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Vietnam Cuts Imports from U.S. and EU in First Quarter

Juliette Moses — Mon, 25 Apr 2022 15:54:06 +0000

As Vietnam continues to expand its economy, Western officials had hoped that the nation of 97.3 million would burgeon into a promising new trade market. Instead, Vietnam is reducing shipments from the U.S. and European Union in favor of more imports from China.

In the first quarter, imports from the EU declined 3.2% year-on-year to $4 billion, and imports from the U.S. fell 7.8% to $3.4 billion. Meanwhile, imports from China increased 12.6% to $27.4 billion, dwarfing figures from other countries. Much of the latter, of course, is made up of parts of high-tech and industrial supply chain moving into Vietnam for transformation, but it’s also consumer goods.

In addition, Vietnam is becoming a key part of the alliance of Asian trading powers setting up a counterpoint to the economic poles of the U.S. and European Union, according to an analysis by Trade Data Monitor, the world’s premier source of trade statistics, which has been building up its Vietnam database.

Vietnam has taken its place among the linchpins of high-tech supply chains, taking in raw materials and churning out mobile phones, tablets, and other computer gear for over a billion middle-class consumers all over the world.
Overall Vietnamese exports in the first quarter of 2022 increased 13.6% year-on-year to $89.1 billion. Much of that growth is being driven by Chinese and U.S. manufacturing companies. Of those exports, $65.4 billion, or 73%, came from foreign direct investment.

Overall, Vietnam’s gross domestic product is expected to rise 5.5% in 2022, up from 2.6% in 2021, according to the World Bank. Part of the increase in exports is due to a rebound from the Covid-19 pandemic, but Vietnam is also booming its production of consumer goods. The exporting manufacturing sector in 2022 will benefit “from steady demand from the United States, the European Union, and China,” the World Bank wrote in a recent report.
As it imports large quantities of parts and raw materials from China, Vietnam is still beefing up exports to Western markets. Exports to the European Union increased 18.3% to $11.6 billion. Shipments to the U.S., its top export market, rose 16.7% to $26 billion.

Overall imports rose 15.8% in the first quarter of 2022 to $87.6 billion.
Vietnam’s integral role in high-tech supply chains is visible in its imports. Imports of “computers, electrical products, spare-parts and components thereof” increased 31.1% to $21.7 billion. Imports of “machine, equipment, tools and instruments”, however, fell 2.9% to $10.5 billion.

Vietnam’s manufacturing prowess means it is more self-sufficient than most countries. That’s one of the reasons imports of textiles, for example, shrank 6.4% to $1.6 billion.

However, it needs large quantities of raw materials. Imports of crude oil rose 2.6% by quantity to 1.9 million tons. By value, they increased 49.8% to $1.2 billion. Imports of chemicals rose 34.2% to $2.3 billion.

Vietnam’s total trade, remarkably, is twice that of GDP. Its trade with regional partners is expected to expand further thanks to the new Regional Comprehensive Economic Partnership. The RCEP, which will cut tariffs and ease trade among countries that already trade with each other, includes Vietnam, China, Japan, South Korea, Australia and New Zealand. Vietnam has been the prime beneficiary of China’s changing trade relationships with the U.S. and Europe, rising protectionism in the West, supply chain adjustments, and the boom in economies across Asia. The combination of low labor costs, stable exchange rates and prodigious foreign investment from multinational companies have turned Vietnam into a shining star.

To be sure, Vietnam’s agribusiness, the anchor of its export economy before industrial development, is still prosperous, and evolving. Its exports of fishery products rose 45.4% to $2.5 billion, while exports of fruits and vegetables declined 12% to $849 million.

Although Vietnam has raised concerns by pursuing its trade relationship with Russia following its invasion of Ukraine, it actually has strong ties with both countries. Exports to Russia in the first quarter declined 29.1% to $543.8 million, while imports increased 36.3% to $703.7 million. Meanwhile, exports to Ukraine declined 42.5% to $45.3 million, while imports from Ukraine increased 122.6% to $104.9 million.

