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Vietnam-US Trade Relations: Evolving Complementarities

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Vietnam- US relations has wittnessed significant developments especially in the areas of economics and trade after 25 years of normalization of Vietnam-US diplomatic ties (1995-2020). Compared with Vietnam’s diplomatic relations with other powers, the Vietnam-US relationship is still quite new and has its own specifics. Due to differences in ideology, disparities in economics, and conflicting strategic goals, this relationship is always interwoven between cooperation and struggle. In the spirit of“Understanding the past, cherishing the present and looking forward to the future”,the leaders of both sides have tried to overcome the differences, uphold the commons and create the favorable conditions for developing the relationship between two countries. Nowadays,the Vietnam – US comprehensive partnership is strongly developedon many fields,in which economic and trade is one of the most successful fields the bilateral cooperationand has achieved many new developments after 25 years, still considered the brightest point and becoming and driving forceVietnam – US overall relationship.

The international and domestic context has great impacts on the Vietnam – USrelations today. The world situation is changing more complicatedly and unpredictably which entails both oppotunitiesand challenges. Fierce strategic competition among major powers is increasing, especially in Asia-Pacific region; the situation of the East Sea (also known as the South China Sea), is complicated, posing a threat peace, stability, security in the region as well as the sovereignty and territorial integrity of the countries. Vietnam is in the process of developing, accelerating industrialization and modernization, so Vietnam needs a peaceful and stable environment, mobilizing capital resources, technology, knowledge and international supports to develop and defend the country. In this context, the two countries will try to make more efforts to promote relationship to the new height. On the one hand, to ensure the national interests of each country, on the other hand to together contribute to building regional security, creating a stable environment, cooperation and development in the future.Therefore, after 25 years of normalization of relations (1995-2020), the two countries have not stopped their efforts to improve the Vietnam-USrelationship on all aspects, in which the economic and trade sector has been playing the most important role and has made breakthrough growth as follow:

– Many important trade agreements and commitments have been signed to promote the Vietnam–US trade relationship such as: “Bilateral Trade Agreement” (BTA) in July 2000 and has officially taken effectsince march 26, 2001. This is an extremely important agreement because it has been creating a solid foundation for further promoting Vietnam–US trade relations by establishing a clear legal framework to ensure benefits for both sides. The Textile Agreement (effectivein 2003), the Aviation Agreement (effective january 2004), etc. In particular, in november 2006, Vietnam officially joined the WTO and the same year, the US government announced to grant Vietnam “Permanent normal trade relations” (PNTR). A major step in investment cooperation was the signing ceremony of the “Trade and Investment Framework Agreement” (TIFA)between Vietnam and the US on June 21, 2007. TIFA has created a foundation for the two countries for developing deeper trade and investment relations through the WTO and the BTA, and to resolve bilateral trade disputes, especially to implement commitments on the protection of intellectual property rights, expanding service market, administrative and legal transparency, thereby creating more favorable conditions for the US investors in Vietnam.

– With many trade agreements continuously signed as above, the US  Foreign Direct Investment (FDI) inflows into Vietnam has also increased continuously and is considered leading investors. According to the statistics of the Ministry of Planning and Investment of Vietnam, by the end of 2019, theUS ranked 11th among 130 countries and territories investing directly into Vietnam, with nearly 1,000 direct investment projects in Vietnam and the total registered capital is nearly 10 billion USD.The US has also kept Official Development Assistance (ODA) for Vietnam at a stable level of over 100 million USD/year. The USis also an investment destination for Vietnam’s businesses. In the first 5 months of 2020, this country’s ranks the second in Vietnam’s overseas investment capital, with 21.72 million USD, accounting for nearly 12%.

According to US Congressional Research Service, this year marks the 25th anniversary of the United States and Vietnam reestablishing diplomatic relations. Over the last 25 years, U.S.-Vietnam economic and trade relations have expanded rapidly. The United States was Vietnam’s 2nd largest trading partner in 2019; Vietnam was the United States’ 13th largest trading partner. Bilateral trade increased by nearly 32% in 2019, and the U.S. trade deficit with Vietnam rose to nearly $56 billion, an increase of 42% over 2018.Two-way trade turnover between Vietnam and US increased nearly 120 times from 451 million USD (1995) to 7.8 billion USD (2005), 45.1 billion USD (2015), 47.15 billion USD (2016), 50.8 billion USD (2017) and 60.3 billion USD (2018). Only in 2017, the value of Vietnamese goods exported to US accounted for more than 20% of the share of Vietnam’s exports to foreign countries. Vietnam is also the largest export market of USin Southeast Asia with rapid growth. Bilateral trade turnover in 2019 reached 77.5 billion USD. The US Business Association in Vietnam (AmChams) predicted that the two countries’ trade turnover could reach $ 80 billion by 2020.

