterweight to China’s growing power. But if only for Beijing’s assertiveness, Hanoi would have insisted on a “normal” upgrade by one notch to a “strategic partnership.” 

What really convinced the Vietnamese to “leapfrog,” I think, is the U.S. offer to turn Vietnam into a major high-tech and semiconductor hub in the U.S.-friendshored supply chains. U.S. assistance for Vietnam to acquire the technology, know-how, capital, and market access necessary for this ambition is a key promise in the elevated U.S.-Vietnam comprehensive strategic partnership. This offer became palpable only this year, after the trips to Hanoi by U.S. Treasury Secretary Janet Yellen, U.S. Trade Representative Katherine Tai, and several U.S. corporate delegations.

How will both countries benefit from the new “comprehensive strategic partnership” designation? 

This designation creates a framework for the bilateral relationship. The benefits it brings are mostly intangible and long-term in nature. One of the most palpable benefits of the new designation is for the U.S.: it signals to the entire political system in Vietnam that Washington is now a “comprehensive strategic partner” on a par with Hanoi’s long-time friends Beijing and Moscow. Besides this heightened respect, it also indicates that Vietnam no longer sees the U.S. as a threat to its Communist regime. Consequently, Hanoi will treat Washington far more favorably in the future. 

The elevated partnership will also bring huge benefits to Vietnam. It signals to the business world that Vietnam is a preferred destination in the U.S. “friendshoring” policy. Investors tied to the U.S. market would get political insurance if they anchor their supply chains to Vietnam. This is extremely important for companies caught in the U.S.-China rivalry, firms that are involved in the production, and trade of strategically critical goods such as semiconductors.

Explain Hanoi’s strategic calculus and geopolitical messaging in upgrading relations with Washington.

Vietnam is faced with absolute uncertainty when entering Cold War 2, the new era of heightened rivalries between the great powers. So it needs to broaden its hedge. In December 2021, Vietnam Communist Party chief Nguyen Phu Trong likened the ideal Vietnamese foreign policy to bamboo for its flexibility and resilience. The elevated partnership with the U.S. is meant to maximize Hanoi’s flexibility in dealing with the great powers. Having “comprehensive strategic partnerships” with all three great powers – the U.S., China, and Russia – Vietnam thinks it can move freely between them. It can take a side that best suits its interests without taking sides in the great power competition. 

This requires that the game Hanoi plays between the great powers is not zero-sum. So Hanoi took pains to show Beijing and Moscow that progress in its relations with Washington didn’t harm its relations with the former. It also tried hard to show Washington that its good ties with Beijing and Moscow were not detrimental to U.S.-Vietnam relations. So a central message Hanoi wants to send is that it’s not playing a zero-sum game between the great powers, and if it takes the side of a great power [on one issue], that doesn’t mean it takes sides in their rivalry.

This game, in turn, requires very adroit bamboo diplomacy. It’s a big question mark whether this approach is sustainable in the long run given the growing chasm between China and Russia on the one hand and the West on the other. If Vietnam’s location were not very strategic, the great powers may be willing to tolerate this geopolitical promiscuity in the long term. But I fear Vietnam’s location may be too strategic for that to happen.

What is the potential impact of upgraded bilateral relations on regional security dynamics and economic integration?

The upgrade will affect the regional balance of power. Vietnam and the United States share the strategic objectives of denying Chinese dominance in Southeast Asia and maintaining an international order based on neutral rules in the South China Sea. The elevated U.S.-Vietnam partnership will throw more weight on this side of the balance of power. 

On the economic front, this partnership will create some tailwinds for the U.S. “friendshoring” policy. It will give a boost to the restructuring of the global supply chains away from China toward some U.S.-friendly countries.

Assess the factors and timing behind Washington’s decision to elevate strategic engagement with Hanoi and implications for U.S. and Vietnamese leadership in the Indo-Pacific.  

The ultimate factor driving the strategic engagement between Washington and Hanoi is the rise of Beijing’s power. On the one hand, China’s expanding influence in the South China Sea, Cambodia, and Laos caused Vietnam to move closer to the U.S. On the other hand, China’s threat to U.S. global power caused the U.S. to strengthen ties with countries most committed to resisting China and to “friendshore” its supply chains. Vietnam is such a country given its commitment to denying Chinese dominance, its strategic location at China’s southern gateway and along the busiest trade route between the Pacific and the Indian Ocean, and its impressive economic potential. All these strategies converged into an elevated U.S.-Vietnam partnership.

The timing of the elevation was, however, more complicated. Washington had pursued a strategic partnership with Vietnam since 2010, but Hanoi only ceased to resist this offer in 2018. The two had plans to upgrade their ties at the second visit to the White House by VCP chief Trong in late 2019, but this never materialized due to Trong’s inability to travel. The upgrade must be announced by the top leaders of both countries, the U.S. president and the VCP general secretary. Thus, it was delayed by the COVID-19 pandemic. 

Then the U.S.-Russia hostility following Russia’s invasion of Ukraine in 2022 prompted Vietnam to shelve the upgrading of its ties with the U.S. because Hanoi needed to demonstrate its commitment to Moscow, among other commitments. The upgrading could only happen after Moscow was convinced of Hanoi’s loyalty and Beijing was reassured of Hanoi’s intentions.

While Hanoi took pains to convince Moscow and Beijing that its elevated partnership with Washington would not harm its ties with them, this is still a big diplomatic victory for the U.S. It shows that the United States is able to attract even a long-time friend of China and Russia and turn an enemy into a friend. This ability to attract, or soft power, is extremely important for U.S. leadership in the international arena.  

The new partnership with the U.S. also vastly elevates Vietnam’s standing in the world. Hanoi is now one of the few capitals in Asia that can maintain close relationships with all great powers. The elevated U.S. ties also significantly improve Vietnam’s place in the global supply chains and in the long run, also Vietnam’s place in the global value chains.

By Mercy Kuo – The Diplomat – September 25, 2023

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