“And so, defending democracy demands a whole-of-society effort. It requires all of us.”
– President Biden, Remarks at the Summit for Democracy Closing Session, December 2021
In May 2022, this was one of the many geopolitical subjects I discussed with my students while teaching at the University of Economics and Finance in Vietnam. Throughout the Global Politics module, students expressed a particular interest in learning about the rising geopolitical tensions between the United States (U.S.) and China. Our discussions illuminated the belief held by most students that a strategic opportunity had emerged for Vietnam to foster warmer relations with Washington. Still, students were uncertain how high U.S.-Vietnam relations could go given President Biden’s values-centered foreign policy rhetoric. While on the surface seemingly contradictory, I argued the Biden Administration’s economic strategy has prioritized disinvesting from China over rigid adherence to cooperating with like-minded liberal democracies. This in turn has opened a strategic window for large-scale U.S. investment to shift to Vietnam.
But why Vietnam? Countries around the world provide economic incentives to attract U.S. foreign investment. Still, Vietnam has been a primary beneficiary of unresolved U.S.-China geopolitical
tensions. In 2020, Vietnam surpassed China to become the top clothes exporter to the United States. As a member of the American Chamber of Commerce in Vietnam (AmCham Vietnam), I have personally witnessed the rapid expansion of the chamber through rising membership numbers. This trend can partly be explained due to a mix of economic disincentives associated with the Chinese market and Vietnam’s efforts to integrate itself into global value chains.
Vietnam Prime Minister Pham Minh Chinh visiting the New York Stock Exchange in 2020. Photo: VGP
China’s recently abandoned zero-COVID policy morphed into a liability for American manufactures. A single COVID-19 case could result in authorities shutting down major manufacturing hubs. The government's anti-pandemic measures would then disrupt components from moving up the value chain or delaying a final product from making its way to consumers in the United States. With COVID-19 now spreading accross the country, some factories are struggling to operate in part due to the number of sick workers infected with the virus. China’s economic development gains have also resulted in a need to pay higher wages to laborers. As succinctly stated by the Supply Chain Management Review, “China can no longer be considered a low-cost labor country”.
Of further concern for U.S. investors is the bipartisan skepticism members of both major political parties have of a rising China. Its origins can be seen in President Obama’s ‘Pivot to Asia’ strategy which highlighted the importance of the Asia-Pacific both economically and politically for the 21st century. President Trump’s fiery rhetoric criticizing China’s trade practices led to his administration placing tariffs on Chinese imports. President Biden has largely left in place these tariffs while signing into law new regulations designed to curb Chinese access to advanced American microchip technology. With influential members on both sides of the aisle arguing for a hawkish foreign policy on China, businesses may feel increasingly pressured to diversify their investments.
U.S. President Barack Obama with ASEAN summit representatives in 2016. Photo: AFP
In contrast, Vietnam has created a more economically and politically attractive business atmosphere. Labor costs remain low as the Southeast Asian country, having only recently reached lower middle-income status. The country’s high population level of nearly 100 million citizens also provides a large pool of eligible laborers who can cheaply produce U.S. products. With Vietnam’s general economy on the rise, those products can be shipped around the world or be sold on Vietnam’s increasingly affluent consumer market.
To further accelerate divestment from China, the U.S. government is providing American expertise and financial support to aid Vietnamese authorities in their economic development goals. This is exemplified through partnerships such as between the United States Agency for International Development (USAID) and General Department of Vietnam Customs (GDVC) which jointly created an action plan to reduce congestion at Cat Lai Terminal, Vietnam’s busiest container operation. As well as the USAID-funded Mekong Sustainable Manufacturing Alliance program which provides resources to strengthen the sustainability and competitiveness of manufacturing in Vietnam and other Southeast Asian countries. Government-led efforts such as these projects, combined with tariffs and exclusionary regulations on the Chinese market, demonstrate the extent to which the U.S. government is willing to take action to make Vietnam’s business environment more viable for American investors.
USAID-AmChamVietnam Manufacturing Economic Recovery Support Roundtable, February 2022. Photo by Sang Nguyen.
Does this signal the end of the global neoliberalism? Is a new economic system emerging where geopolitics rather than market factors drive international capital? From my perspective, this does not seem to be the case. While the U.S. government is pursuing a strategy of ‘friend-shoring’, corporations are focused on maximizing profits. As noted by David Harvey in A Brief History of Neoliberalism, a neoliberal economy requires “a large, easily exploited,and relatively powerless labor force”. With or without the inclusion of China in U.S. global value chains, American companies will minimize costs by using cheap and abundant global labor. Even now, some American companies continue to rely on Chinese manufactures. This is because each company conducts their own profit analysis and weighs the benefits and costs of using Chinese labor. While for many the cons have now begun to outweigh the pros, company analysis relies upon neoliberal modes of thinking.
Moving forward the U.S. government will continue to use a combination of tariffs, regulations, and foreign development assistance to persuade American businesses to further diversify their investments away from China. While these efforts coupled with traditional market factors may prove successful, it does not signify a genuine move away from global neoliberalism. The shift in U.S. investment from China to Vietnam is ultimately a result of evolving market conditions rather than a revolutionary change in how global capital flows.
About the author:
Alexander Parini is an academic, writer, and consultant with a focus in economic development. Having recently relocated to London, he is pursuing his second master's degree at SOAS University of London in Research for International Development. For over two years Alexander has been an active member of the American Chamber of Commerce in Vietnam.
Previously he lectured at multiple universities in Ho Chi Minh City, Vietnam where he primarily taught international relations classes. In 2020 he completed his Master's in International Relations at Peking University in Beijing, China. Before moving to Asia, he worked in U.S. politics and studied Political Science at Portland State University.
He is active on both LinkedIn and Twitter.