According to statistics of Vietnam’s General Department of Customs,in the first 5 months of 2020, although the two countries have been hit hard by the covid -19 pandemic, Vietnam’s trade exchang in goods with US reached 31.11 billion USD, in which Vietnam exported toUSthe amount of goods worth 25.11 billion USD, up 10.6% over the same period last year. The main products exported from Vietnam to US market are textiles and garments; phones and accessories; computers, electronic products & components…. footwears, wooden, with a turnover of each item from $ 1 billion or more. On the contrary, US exported to Vietnam worth 6 billion USD, up 5.4% over the same period last year. The largest group of imported goods with a turnover of “billion USD” from the US market in the first quarter were computers, electronic products and components with a turnover of $ 1.92 billion, up 8.2% over the same period last year. Many American products have been continuing to grow in exports to Vietnam such as wood and wood products, animal feed and raw materials, seafood, vegetables and fruits… In the field of agricultural products, US has been exporting surplus to Vietnam such as corn, soybeans, meat, milk and fruits, with a value of about 400 million USD/year.

– In another economic and trade fields, science – technology and tourism over the years are most remarkable. …. Regarding science – technology cooperation, American and Vietnamese businesses are particularly interested in cooperation on artificial intelligence, creative start-ups, renewable energy, and infrastructure development of information technology and high quality human resource training. In term of  Tourism: in 2019, the American Tourism Association voted Vietnam as one of the 10 most attractive destinations in the world. The number of American visitors to Vietnam has increased steadily every year. The US visitor market continuously ranks in the top 5 source markets in terms of the number of visitors to Vietnam, the average growth rate in the period 2014-2018 was 11.55%. In january 2020, the number of international visitors to Vietnam from America reached 96,500 arrivals, up 19.7%. For the US tourists, Vietnam is a safe, friendly destinations where is capable of holding important international political events, notably the US-North Korea Summit was successfully held in Vietnam in February 2019 attracted worldwide attention. In Vietnam, there are a lot of  large American hotel management groups such as Hilton, Wyndham, JW Marriott, Best Western International, Starwood, Hyatt.

Besides the achievements, Vietnam is still facing challenges in economic and trade cooperation due to the rise of protectionism in the US. The fact that the UShas not yet recognized Vietnam as a market economy that has caused many products of Vietnam to be entangled in anti-dumping lawsuits, pressured and unable to penetrate deeper into America’s market, typically are aquatic products (shrimp, Tra fishes, catfish…), textile and garment products, leather and footwear that are the key products of Vietnam to export to foreign countries. In addition, Vietnam also often faces strict technical barriers to standards when exporting to US, mainly due to the large disparities in economics as well as science – technology potential between the two nations.

In general, the Vietnam –US strategic partnership has achieved remarkable achievements over the past 25 years (1995-2020). The bilateral relationship between Vietnam and the United States has achieved such remarkable achievements thanks to the efforts of the two governments on the foundation of the two countries’ perception of the new era of democratic and public equal values, of mutual understanding and sharing economic and spiritual benefits; of each side’s strengths in global geopolitical relations and the nation’s contribution to peace and prosperity as well as inter-state interdependence in response to global problems. Therefore, the values ​​that the two countries have built in the past 25 years are extremely large and sustainable, and therefore need to be considered as the foundation to create new values ​​in the future of Vietnam – US strategic partnership.

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The free trade vision and its fallacies: The case of the African Continental Free Trade Area

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The notion of free trade consists of the idea of a trade policy where no restrictions will be implemented on imports or exports in the respected countries that have signed such an agreement. Some economists argue that free trade is understood through the idea of the free market being forced through international trade. The African Continental Free Trade Area (AfCFTA) is a trade area that was founded in 2018, and it is the most ambiguous project in the history of the continent. This project has plenty of potential successes, as well as fallacies. Particular African nations are either in favor or against this project, and it is a matter of time before the world understands if this project will reflect the true notion behind the idea of a free trade policy.

The African Continental Free Trade Area: The European Union Vision in Africa?

