Argument: The Road to Improved US–Vietnam Relations is Economic Reform

Lost amid the threat of ISIS and ISIL and the turmoil and devastation in the Middle East has been the United States’ strategic rebalance to Asia-Pacific.

It was Hillary Clinton in 2011, during her stint as secretary of state, who detailed the importance of Asia-Pacific in an article for Foreign Policy. Titled “America’s Pacific Century,” Clinton predicted the dominance of Asia-Pacific in global affairs and the necessity for America to focus its attention on the region.

Yet, America’s pivot has been slow, if it has been moving at all. Moreover, the US Navy’s plan to relocate 60 percent of its assets to Asia-Pacific by 2020 – to address and respond to challenges including North Korea, human trafficking and natural disasters, among others – was criticized by Beijing as a blatant attempt to contain China.

If, however, the US pivot was an attempt to contain China, one can argue that is has failed so far. Only this past May, tensions in the South China Sea were raised when China relocated one of its oil rigs inside Vietnam’s 200-mile exclusive economic zone, near the disputed Paracel Islands.

The incident sparked a wave of anti-China riots and demonstrations across Vietnam. On the seas, the two countries’ coast guards squared off. The incident came to an end in July when China finally withdrew the oil rig, a month before its planned August removal.

The incident deteriorated an already vulnerable relationship between Hanoi and Beijing, strained by ongoing maritime and territorial disputes over the Paracel and Spratly Islands. The incident may not have driven Vietnam into the arms of the US, but it has given Vietnam’s political leaders and business owners pause over their country’s economic dependence on China.

Talks of lifting America’s ban on the sale of lethal weapons to Vietnam have been growing in momentum in Washington, DC. No less than Senator John McCain, naval aviator and long-time prisoner of war during the Vietnam War, as well as a prominent critic of the Communist regime in Vietnam, has given tacit support to a conditional lifting of the ban.

Risks of overdependence

Not that Vietnam needs US armaments, for it has been happy to purchase its weapons elsewhere, particularly Russia, but a lifting of the arms embargo would certainly indicate a significant shift in US–Vietnam relations. But what of this relation, and what kind of relation does the US seek to have with Vietnam?

Until now, the US has hesitated to sell arms to Vietnam due to the country’s deplorable record on human rights, and fears that any weapons sold could be used against its people. Although human rights in Vietnam remain a concern for the US, perhaps the calculus has changed in Washington, possibly with the benefit of a potential ally in Southeast Asia outweighed the need for democratization in Vietnam.

Regardless of motives, lifting the arms embargo would unlikely establish the foundations for long-term, productive US–Vietnam relations. Geographically and economically, Vietnam continues to exist in China’s orbit, and it will continue to do so unless its dependence on its neighbor can be alleviated. Simply selling guns will not be enough.

Instead, if the US should hope to peel Vietnam away from China, or at the very least diminish Beijing’s influence in Hanoi, the US can start by relieving Vietnam’s economic dependence on China and encouraging greater economic liberalization policies.

The oil rig incident demonstrated the risks of Vietnam’s dependence. Factory owners in Vietnam were particularly concerned due to their reliance on materials from China. Indeed, some owners began to purchase materials elsewhere at greater cost. The anti-China riots also forced Beijing to evacuate its citizens from Vietnam, resulting in a shortage of technicians and workers for many of these factories.

For Vietnam’s political leaders, their continued governance depends largely on their ability to satisfy and improve living standards. If economic conditions in the country should have faltered and got worse over Hanoi’s handling of the dispute, it would not have been long before the people began blaming their government.

Foothold by way of a backdoor

Since the birth of Vietnam as separate and distinct from China, Vietnamese leaders have worked hard to strike a balance between national independence and maintaining good relations with their larger and more powerful neighbor. This balancing act has never been easy and has at times led to violence. Although war between these two countries is unlikely at present, the status quo is unhealthy and dangerous.

Rather than presenting itself as a military counterweight to China, the US should present itself as a viable economic alternative. In 2013, US exports to Vietnam accounted for about US$5 billion, mostly electronics, whereas Chinese exports stood at almost US$37 billion, an increase of 28.4 percent from the previous year.

It will be no small task to wean Vietnam off of China. Hanoi will naturally take its time given the demands imposed, although present indications suggest that Vietnam is ready to diversify; and Beijing will no doubt attempt to thwart any attempt by the US to usurp its grip over Vietnam, and gain a foothold in China’s backyard by way of a backdoor.

Economic prosperity, not guns, will not only have the benefit of securing Vietnam’s partnership for the decades ahead but also improve the lives of ordinary Vietnamese. However, the primary challenge in liberalizing Vietnam’s economy is its continued defense of state enterprises, riddled with corruption and mismanagement, which were central to the country’s economic downturn in 2012.

While the number of state-owned corporations has declined, they remain an impediment to free market competition, particularly in light of the Trans-Pacific Partnership (TPP) regional free trade agreement, of which Vietnam is a part. If the TPP should succeed—and the pact is in jeopardy both in the US Congress and in Japan -- it would encourage Vietnam to engage in necessary economic reform.

If the US intends to partner with Vietnam and bolster relations, merely lifting the arms embargo will do little to cement a long and lasting relationship. Vietnam does not need to buy arms from the US, and the US does not need to sell arms to Vietnam.

However, given the importance of Asia-Pacific in the decades ahead, the US would do well to secure a presence in the region’s emerging markets, and perhaps no one country shows as much promise in Southeast Asia as Vietnam. It is in helping Vietnam realize its economic potential where the US can find its footing.

What kind of relationship does the US desire with Vietnam? Hopefully, it will be one that is long and productive. Until such a time, there remains much to do.

Khanh Vu Duc is a lawyer and part-time law professor at the University of Ottawa. His research covers Vietnamese politics, international relations and international law. Duvien Tran is a special research associate at VDK Law Office in Ottawa, Canada, focusing on foreign policy and South China Sea security issues.