Thayer Consultancy Background Brief:

ABN # 65 648 097 123

U.S. Relations with Vietnam
Carlyle A. Thayer
June 7, 2021

We are preparing a major report on U.S.-Vietnam relations and request your

assessment of the following ten issues:
Q1. How have U.S.-Vietnam relations evolved over the nearly 50 years since the end
of the Vietnam conflict?
ANSWER: U.S.-Vietnam relations may be broadly periodised into four stages: 1973-75,
1975-95, 1996-2013 and 2013-present.
The first stage was marked by the four-party Agreement on Ending the War and
Restoring the Peace in Vietnam signed in Paris in January 1973 by the Democratic
Republic of Vietnam (DRV or North Vietnam), United States, Republic of Vietnam
(South Vietnam) and the Provisional Revolutionary Government of the Republic of
Vietnam. Under this agreement the DRV promised to provide a full accounting of all
American Prisoners of War (POWs) and Missing in Action (MIA). The United States
promised to heal the wounds of war.
Separately, President Richard Nixon wrote a letter to DRV Premier Pham Van Dong
promising a "range of $2.25 billion" in reconstruction aid and $1 billion to $1.5 billion
for food and commodity aid. In early 1973, a DRV-US Joint Economic Commission met
in Hanoi to discuss how to disburse Nixon’s offer of aid. If this plan proceeded,
Vietnam would have been able to cut an independent path from its dependence on
the Soviet Union. The first period came to an abrupt end when the DRV launched the
1975 Ho Chi Minh Offensive that led to the collapse of South Vietnam and the U.S.
repudiation of the Paris Peace Agreements.,
The second stage was marked by a period of estrangement between Hanoi and
Washington. Bilateral relations focused almost entirely on full accounting for POWs
and MIAs. In 1978, the Carter Administration came close to normalising relations with
reunified Vietnam, now known as the Socialist Republic of Vietnam (SRV) but was
thwarted by legislative action by the U.S. Congress. In November 1978, Vietnam and
Soviet Union signed a 25-year Treaty of Friendship and Cooperation, an alliance under
another name. The following month Vietnam invaded and occupied Cambodia and
was subject to U.S. economic sanctions. Vietnam’s unilateral withdrawal from
Cambodia in September 1989, followed by the comprehensive political settlement of
the Cambodian conflict, laid the groundwork for a gradual reproachment between the
U.S. and the SRV.
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Milestones during the second stage include: opening of the U.S. Office for MIA Affairs
in Hanoi (July 1991) and the lifting of the U.S. trade embargo (February 1994).
The third stage in relations was marked by the normalisation of diplomatic relations
in July 1995 and the raising of bilateral relations to a comprehensive partnership in
2013 under the Obama Administration.
Milestones in the third stage include: Secretary of Defense William Cohen makes first
visit to Hanoi since end of Vietnam War (March 2000), Bilateral Trade Agreement
signed (July 2000 became law October 2001), President Bill Clinton visits Vietnam
(November 2000), Vietnam’s Minister of National Defence visits the U.S. (November
2003), USS Vandegrift makes first of what becomes annual port visit to Vietnam
(November 2003), Prime Minister Phan Van Khai visits U.S. (June 2005), Defense
Secretary Donald Rumsfeld visits Hanoi (June 2006), President G. W. Bush attends
APEC summit in Vietnam (November 2006), U.S. grants Vietnam Permanent Normal
Trade Relations (PNTR) status (December 2006), President Nguyen Minh Triet visits
Washington (June 2007), Prime Minister Nguyen Tan Dung visits U.S. (June 2008), U.S.
– Vietnam hold first Political, Security, Defence Strategic Dialogue (October 2008),
Prime Minister Nguyen Tan Dung attends Nuclear Summit in Washington (April 2010),
and MOU on Advancing Bilateral Defence Cooperation (2011).
The fourth and current stage in relations is marked by the implementation of the
comprehensive partnership (2013), the development of defence relations, and a
marked growth in bilateral trade during which the United States became Vietnam’s
largest export market.
Milestones during the fourth stage include: Joint Vision Statement on Defence
Relations (2015), President Obama visits Vietnam and lifts arms embargo (May 2016),
Prime Minister Nguyen Tan Dung is first Southeast Asian leaders to be received by
President Donald Trump at The White House (May 2017), President Trump attends
APEC summit in Da Nang and pays official visit to Hanoi (November 2017), Vietnam
hosts second Trump-Kim Jong-un summit in Hanoi (February 2019).