The African Continental Free Trade Area was founded in 2018 in Kigali, Rwanda. It is believed to be the most prestigious project ever created on the continent. It was created by the African Continental Free Trade Agreement and it was signed by 44 countries. Some of the general objectives of this agreement include: The creation of a single economic market, the establishment of a liberalized market, the allowance of free movement of capital and people, diversification of the industrial development in the continent, e.t.c. In some ways, this project can be compared with the European Union and the vision that it represents for a single market and free movement of goods and people. However, due to the size and the geopolitical tensions of the African continent, there are a few obstacles to the achievement of this project. The European Union itself was a project that took more than half a century to be established in its current form, and still, we can see some problems that remain. With that being said, among the 27 member states, there seems to be more or less a coherent economic and political stability. In the case of the African Union, there are far more obstacles, ranging from huge economic differences, political and religious turmoils, and in general a neglected infrastructure; that might not be able to support a mammoth project like this. Any sort of optimism should be also approached with a realistic perspective when it comes to its implementation, which might not be happening anytime soon, certainly not before 2030.

The Relevance of the Free Trade Notion in Africa

It is important to remember that this project deals with the concept of free trade, and free trade itself is something that economists still argue about. Generally speaking, most economists seem to be in favor of free trade. There is an argument that supports the idea of free trade and any kind of reduction in government-induced restrictions on free trade which will be beneficial to economic growth and stability. On the other hand, some economists suggest that the policy of protectionism could be a more lucrative alternative for an economic policy. There is a suggestion that the liberalization of trade will result in an unequal distribution of losses and profit gains while economically dislocating a large number of workers in import-competing sectors.

In the case of the AfCFTA however, the opinion of Ha-Joon Chang, a South Korean economist, might be more relevant. He suggested that if there is going to be any kind of free trade liberalization in the African continent, some prior steps should be taken. For example, the improvement of the institutions in those developing African nations must be achieved to have sustainable economic growth and development. In addition, the idea of demanding from the developing nations to achieve institutional standards that we see in the developed nations such as the U.S or Great Britain, but have never before been achieved in those countries, will only hurt these nations since they might not need or even afford the implementation of these institutions that we see in the West. There is a valid point in the argument because the concept of the AfCFTA might indeed benefit some nations in Africa, but still, it will not develop to its full potential to benefit all 44 countries that have signed the agreement. This is because this project involves countries with different views and needs. Some of them see the AfCFTA as a blessing for the liberalization of the African economy, while other nations are more skeptical about it, thinking that this project will result in African states “biting off, more than they can chew”. This dichotomy is visually striking when we compare some African nations and examine the true reasons why they are in favor or against the AfCFTA.

The African Dichotomy

Rwanda is a small nation in East Africa, having at least 12.5 million people, with a total estimate of its GDP being close to $33.45 billion. A very impressive number, if someone considers the fact that in 1980 its GDP was barely $2.1 billion. It is also the nation that is strongly in favor of the ambitious free trade project in the continent. It is estimated that from 1994 until 2010, Rwanda’s economy grew an average of 6.6%. This is mostly based on the fact that the president of the country, Paul Kagame, led a strong campaign towards the liberalization of the country’s agricultural sector. His reforms allowed the producers to benefit from this liberalization boom while boosting productivity through capital investments. It is clear by now that any sort of project that aims to liberalize the economies of other African nations will be beneficial to Rwanda that aims, as President Paul Kagame mentioned before, to make Rwanda the “Singapore of Africa”.

However, some countries pose some key arguments that need to be addressed for the AfCFTA. There are concerns regarding the massive difference between populations in many African states, as well as the potential of the markets to sustain such a project. With that being said, there is still optimism from some experts that view this project as a win-win situation for Africa since it will allow a trade-led diversification away from Africa’s commodity dependence and focus towards industrial development. On the other hand, this optimism is being taken with a “pinch of salt” from certain African nations, like Nigeria. Nigeria is a nation of at least 205 million people with a total GDP of $1.087 trillion. Nigeria was one of the last nations to sign the agreement, but not before firmly opposing the deal. The strongest argument that Nigeria had against the deal, was the fact that Nigeria could do nothing to undermine the local Nigerian manufactures and entrepreneurs of the country. There was strong domestic opposition to regional trade liberalization and concerns about the government’s ability to implement it effectively. In the same line of thought, Togo’s Foreign Minister Robert Dussey did not hide his concerns. In an interview with Deutsche Welle, Mr. Dussey stressed the fact that many African countries will need to be firstly well-equipped with the right technical tools to meet the challenges of such an enormous project. He shared his views that some rich nations in the West are not so keen to see the potential industrialization of the African continent: “African development is foremost the responsibility of Africans. We have a problem with work for our youth. It is important that we have strong industries to have work for the young”, said Mr. Dussey for Deutsche Welle.

