Together with many other countries worldwide, the US economy is recovering, leading to an expansion in demand for goods including those shipped from Vietnam with the two economies witnessing growth in bilateral trade and investment ties, and other forms of momentum including fresh senior visits to the Southeast Asian nation.

More than a year since the appearance of COVID-19 in the world, the rapid pace of inoculation and massive fiscal stimulus expenditure will push the global economy to recover vehemently, according to the Organisation for Economic Co-operation and Development (OECD).

The global economic outlook has improved, with global GDP growth projected to strengthen to 5.5% in 2021 and 4% in 2022, instead of -3.4% last year due to COVID-19, the OECD said in its Economic Outlook, Interim Report titled “Strengthening the recovery: The need for speed” released recently.

Significant fiscal and monetary supports continue to underpin activity. Additional discretionary fiscal measures announced in several countries during the past few months will add to the overall support this year, including in the US, Japan, Germany, Canada, and India. Many countries have also extended existing income support schemes, or planned for their reintroduction, such as in Brazil.

In Europe, spending of EUR2.018 trillion (US$2.45 trillion) from the Next Generation recovery fund is due to begin later this year, but the total discretionary fiscal stimulus in 2021 appears likely to be relatively mild, at around 1% of GDP in the euro area, despite considerable spare capacity.

Notably, the extent of fiscal support in the US this year is set to be considerably larger than in most other economies. The Consolidated Appropriations Act enacted last December contained new temporary measures worth US$900 billion (4% of GDP), largely concentrated on emergency assistance for households and the unemployed.

On March 12, US President Joe Biden signed the US$1.9 trillion American Rescue Plan Act into law, sending much-needed aid to millions of Americans still struggling due to the COVID-19 pandemic.

The American Rescue Plan provides for US$1,400 direct payments to individuals making up to US$75,000 annually, US$350 billion in aid to state and local governments and US$14 billion for vaccine distribution. The bill also provides US$130 billion for elementary, middle and high schools to assist with safe reopening.

The bill’s economic-relief provisions are overwhelmingly geared toward low-income and middle-class Americans, who will benefit from (among other provisions) direct payments, the bill’s expansion of low-income tax credits, child-care subsidies, expanded health-insurance access, extension of expanded unemployment benefits, food stamps, and rental assistance programmes. The bill contains little direct aid to high income-earners, who largely retained their jobs during the COVID-19 economic shock and bolstered their savings.

Brighter prospects

Early this year, Vietnam and the US agreed that bilateral ties have advanced across many fields over the past 26 years, vowing to cement the ties “in a more comprehensive manner, with a focus on economy-trade-investment, overcoming the consequences of war, enhancing maritime capacity, fighting COVID-19 and adapting to climate change.”

The US affirms it continues attaching great importance to its relationship with Vietnam.

According to Vietnam’s Ministry of Industry and Trade, Vietnam and the US are expected to continue witnessing trade cooperation flourish in the time to come.

In the first seven months of this year, the US was Vietnam’s largest export market, with total turnover of US$53.7 billion, up 37.7% year-on-year, and the US is also Vietnam’s sixth largest import market, with importers using US$8.97 billion to purchase goods from the US, up 10.6% as compared to the same period last year.

In fact, over the past 26 years, since the US and Vietnam normalised diplomatic relations, bilateral trade has skyrocketed from almost nothing in 1995 to US$90.1 billion in 2020. Vietnam is now the US’ 10th largest trading partner in the globe, ahead of India and France.

“The US remains Vietnam’s largest export destination, and Vietnam is a fast-growing market for US firms: since 2015, American exports to Vietnam have grown by nearly 40 percent. We see tremendous market opportunities in Vietnam for US goods and services in the fields of agriculture, aviation, education, energy, healthcare and Smart Cities technologies, to name a few,” said Lynne Gadkowski, economic counsellor at the US Embassy to Vietnam.

“As a manufacturing powerhouse, Vietnam plays in integral role in ensuring a diverse and secure global supply chain, necessary to bolster a strong global economic recovery. On climate, Vietnam is setting the pace for renewable energy deployment in Southeast Asia, but still faces challenges in reducing its emissions overall,” Gadkowski said.

Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi also expected US-Vietnam trade and investment ties to further flourish.

“Vietnam and the United States have developed a healthy commercial relationship that has created jobs, tax revenue, and opportunities for the citizens of both countries,” Sitkoff said. “The US is Vietnam’s largest export market. Vietnam also receives billions of US dollars of foreign investment from US companies each year - much of it to build integrated supply chains that benefit American consumers. At the same time, Vietnam has become one of America’s fastest growing export markets.”

“COVID-19 is likely to continue causing economic disruption. However, I believe the trade and investment relationship between Vietnam and the US will keep growing stronger in the days ahead,” Sitkoff said.

Statistics from Vietnam’s Ministry of Planning and Investment show that as of July 20, US investors registered US$9.68 billion in Vietnam in nearly 1,120 valid projects, making the US the 11th largest foreign investor in the Southeast Asian nation. In the first seven months of 2021, the US ranked seventh in terms of investment in Vietnam, with total newly-registered capital of US$415.7 million.

Enhanced cooperation

It is expected the relationship between Vietnam and the US in many sectors will see a big change from this year following senior official visits.

According to the White House, US Vice President Kamala Harris will travel to Singapore and Vietnam to strengthen relationships and expand economic cooperation with the two critical Indo-Pacific partners of the United States.

No concrete dates for the visit have been fixed so far, but it is said to take place between August 20-26.

“During the trip, the vice president will engage with the leaders of both governments on issues of mutual interest, including regional security, the global response to the COVID-19 pandemic, climate change, and joint efforts to promote a rules-based international order,” according to the White House’s senior advisor and chief spokesperson Symone Sanders. “The vice president will also affirm and celebrate the strong cultural and person to person ties between the United States and these countries. Vice President Harris will be the first vice president to ever visit Vietnam.”

Earlier Defence Secretary Lloyd Austin was received in Hanoi on July 28. Austin was accorded courtesy meetings with President Nguyen Xuan Phuc and Prime Minister Pham Minh Chinh who stressed the importance of the comprehensive partnership.

PM Chinh believed that Austin’s visit will “contribute to a more substantive development of relations between the two countries, in line with the relationship between the two countries’ comprehensive partnership.”

PM Chinh suggested strengthening cooperation in trade and investment, climate change, science and technology, as well as education and training. He also noted that economic cooperation “still has a lot of room for development.”

In his meeting with President Phuc, Secretary Austin suggested “the two sides study and upgrade their relationship to that of a strategic partnership in the future”. Austin also told PM Chinh that he attached great importance to the comprehensive partnership and suggested “elevating the relationship between the two countries.”

On July 23 the United States Trade Representative’s (USTR) office said it had determined that no tariff action against Vietnam was warranted after the State Bank of Vietnam (SBV) agreed with the US Treasury not to manipulate its currency for an export advantage.

Specifically, the office issued a formal determination in the Vietnam Currency Section 301 investigation reflecting the agreement reached earlier between the Department of the Treasury and the SBV.

The determination found that the Treasury-SBV agreement provides a satisfactory resolution of the matter, subject to investigation, and accordingly no trade action is warranted at this time. The USTR, in coordination with the Treasury, will monitor Vietnam’s implementation going forward.

In the US’ National Security Strategic Guidance issued in March, US President Biden stated, “We will deepen our partnership with India and work alongside New Zealand, as well as Singapore, Vietnam, and other ASEAN member states, to advance shared objectives.”

Carl Thayer, emeritus professor at the University of New South Wales, said that there will be considerable continuity in the Biden administration’s policy from that of the Trump Administration.

“President Biden’s National Security Strategic Guidance issued in March sets out to engage Vietnam (along with India). The Biden Administration will set a priority on enhancing its comprehensive partnership with Vietnam in all nine areas of cooperation spelled out in the 2013 original joint statement during the Obama administration when Biden was vice president.”

Specifically, the partnership covers furthering bilateral economic, commercial, and investment ties as one among the key pillars of bilateral cooperation .