Q2. How would you characterize the current relationship between the two countries
– is it one of mutual cooperation or something more, something less?
ANSWER: The Biden Administration inherited the comprehensive partnership
framework with Vietnam agreed to by President Obama in 2013 and expanded by
President Trump. Recently retired ambassadors from both countries wax lyrical about
how close the two countries are. President Biden’s Interim National Security Strategic
Guidance singles out Vietnam as a priority security partner. Within days of his
confirmation as Secretary of State Anthony Blinken rang his counterpart in Hanoi,
Pham Binh Minh. In March, following leadership changes in Vietnam, Secretary
Blinken called the new Foreign Minister, Bui Thanh Son.
Q3. What are the main products that the U.S. imports from Vietnam? What are the
main products Vietnam imports from the U.S.?
ANSWER: According to a Department of State Fact Sheet (April 9, 2021):
U.S. exports to Vietnam include machinery, computers and electronics, yarn/fabric, agricultural
products, and vehicles. U.S. imports from Vietnam include apparel, footwear, furniture and bedding,
agricultural products, seafood, and electrical machinery. U.S.-Vietnam bilateral trade has grown from
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$451 million in 1995 to over $90 billion in 2020. U.S. goods exports to Vietnam were worth over $10
billion in 2020, and U.S. goods imports in 2020 were worth $79.6 billion. U.S. investment in Vietnam
was $2.6 billion in 2019.
This profile was issued the Office of the U.S. Trade Representative:
Vietnam
U.S. goods and services trade with Vietnam totaled an estimated $81.3 billion in 2019. Exports were
$13.4 billion; imports were $67.9 billion. The U.S. goods and services trade deficit with Vietnam was
$54.5 billion in 2019.
Vietnam is currently our 13th largest goods trading partner with $77.5 billion in total (two way) goods
trade during 2019. Goods exports totaled $10.9 billion; goods imports totaled $66.6 billion. The U.S.
goods trade deficit with Vietnam was $55.8 billion in 2019.
Trade in services with Vietnam (exports and imports) totaled an estimated $3.8 billion in 2019. Services
exports were $2.5 billion; services imports were $1.3 billion. The U.S. services trade surplus with
Vietnam was $1.2 billion in 2019.
Exports
• Vietnam was the United States' 27th largest goods export market in 2019.
• U.S. goods exports to Vietnam in 2019 were $10.9 billion, up 12.2% ($1.2 billion) from 2018
and up 250.7% from 2009.
• The top export categories (2-digit HS) in 2019 were: electrical machinery ($1.7 billion), cotton
($1.5 billion), aircraft ($787 million), plastics ($772 million), and machinery ($476 million).
• U.S. total exports of agricultural products to Vietnam totaled $3.5 billion in 2019, our 7th
largest agricultural export market. Leading domestic export categories include: cotton ($1.4
billion), soybeans ($262 million), distillers grains ($257 million), soybean meal ($195 million),
and dairy products ($170 million).
• U.S. exports of services to Vietnam were an estimated $2.5 billion in 2019, 7.8% ($180 million)
more than 2018, and 107% greater than 2009 levels. Leading services exports from the U.S. to
Vietnam were in the travel, transportation, and intellectual property (computer software)
sectors
Imports
• Vietnam was the United States' 7th largest supplier of goods imports in 2019.
• U.S. goods imports from Vietnam totaled $66.6 billion in 2019, up 35.5% ($17.5 billion) from
2018, and up 442.2% from 2009. U.S. imports from Vietnam account for 2.7% of overall U.S.
imports in 2019.
• The top import categories (2-digit HS) in 2019 were: electrical machinery ($22 billion), knit
apparel ($7.7 billion), furniture and bedding ($7.2 billion), footwear ($7.0 billion), and woven
apparel ($5.8 billion).
• U.S. total imports of agricultural products from Vietnam totaled $2.0 billion in 2019, our 21th
largest supplier of agricultural imports. Leading categories include: tree nuts ($1.1 billion),
unroasted coffee ($277 million), spices ($194 million), processed fruit & vegetables ($53
million), and rubber & allied products ($43 million).
• U.S. imports of services from Vietnam were an estimated $1.3 billion in 2019, 13.3% ($149
million) more than 2018, and 120% greater than 2009 levels. Leading services imports from
Vietnam to the U.S. were in the travel, transportation, and professional and management
services sectors.