Can we safely say that the AfCFTA project complies with the economic policy of free trade? Theoretically, it does. The project has the potential to change the socio-economic status of all the countries involved. Even if some nations are more industrialized than others, and can take full advantage of the opportunities for manufactured goods, other nations that might not be so privileged can benefit by linking their economies into regional value chains. This can happen again theoretically if there is a reduction in trade costs and facilitating investments. However, one should not overlook the growing challenges of this project. It is not feasible to suggest a 90% tariff cut, a unified digital payments system, and an African trade observatory dashboard that the AU Commission promises in the next five years. For the simple reason that you cannot have this liberalized economic system when most of the African countries are suffering from socio-political instability. How can a system which in some ways is based on the European Union, work when there is such a striking inequality among African nations? There is a lack of industrial infrastructure to support such a project, and it will be more beneficial to address these regional problems before expanding in a global vision. One day Africa will reach its full potential, but not in the next five years and not in the next ten years. Such an agreement is a blessing, but it needs careful examination before being implemented; otherwise, we will talk about a disaster in the African continent that could potentially bring more inequality and regional tensions.

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Turning to sustainable global business: 5 things to know about the circular economy

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Due to the ever-increasing demands of the global economy, the resources of the planet are being used up at an alarming rate and waste and pollution are growing fast. The idea of a more sustainable “circular economy” is gaining traction, but what does this concept mean, and can it help save the planet?

1) Business as usual, the path to catastrophe

Unless we make some major adjustments to the way the planet is run, many observers believe that business as usual puts us on a path to catastrophe.

Around 90 per cent of global biodiversity loss and water stress (when the demand for water is greater than the available amount), and a significant proportion of the harmful emissions that are driving climate change, is caused by the way we use and process natural resources.

Over the past three decades, the amount of raw materials extracted from the earth, worldwide, has more than doubled. At the current rate of extraction, we’re on course to double the amount again, by 2060.

According to the International Resource Panel, a group of independent expert scientists brought together by the UN to examine the issue, this puts us in line for a three to six degree temperature increase, which would be deadly for much life on Earth. 

2) A circular economy means a fundamental change of direction

Whilst there is no universally agreed definition of a circular economy, the 2019 United Nations Environment Assembly, the UN’s flagship environment conference, described it as a model in which products and materials are “designed in such a way that they can be reused, remanufactured, recycled or recovered and thus maintained in the economy for as long as possible”.

In this scenario, fewer resources would be needed, less waste would be produced and, perhaps most importantly, the greenhouse gas emissions which are driving the climate crisis, would be prevented or reduced.

This goes much further than simply recycling: for the circular economy to happen,  the dominant economic model of “planned obsolescence” (buying, discarding and replacing products on a frequent basis) would have to be upended, businesses and consumers would need to value raw materials, from glass to metal to plastics and fibres, as resources to be valued, and products as things to be maintained and repaired, before they are replaced.

3) Turn trash into cash

Increasingly, in both the developed and the developing world, consumers are embracing the ideas behind the circular economy, and companies are realising that they can make money from it. “Making our economies circular offers a lifeline to decarbonise our economies”, says Olga Algayerova, the head of the UN Economic Commission for Europe, (UNECE), “and could lead to the creation of 1.8 million net jobs by 2040”.

In the US, for example, a demand for affordable, high-quality furniture, in a country where some 15 million tonnes of discarded furniture ends up in landfill every year, was the spur for the creation of Kaiyo, an online marketplace that makes it easier for furniture to be repaired and reused. The company is growing fast, and is part of a trend in the country towards a more effective use of resources, such as the car-sharing app Zipcar, and Rent the Runway, a rental service for designer clothing.

In Africa, there are many projects, large and small, which incorporate the principles of the circular economy by using existing resources in the most efficient way possible. One standout initiative is Gjenge Makers in Kenya. The company sells bricks for the construction industry, made entirely from waste. The young founder, Nzambi Matee, who has been awarded a UN Champion of the Earth award, says that she is literally turning trash into cash. The biggest problem she faces is how to keep up with demand: every day Gjenge Makers recycles some 500 kilos of waste, and can produces up to 1,500 plastic bricks every day.

4) Governments are beginning to step up

But, for the transition to take hold, governments need to be involved. Recently, major commitments have been made in some of the countries and regions responsible for significant resources use and waste. 
The US Government’s American Jobs Plan, for example, includes measures to retrofit energy-efficient homes, electrify the federal fleet of vehicles, including postal vans, and ending carbon pollution from power generation by 2035.

In the European Union, the EU’s new circular economy action plan, adopted in 2020, is one of the building blocks of the ambitious European Green Deal, which aims at making Europe the first climate-neutral continent.

