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 expand relations across a wide spectrum of issues. In the summer of 2010, the Obama Administration indicated its intent to take relations to "the next level," and cooperated with Vietnam to coordinate a multi-country diplomatic push back against perceived Chinese encroachment in the South China Sea. 

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. 

The United States is Vietnam's largest export market and in 2009 was its largest source of foreign direct investment. Bilateral trade was over $15 billion, a tenfold increase since the United States extended "normal trade relations" (NTR) treatment to Vietnam in 2001. Increased trade also has been fostered by Vietnam's market-oriented reforms. 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: August 6, 2010
Number of Pages: 39
Order Number: R40208
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North Korea: Back on the Terrorism List?

Mark E. Manyin
Specialist in Asian Affairs

Whether North Korea should be included on the U.S. list of terrorism-supporting countries has been a major issue in U.S.-North Korean diplomacy since 2000, particularly in connection with negotiations over North Korea's nuclear program. North Korea demanded that the Clinton and Bush Administrations remove it from the terrorism support list. On October 11, 2008, the Bush Administration removed North Korea from the terrorism list. 

This move was one of the measures the Bush Administration took to implement a nuclear agreement that it negotiated with North Korea in September 2007 and finalized details of in April 2008. The agreement was reached under the format of the six party talks, which involve the United States, North Korea, South Korea, China, Japan, and Russia. The President also announced that he was immediately lifting sanctions on North Korea under the U.S. Trading with the Enemy Act. North Korea's obligations under this nuclear agreement were to allow the disabling of its plutonium facility at Yongbyon and present to the United States and other government in the six party talks a declaration of its nuclear programs. North Korea submitted its declaration in June 2008. 

The removal of North Korea from the terrorism list, however, did not result in an early conclusion of the February 2007 six party nuclear agreement. The North Korean government and the Bush Administration disagreed over the content of an October 2008 agreement on verification, particularly over whether it allowed inspectors to take samples of nuclear materials from the Yongbyon installations. The other parties to the talks also had not completed the delivery of 1 million tons of heavy oil that they had promised in the February 2007 agreement. Against this backdrop, along with an apparent stroke suffered by North Korean leader Kim Jong-il, the six party process broke down. 

In the months after the breakdown of the talks, North Korea took a series of actions that have led to calls for its reinstatement on the terrorism list. In April 2009, North Korea launched devices suspected of being long-range missiles. In May 2009, North Korea tested a nuclear device. In March 2010, a South Korean naval vessel, the Cheonan, sank in waters disputed by the two Koreas. Nearly 50 South Korean sailors died in the incident. A multinational investigation team led by South Korea determined that the ship was sunk by a North Korean submarine. In June 2010, the State Department determined that the Cheonan sinking was not an act of terrorism and thus by itself was an insufficient reason for placing North Korea back on the terrorism list. 

Meanwhile, reports in 2009 and 2010 from French, Japanese, South Korean, and Israeli sources described North Korean programs to provide arms and training to Hezbollah in Lebanon and the Tamil Tigers in Sri Lanka, two groups on the U.S. list of international terrorist organizations. Large quantities of North Korean arms bound for Iran, intercepted in 2009, contained weapons that Iran supplies heavily to Hezbollah and Hamas. Moreover, a large body of reports describe a long-standing, collaborative relationship between North Korea and the Iranian Revolutionary Guard Corps. 

This report describes the rationales for including North Korea on the terrorism list from 1987- 2008, for North Korea's delisting in 2008, and the debate in 2010 over whether to re-list North Korea. The major impact of a decision to return North Korea to the list would likely be symbolic, because removing North Korea from the list does not appear to have provided Pyongyang with direct, tangible benefits.


Date of Report: June 29, 2010
Number of Pages: 36
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U.S.-Australia Civilian Nuclear Cooperation: Issues for Congress

Mary Beth Nikitin
Analyst in Nonproliferation

Bruce Vaughn
Specialist in Asian Affairs

Australia and the United States have cooperated in the peaceful use of nuclear energy since the mid-1950s. The framework for this cooperation is a civilian nuclear cooperation agreement as required by section 123 of the Atomic Energy Act. President Obama transmitted the proposed text of the latest renewal agreement to Congress on May 5, 2010, along with the required Nuclear Proliferation Assessment Statement (NPAS) and his determination that the agreement promotes U.S. national security. Congress has 30 days of continuous session for consultations with the Administration, followed by an additional 60 days of continuous session to review the agreement. If not opposed by a joint resolution of disapproval or other legislation, then the agreement will be considered approved at the end of this time period. 