Trade Balance
• The U.S. goods trade deficit with Vietnam was $55.8 billion in 2019, a 41.2% increase ($16.3
billion) over 2018.
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• The United States had a services trade surplus of an estimated $1.2 billion with Vietnam in
2019, up 2.6% from 2018.
Investment
• U.S. foreign direct investment (FDI) in Vietnam (stock) was $2.6 billion in 2019, a 8.2% decrease
from 2018. There is no information on the distribution of U.S. FDI in Vietnam.
• Vietnam's FDI in the United States (stock) was $57 million in 2019, down 3.4% from 2018.
There is no information on the distribution of Vietnam FDI in the U.S.
• Sales of services in Vietnam by majority U.S.-owned affiliates were $835 million in 2017 (latest
data available), while sales of services in the United States by majority Vietnam-owned firms
were $1 million.
Q4. What does Vietnam's current relationship with the U.S. mean for Vietnam, its
economy and for Asia more broadly?
ANSWER: Vietnam represents the fastest growing market in Southeast Asia for
American exports. Late in the Trump Administration, Vietnam committed itself to
buying several billion dollars of liquified natural gas from the United States.
Also in late 2020, the Office of the U.S. Trade Representative (USTR) designated
Vietnam a currency manipulator but took no action. Biden’s new USTR and Vietnam’s
newly appointed Minister for Industry and Trade agreed to address trade issues
through a working group.
Vietnam is touted as a rising economic power in the Indo-Pacific in the coming decade.
It is a staunch supporter of multilateralism and is member of both the Regional
Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive
Trans-Pacific Partnership. The U.S.-Vietnam bilateral relationship will be an enduring
part of the post-COVID-19 economic architecture.
Q5. What does the U.S.-Vietnam relationship mean for China?
ANSWER: China is more concerned about defence, security, and political relations
between Hanoi and Washington than about economic relations. China is especially
sensitive to U.S.-Vietnam relations because Vietnam lies on China’s southern border.
China continually reminds Vietnam of their shared commitment to socialism and
opposition to foreign interference in their internal affairs (read democracy and human
rights).
Vietnam normalised relations with China four years before it normalised relations with
the United States. China was one of Vietnam’s earliest strategic partners (a peg higher
than a comprehensive partnership) and this bilateral relationship has evolved over
time to a comprehensive strategic cooperative partnership. While the South China Sea
remains a major irritant in bilateral relations, China continues manage its relations
with Vietnam through a Joint Steering Committee at deputy prime minister level.
Q6. Is China unhappy that the two countries are doing so much trade?
ANSWER: China has a huge trade surplus with Vietnam. It provides the resources that
fuel Vietnamese manufacturing and exports. It is in China’s material interest to see
Vietnam prosper economically. Both are linked through the ASEAN-China Free Trade
Agreement and RCEP, and both are reliant on access to the American market.
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Q7. What is the state of current security cooperation between the two countries?
Does China see this as a threat?
ANSWER: So far, there has been more continuity in bilateral security relations under
the Biden Administration than change. Present cooperation is a legacy of the Trump
Administration such as the transfer of a second U.S. Coast Guard cutter to Vietnam,
for example.
U.S. security assistance remains quite modest. For example, the State Department
issued a brief on security cooperation with Vietnam in June 2021 which stated in part:
From FY 2017 to FY 2021, Vietnam received approximately $60 million in bilateral State Department-funded
security assistance under the Foreign Military Financing (FMF) program and more than $20 million under the
Department’s Southeast Asia Maritime Security Initiative (SAMSI) regional FMF account. Vietnam also
received an additional $81.5 million of FMF in FY 2018 to support the Indo-Pacific Strategy.
• FMF primarily supports Vietnam’s maritime security/domain awareness capacity building
efforts. Key projects for the Vietnam Coast Guard include the transfer, refurbishment, and
sustained maintenance of two former U.S. Coast Guard cutters under the Excess Defense Articles
program and the purchase of MetalShark patrol boats. The cutters represent the most significant
major defense transfer between the United States and Vietnam.
• SAMSI is designed to enhance maritime domain awareness, increase the presence of partner
countries in their own territorial waters, and help them maintain the rights and freedoms specified
under international law of the sea. Vietnam purchased Scan Eagle UAS using SAMSI funds.