And, in Africa, Rwanda, Nigeria and South Africa founded the African Circular Economy Alliance, which calls for the widespread adoption of the circular economy on the continent. The Alliance supports African leaders who champion the idea, and creates coalitions to implement pilot projects.

5) Squaring the circle?

However, there is still a long way to and there is even evidence that the world is going backwards: the 2021 Circularity Gap Report, produced annually by the Circle Economy thinktank, estimates that the global circularity rate (the proportion of recovered materials, as a percentage of overall materials used) stands at only 8.6 per cent, down from 9.1 per cent in 2018

So how can the world be made “rounder”? There are no easy answers, and no silver bullet, but Ms. Algayerova points to strong regulation as a big piece of the puzzle.

“I am proud that for the automotive sector, a UN regulation adopted at UNECE in 2013 requires 85 per cent of new vehicles’ mass to be reusable or recyclable. This binding regulation influences the design of around one quarter of all vehicles sold globally, some 23 million in 2019.”

“It’s a step in the right direction, but these kind of approaches need to be massively scaled up across all sectors”, she adds. “Shifting to the circular economy is good for business, citizens and nature, and must be at the heart of a sustainable recovery from the COVID-19 pandemic.”

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Pandemic: A Challenge for the Globalization

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The vaccination process across the world is underway, and after almost complete vaccination of the world population, we will see a post-pandemic world that is going to be different from the pre-pandemic world, especially in the context of Globalization and the role of states in the world. 

In the post-1980 world, Globalization became the prevailing phenomenon that impacted the whole world and its functioning. Whether it was the realm of society, power politics, or economics of the world, whether, in the context of domestic affairs or global affairs, Globalization has been unavoidable and un-resistible until the ongoing pandemic has erupted after which many changes have been brought to the world. Social distancing and travel restrictions protocols posed challenges but that is temporary, but what offered concerns to the policymakers and businesses of the world that how fragile the functioning of the global economy is, and how the economies of states are depending on this fragile mechanism. 

The interdependence and interconnectedness between national economies as well as multinational corporations and organizations in the global economy are in such a way that if only a single link breaks down, a series of collapses will occur. This has happened during the pandemic. 

When China was hit by the pandemic, two-third of its economy stopped working, consequently, the world witnessed a sharp decline in the global supply. The same happened when the pandemic was at its peak in the West. In this way, the worst impact on the global economy was in the form of a major recession, depriving people of employment, and increasing poverty, across the world as no nation could remain unaffected. 

When such pandemics exploded at a place somewhere before the era of Globalization, other parts of the world were unaffected economically. Another point of pondering is the fact that in the case of China it is not because of the involvement of Chinese firms in the rest of the world but because global companies have some of their production lines installed in China. Globalization lets it happen. This is well explained by famous sociologist Anthony Giddens, who says that it is the major characteristic of Globalization that distant localities are linked with each other in such a way that one event at a place shapes events at other places. 

Notice that if it is thought that virus pandemics erupt once in a lifetime and therefore most of the time Globalization will be dominating and decisive, it is not the case. The future of Globalization was at stake in the recent crisis when both the economic giants China and the USA engaged in a trade dispute because of which world economy faced contraction in its GDP which would have been turned into a global economic recession if the trade war continued. 

Like pandemic exposed the vulnerability in the economic structure of Globalization, so it did by revealing the dangers on the political front. In Globalization, governments were subjected to cooperation which reduced the political tensions between them, however, pandemic reactivated their political motives, which means that in case of an emergency governments failed to cooperate. Such a severe blame game was started when some countries lashed out at China, calling it responsible for the global spread of the pandemic, while China refused all accusations and blamed the US for politicizing the health crisis. The political tussle made faces at Globalization.

International and regional organizations which are the key aspects of Globalization failed too. The World Health Organization is the case in this regard that how it crumbled. It not only faced criticism but the US even withdrew its financial support from it. Likewise, other international and regional organizations could not maintain cooperation among nations. In this way, Globalization could not even handle the crisis adequately. 

Globalization brags about free trade but now people are asking the question that what is the benefit of free trade if it cannot even function when it is needed the most. When there was more need for cooperation between governments, Globalization failed again and it was also exposed in the role of organizations. That’s why one may argue that the post-pandemic world would be the era of de-globalization and states would strive to gain more and more power as they do not want to rely only on Globalization anymore. Likewise, people are now more careful in their spending, while corporations are now more conscious about their dependence on Globalization, therefore, they are going for precautionary measures.

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