John W. Miller is Trade Data Monitor’s Chief Economic Analyst, in charge of writing TDM Insights, a newsletter analyzing key issues through trade statistics. John is an award-winning journalist who’s reported from 45 countries for the Wall Street Journal, Time Magazine, and NPR.

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U.S. Relationship With Vietnam Blossoms as Former Foe Opens Up Economically

Erin Cearlock — Fri, 11 Jun 2021 19:09:19 +0000

KEY TAKEAWAYS

Vietnam has shown steady growth in both economic output and freedom in its transition to a more free-market economic system.

Vietnam jumped 15 places to become the 90th-freest economy in the world out of 178 countries ranked, and the 17th-freest in the Asia-Pacific.

As Vietnam continues its embrace of more free-market principles, it should be regarded as an increasingly important strategic economic partner of the United States.

It’s been almost half a century since the end of the Vietnam War, and the relationship between the United States and Vietnam, particularly in terms of trade and investment, has been steadily improving since the normalization of relations in 1995.

According to a 2021 report by the Congressional Research Service, bilateral trade between the two countries reached $90 billion in 2020, an increase of 17% from the previous year.

The United States is Vietnam’s second-largest trading partner, while Vietnam is the United States’ 10^th-largest. And unlike the European Union-China partnership agreement—consideration of which has been “frozen” by the EU Parliament—the U.S.-Vietnam relationship is built on something much stronger; namely, an understanding of the principles of economic freedom.

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Vietnam has shown steady growth in both economic output and freedom in its transition to a more free-market economic system. Despite projections of economic downturn as a result of the coronavirus pandemic, Vietnam actually was the highest performing Asian economy in 2020, outpacing China with an estimated growth rate of 2.9%.

As Growing Trade Partner, Vietnam Improves Economic Freedom

Much of this growth is credited to Vietnam’s booming manufacturing industry and the high international demand for Vietnamese exported goods. At the same time, Vietnam has been continuing to open its economy up to international trade and participating in bilateral and multilateral agreements with the rest of the world.

In 2019, Vietnam joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a free trade agreement among 11 countries in Asia, the Pacific, and North America, and signed its own bilateral trade agreement with the European Union.

And in 2020, Vietnam became a founding member of the Regional Comprehensive Economic Partnership, a massive trade agreement joining together the 10 Association of Southeast Asian Nations countries, along with Australia, China, India, Japan, New Zealand, and South Korea, into the world’s largest trading bloc. It encompasses over a quarter of the world’s gross domestic product and half of the world’s population.

These recent actions have been noticed and recognized in Vietnam’s steady improvements in its ranking in The Heritage Foundation’s Index of Economic Freedom. In the 2021 index, Vietnam jumped 15 places to become the 90^th-freest economy in the world out of 178 countries ranked, and the 17^th-freest in the Asia-Pacific.

However, the country is still only considered moderately free due to lingering institutional weaknesses, such as persistent corruption and the lack of judicial independence, that are holding back its economic freedom.

Still, Vietnam’s efforts toward achieving more economic liberalization are certainly commendable, especially given the current trajectory of similarly positioned countries in the region.

The country’s ongoing reforms in key pillars of economic freedom have led to measurable progress in ensuring private property rights and market openness.

In the 27 years of the index’s publication, Vietnam has seen greater improvements in its score than other nations, such as Russia or China, especially in the categories of investment and financial freedom.

2021 Index of Economic Freedom

As Vietnam continues its embrace of more free-market principles, it should be regarded as an increasingly important strategic economic partner of the United States.

Economic relationships in the Indo-Pacific region are changing fast, and the United States needs to make sure that it continues to actively cultivate closer relations with like-minded regional powers, even as those powers are cultivating closer relations among themselves and with China.

To read the full commentary from The Heritage Foundation, please click here.

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