The United States and Australia first concluded a civilian nuclear cooperation agreement in 1957. That agreement was updated in 1979. Australia sells around 36% of its $1 billion in uranium exports to the United States. The United States is also a major processor of Australian uranium sold to other countries. Australia does not currently possess any nuclear power plants, but it operates one research reactor.


Date of Report: July 7, 2010
Number of Pages: 12
Order Number: R41312
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Japan-U.S. Relations: Issues for Congress

Emma Chanlett-Avery, Coordinator
Specialist in Asian Affairs

William H. Cooper
Specialist in International Trade and Finance

Mark E. Manyin
Specialist in Asian Affairs

The post-World War II U.S.-Japan alliance has long been an anchor of the U.S. security role in East Asia. The alliance facilitates the forward deployment of about 36,000 U.S. troops and other U.S. military assets in the Asia-Pacific, thereby undergirding U.S. national security strategy in the region. For Japan, the alliance and the U.S. nuclear umbrella provide maneuvering room in dealing with its neighbors, particularly China and North Korea.

U.S.-Japan relations have been adjusting to the Democratic Party of Japan's (DPJ) landslide victory in the August 30, 2009 elections for the Lower House of Japan's legislature. With the resignation of the DPJ's first prime minister, Yukio Hatoyama, the United States must now adjust to the leadership of Naoto Kan, the new premier. While most members of the left-of-center DPJ are broadly supportive of the U.S.-Japan alliance and the general thrust of Japanese foreign policy, in the past the party has questioned and/or voted against several features of the alliance, including base realignment and Japan's financial payments for U.S. forces stationed in Japan. The Party has put forward a foreign policy vision that envisions greater "equality" in Japan's relations with the United States, in part through deeper engagement with Asia and a more United Nationsoriented diplomacy. The DPJ's victory appears to mark the end of an era in Japan; it was the first time Japan's Liberal Democratic Party (LDP) was voted out of office. The LDP had ruled Japan virtually uninterrupted since 1955.

After the DPJ victory, bilateral tensions arose over the 2006 agreement to relocate the controversial Futenma Marine Air Station to a less densely populated location on Okinawa. The move is to be the first part of a planned realignment of U.S. forces in Asia, designed in part to reduce the footprint of U.S. forces on Okinawa by redeploying 8,000 U.S. Marines and their dependents to new facilities in Guam. After months of indecision and mixed messages from Tokyo, the Hatoyama government agreed to honor the original agreement, much to the dismay of the many Okinawans opposed to the base. Kan has voiced his intention to honor the agreement, although many concerns remain about its implementation.

Japan is one of the United States' most important economic partners. Outside of North America, it is the United States' second-largest export market and second-largest source of imports. Japanese firms are the United States' second-largest source of foreign direct investment, and Japanese investors are the second-largest foreign holders of U.S. treasuries, helping to finance the U.S. deficit and reduce upward pressure on U.S. interest rates. Bilateral trade friction has decreased in recent years, partly because U.S. concern about the trade deficit with Japan has been replaced by concern about a much larger deficit with China. One exception was U.S. criticism over Japan's decision in 2003 to ban imports of U.S. beef, which have since resumed, but on a limited basis.

However, the economic problems in Japan and the United States associated with the credit crisis and the related economic recession and how the two countries deal with those problems will likely dominate their bilateral economic agenda for the foreseeable future. Japan has been hit particularly hard by the financial crisis and subsequent recession. Japan's gross domestic product (GDP) declined 1.2% in 2008 and 5.3% in 2009 and is forecast to grow 3.0% in 2010. At the same time, the United States is showing signs of recovery.


Date of Report: July 30, 2010
Number of Pages: 25
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China-U.S. Trade Issues

Wayne M. Morrison
Specialist in Asian Trade and Finance

U.S.-China economic ties have expanded substantially over the past three decades. Total U.S.- China trade rose from $5 billion in 1980 to $409 billion in 2008. Although commercial ties were sharply affected by the global economic crisis in 2009 (total U.S. trade with China dropped by 10.5% to $366 billion), China remained the second-largest U.S. trading partner, its third-largest export market, and its biggest source of imports. With a large population and a rapidly expanding economy, China is a huge market for U.S. exporters and investors. However, bilateral economic relations have become strained over a number of issues, including large U.S. annual trade deficits with China (the deficit was $266 billion in 2008, but fell to $227 billion in 2009), China's mixed record on implementing its World Trade Organization (WTO) commitments, its resistance to international calls to reform its pegged (and undervalued) currency system, its relatively poor record on enforcing intellectual property rights (IPR), and its extensive use of industrial policies and discriminatory government procurement policies (such as proposed "indigenous innovation" certification regulations) to promote domestic Chinese firms over foreign companies. Some observers contend that the business climate in China has worsened over the past few years.

