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Thursday, July 22, 2010

U.S.-Vietnam Relations in 2010: Current Issues and Implications for U.S. Policy

Mark E. Manyin
Specialist in Asian Affairs

After communist North Vietnam's victory over U.S.-backed South Vietnam in 1975, U.S.- Vietnam had minimal relations until the mid-1990s. Normal diplomatic relations were established on July 11, 1995. Since then, bilateral ties have expanded to the point where leaders on both sides describe each other as partners on a number of issues. The maturation of relations has been particularly marked since the mid-2000s, when Vietnam made a decision to upgrade the relationship; since then, overlapping strategic and economic interests have compelled the United States and Vietnam to improve ties across a wide spectrum of issues. Congress played a significant role in the normalization process and continues to influence the state of relations.

In the United States, voices favoring improved relations have included those reflecting U.S. business interests in Vietnam's reforming economy and U.S. strategic interests in expanding cooperation with a populous country—Vietnam has 88 million people—that has an ambivalent relationship with China. Others argue that improvements in bilateral relations should be conditioned upon Vietnam's authoritarian government improving its record on human rights. Vietnam is asserting itself on the regional stage; for instance, in 2010 it is the chair of the Association of Southeast Asian Nations (ASEAN). The population of more than 1 million Vietnamese-Americans, as well as legacies of the Vietnam War, also drive continued U.S. interest.

Vietnamese leaders have sought to upgrade relations with the United States in part due to the desire for continued access to the U.S. market and to worries about China's expanding influence in Southeast Asia. That said, Sino-Vietnam relations are Vietnam's most important bilateral relationship and Vietnamese leaders must tiptoe carefully along the tightrope between Washington and Beijing, such that improved relations with one capital not be perceived as a threat to the other. Also, some Vietnamese remain suspicious that the United States' long-term goal is to erode the Vietnamese Communist Party's (VCP) monopoly on power.

Economic ties are the most mature aspect of the U.S.-Vietnam bilateral relationship. The United States is Vietnam's largest export market and in 2009 was its largest source of foreign direct investment. Bilateral trade has grown more than fivefold since the United States extended "normal trade relations" (NTR) treatment to Vietnam in 2001. Increased bilateral trade also has been fostered by Vietnam's market-oriented reforms and the resulting growth in its foreigninvested and privately-owned sectors. From 1987-2007, Vietnam's annual gross domestic product (GDP) growth averaged over 7%. Since then, Vietnam's economy has been buffeted by economic difficulties that have lowered growth rates and raised inflation. Vietnam is one of the largest recipients of U.S. assistance in East Asia; since the late 2000s, annual U.S. aid typically surpasses $100 million, much of it for health-related activities. The Obama Administration is debating whether to add Vietnam to the Generalized System of Payments (GSP) program, which extends duty-free treatment to certain products that are imported from designated developing countries. The United States and Vietnam are two of eight countries negotiating a Trans-Pacific Strategic and Economic Partnership (TPP) regional free trade agreement (FTA).

Human rights are the biggest thorn in the side of the relationship. Vietnam is a one-party, authoritarian state ruled by the Vietnamese Communist Party (VCP), which appears to be following a strategy of permitting most forms of personal and religious expression while selectively repressing individuals and organizations that it deems a threat to the party's monopoly on power. Most observers argue that the government, which already had tightened restrictions on dissent and criticism since 2007, intensified its suppression in 2009 and early 2010.

Date of Report: July 12, 2010
Number of Pages: 37
Order Number: R40208
Price: $29.95

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