There were strong rumours that Secretary of Defense Lloyd Austin would make a side
trip to Vietnam in early June before his attendance at the Shangri-La Dialogue in
Singapore. The Shangri-la Dialogue was cancelled at short notice due to an upsurge in
COVID-19 infections in Singapore. In sum, the two sides have not yet had the
opportunity to meet and agree on new avenues of defence-security cooperation.
China is wary of any growth in U.S.-Vietnam defence-security cooperation but this
concern is mitigated by Vietnam’s long-standing defence policy of “three no’s”
expanded to “four no’s” in the most recent Defence White Book published in late
2019. The White Book states, “Viet Nam consistently advocates neither joining any
military alliances, siding with one country against another, giving any other countries
permission to set up military bases or use its territory to carry out military activities
against other countries nor using force or threatening to use force in international
relations.”
China is also constrained, to a certain extent, by a new policy declaration included in
the 2019 White Book. This new policy states, “Depending on circumstances and
specific conditions, Viet Nam will consider developing necessary appropriate defence
and military relations with other countries…”
Q8. How do the Vietnamese people currently view the U.S.? Are there lingering
suspicions/hostilities from the war?
ANSWER: Any Vietnamese hostility against the U.S. government or Americans arising
from the Vietnam War have long receded. General public views of China are toxic, in
contrast to strongly positive views of the United States in annual polls. Donald Trump
was immensely popular due to his anti-China rhetoric and punitive tariffs.
In official party and government circles, there are reservations in some quarters about
U.S. advocacy of democracy and criticism of Vietnam’s human rights record. This is
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termed the “plot of peaceful evolution.” In addition, official circles keep pressing the
United States to continue to address war legacy issues such as dioxin poisoning from
the use of Agent Orange defoliant, and unexploded ordnance (bombs and shells) still
strewn in the countryside.
Q9. Will the U.S.-Vietnam relationship grown closer in the near future?
ANSWER: Around 2010, Secretary of State Hillary Clinton raised the possibility of
elevating bilateral relations from a comprehensive to a strategic partnership. This
proposal is a hardy perennial, arising from time to time. It is almost certain that a
strategic partnership will be considered by the Biden Administration. However, it
should be noted that recent former ambassadors from the U.S. to Vietnam, and vice
versa, have said virtually the same thing: it doesn’t matter what you call the
partnership as long as it is strategic in nature.
10. Do you see any major roadblocks on the horizon which might prevent the two
countries from becoming even closer?
ANSWER: There are three possible irritants that could impede raising cooperation
between Vietnam and the United States.
The first is how the Biden Administration will handle concerns about Vietnam’s human
rights record and suppression of pro-democracy activists. During the Trump
Administration Congress passed the Asia Reassurance Initiative Act (ARIA). This
legislation specifically mentions Vietnam in this context. If the U.S. and Vietnam agree
on an exchange of high-level visits, human rights and democracy issues are likely to be
raised in Congress and by the Vietnamese-American community.
The second possible irritant is Vietnam’s dependence on the Russian Federation for
arms and military technology. Under the Countering America’s Adversaries Through
Sanctions Act (CAATSA), Vietnam could be sanctioned if it continued to purchase
weapons and military technology from Russian entities listed in CAATSA. If Vietnam
were granted a waiver, it would have to demonstrate that it was reducing its
purchases from Russia. A waiver comes with a deadline. Also, a waiver cannot be
granted if Vietnam does business with Russian entities involved in hacking in the
United States.
Third, there are a host economic and trade issues that remain unresolved: U.S. tariffs
on Vietnamese catfish and shrimp, U.S. designation of Vietnam as a “non-market
economy,” tariffs on Vietnamese exports of steel and aluminium originally sourced in
China, Vietnam’s loss of developing country status in the World Trade Organisation by
the Trump Administration, USTR restrictions on Vietnamese truck tires, and issues
relating to charges of currency manipulation. In addition, there is the issue of
protecting U.S. intellectual property rights and improved market access to Vietnam.
Any or all of these issues could be raised by Democrats in Congress or if Republicans
gain in the mid-term elections.
Suggested citation: Carlyle A. Thayer, “U.S. Relations with Vietnam,” Thayer
Consultancy Background Brief, June 7, 2021. All background briefs are posted on
Scribd.com (search for Thayer). To remove yourself from the mailing list type,
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.