Further complicating the U.S.-China bilateral relationship is the growing level of economic integration and mutual commercial dependency between to two economies. U.S. economic ties with China benefit many U.S. groups, such as consumers (through low-cost imports from China) and certain business interests (such as firms who use China as a center for their supply chain operations to assemble inputs into finished products). However, other U.S. groups, primarily U.S. domestic firms and workers that compete with low-cost imported Chinese products, see growing economic ties as damaging to U.S. economic interests, largely because of "unfair" Chinese trading practices. Such groups have urged the U.S. government to take a more assertive trade policy to force China to eliminate unfair economic policies in order to help achieve a level trading field for U.S. firms and workers. Other analysts counter that, although many trade problems exist, the overall economic relationship benefits both sides, and warn that unilateral trade action by either side would harm both economies. They support using high-level talks, such as the Strategic and Economic Dialogue (S&ED), to address long-term bilateral and global economic issues.

Another example of the complex bilateral economic relationship is China's large holdings of U.S. Treasury securities, which totaled $868 billion as of May 2010, making it the largest foreign holder of such securities. Some U.S. analysts welcome China's purchases of U.S. debt, which enable the federal government to fund its budget deficit and help to keep U.S. interest rates relatively low. Others have expressed concerns that China's large holdings of U.S. debt could give it significant leverage over the United States. For China, a growing and stable U.S. economy is an important component to its own economic growth. Chinese officials have expressed concerns over the "safety" of their U.S. debt holdings.

Many economists contend that global imbalances, particularly in the United States and China, were a major factor behind the global financial crisis. Until very recently, U.S. domestic savings were very low relative to its investment needs, consumption was the dominant source of economic growth, and the United States had to borrow heavily from abroad, including from China, which helped fuel U.S. demand for imports. China, until recently, had a very high savings rate, a low rate of consumption, and was heavily dependent on its trade sector for economic growth. Both countries contend that they are now seeking to implement policies to rebalance the sources of their economic growth.


Date of Report: July 29, 2010
Number of Pages: 39
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China Naval Modernization: Implications for U.S. Navy Capabilities—Background and Issues for Congress

Ronald O'Rourke
Specialist in Naval Affairs

The question of how the United States should respond to China's military modernization effort, including its naval modernization effort, has emerged as a key issue in U.S. defense planning. The issue is of particular importance to the U.S. Navy, because many U.S. military programs for countering improved Chinese military forces would fall within the Navy's budget.

Decisions that Congress and the executive branch make regarding U.S. Navy programs for countering improved Chinese maritime military capabilities could affect the likelihood or possible outcome of a potential U.S.-Chinese military conflict in the Pacific over Taiwan or some other issue. Some observers consider such a conflict to be very unlikely, in part because of significant U.S.-Chinese economic linkages and the tremendous damage that such a conflict could cause on both sides. In the absence of such a conflict, however, the U.S.-Chinese military balance in the Pacific could nevertheless influence day-to-day choices made by other Pacific countries, including choices on whether to align their policies more closely with China or the United States. In this sense, decisions that Congress and the executive branch make regarding U.S. Navy programs for countering improved Chinese maritime military forces could influence the political evolution of the Pacific, which in turn could affect the ability of the United States to pursue goals relating to various policy issues, both in the Pacific and elsewhere.

China's naval modernization effort, which began in the 1990s, encompasses a broad array of weapon acquisition programs, including anti-ship ballistic missiles (ASBMs), submarines, and surface ships. China's naval modernization effort also includes reforms and improvements in areas such as maintenance and logistics, naval doctrine, personnel quality, education, training, and exercises.

DOD and other observers believe that the near-term focus of China's military modernization effort has been to develop military options for addressing the situation with Taiwan. Consistent with this goal, observers believe that China wants its military to be capable of acting as a socalled anti-access force—a force that can deter U.S. intervention in a conflict involving Taiwan, or failing that, delay the arrival or reduce the effectiveness of intervening U.S. naval and air forces. Some observers believe that China's military modernization effort, including its naval modernization effort, is increasingly oriented toward pursuing additional goals, such as asserting or defending China's claims in maritime territorial disputes, protecting China's sea lines of communications, displacing U.S. influence in the Pacific, and asserting China's status as a major world power.

Placing an increased emphasis on U.S. Navy programs for countering improved Chinese maritime military capabilities in coming years could lead to one more of the following: developing and procuring highly capable ships, aircraft, and weapons for defeating Chinese anti-access systems; assigning a larger percentage of the Navy to the Pacific Fleet (and, as a result, a smaller percentage to the Atlantic Fleet); homeporting more of the Pacific Fleet's ships at forward locations such as Hawaii, Guam, and Japan; increasing training and exercises in operations relating to countering Chinese maritime anti-access forces, such as antisubmarine warfare (ASW) operations; and increasing activities for monitoring and understanding developments in China's navy, as well as activities for measuring and better understanding operating conditions in the Western Pacific.


Date of Report: July 29, 2010
Number of Pages: 61
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Guam: U.S. Defense Deployments

Shirley A. Kan
Specialist in Asian Security Affairs

Since 2000, the U.S. military has been building up forward-deployed forces on the U.S. territory of Guam to increase deterrence and power projection for possible responses to crises and disasters, counter-terrorism, and contingencies in support of South Korea, Japan, the Philippines, Taiwan, or elsewhere in Asia. The defense buildup on Guam has been moderate. Nonetheless, China has concerns about the defense buildup, suspecting it to be directed against China. Guam's role has increased with plans to withdraw some U.S. forces from Japan and South Korea.

In 2006, the United States and Japan agreed on a "Roadmap" to strengthen their alliance, including a buildup on Guam to cost $10.3 billion, with Japan contributing 60%. Primary goals were to start the related construction on Guam by 2010 and to complete relocation of about 8,000 marines from Okinawa to Guam by 2014. In Tokyo on February 17, 2009, the Secretary of State signed the bilateral "Agreement Between the Government of the United States of America and the Government of Japan Concerning the Implementation of the Relocation of the III Marine Expeditionary Force Personnel and Their Dependents From Okinawa to Guam" that reaffirmed the "Roadmap" of May 1, 2006. The two governments agreed that of the estimated $10.27 billion cost of the facilities and infrastructure development for the relocation, Japan will provide $6.09 billion, including up to $2.8 billion in direct cash contributions (in FY2008 dollars). The United States committed to fund $3.18 billion plus about $1 billion for a road.

However, in September 2009, the Democratic Party of Japan (DPJ) became the ruling party. This political change raised uncertainty as Japan sought to re-negotiate the agreement, even while the United States sought its implementation. The dispute over the location on Okinawa of the Futenma Replacement Facility (FRF) to replace the Marine Corps Air Station Futenma raised implications for the relocation of marines from Okinawa to Guam. In January 2010, Japan promised to decide by May on the location of the FRF. Then, North Korea's attack on South Korea's naval ship (Cheonan) in March, and China's deployment of its Navy near Okinawa which confronted Japan's forces in April, catalyzed Japan to resolve the dispute in favor of deterrence. On May 28, the Secretaries of Defense and State and their counterparts in Japan issued a "2+2" Joint Statement, in which they reaffirmed commitment to implement the 2006 Roadmap and the 2009 Agreement. In July, the Navy issued the final Environmental Impact Statement on the buildup on Guam, while planning to start construction by the end of FY2010. The Navy estimated that Guam's population would increase by a total of 30,190, including 8,552 Marines.

The National Defense Authorization Act for FY2010 (enacted as P.L. 111-84 on October 28, 2009) authorized the first substantial incremental funding for the relocation of about 8,000 marines from Okinawa to Guam, but conditioned upon the Defense Department's submission to Congress of a Guam Master Plan. Among a number of provisions related to Guam in the legislation and conference report, Congress designated the Deputy Secretary of Defense to lead a Guam Executive Council and coordinate interagency efforts related to Guam. Congress also required a report on training, readiness, and movement requirements for Marine Forces Pacific, with a sense of Congress that expansion of Marine Corps training should not impact the implementation of the U.S.-Japan agreement on relocation from Okinawa to Guam. Congress authorized a total amount (including for Defense-wide, Army, Navy, and Air Force) of almost $733 million. Updated as warranted, this CRS Report discusses major developments and policy issues. On appropriations related to military construction on Guam, see CRS Report R40731, Military Construction, Veterans Affairs, and Related Agencies: FY2010 Appropriations.


Date of Report: July 30, 2010
Number of Pages: 12
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