Date: Wednesday, July 26th, 2023
Treasury Secretary Janet Yellen’s push to elevate economic ties with Vietnam, on display with a high-profile trip this week, is drawing fire for seeking to strengthen US supply chains by replacing one repressive country with another.
Yellen, who in December wrote, “We must shift away from supply chains that violate core human rights” — a reference to documented abuses in China — is meeting Vietnam’s prime minister, finance minister, central bank governor and chair of its national assembly on a three-day visit to Hanoi. The trip highlights what Yellen on Friday described as Vietnam’s “trusted-partner” status in building “secure and reliable supply chains.”
Critics find it hard to square Yellen’s rhetoric with an authoritarian Vietnamese regime that jails political opponents and maintains single-party rule. It’s also unclear the extent to which raising Vietnam’s role is truly diversifying US supply lines, with Chinese companies setting up operations and providing key inputs to non-Chinese production facilities there.
“It’s absolutely shocking that the Biden administration thinks it can encourage investment and business in Vietnam without supporting Hanoi’s horrible human rights record,” said Phil Robertson, deputy director of the Asia division at Human Rights Watch.
Robertson’s group, an international watchdog, listed a litany of offenses in its 2022 annual report on Vietnam, including details on its imprisonment of rights and climate-change activists.
Yellen says she won’t shy away from bringing up Vietnam’s record.
In an interview as she prepared to fly to Hanoi Tuesday, Yellen said, “I don’t think we can just look the other way.”
“It’s important to raise this issue,” she said. “There is a State Department regular dialogue on human rights, and I would expect to raise it in the meeting that I have, probably, with the prime minister.”
Yellen did raise the human rights situation in Vietnam during her meeting with Finance Minister Ho Duc Phoc Friday, according to a Treasury official who spoke on condition of anonymity on the matter. The official offered no such confirmation on her meeting with Prime Minister Pham Minh Chinh. Vietnam’s Ministry of Foreign Affairs didn’t respond to a request for comment on criticism of its human-rights record.
Yellen has been a champion in President Joe Biden’s cabinet of “friend-shoring,” an effort to reduce the vulnerability of US supply lines to potential coercion from China. She flew to Vietnam from India, another big friend-shoring prospect — though a democratic one.
Its politics aside, Vietnam presents an alluring investment target. China’s rapid development has increased its labor costs, leaving them more than double that of its southern neighbor. Machine operators in Vietnam cost as little as one-fourth that of those in China, according to 2022 data compiled by the Reshoring Institute, a nonprofit consulting service.
Geopolitics is also a key dynamic. Vietnam has its own contentious relationship with China, with the two having overlapping claims on swaths of the South China Sea.
Many Americans may still think of Vietnam as the place where more than 58,000 of their servicemen perished in a wasteful Cold War conflict that saw as many as 3 million Vietnamese killed. But Vietnam for years has been welcoming the US and its people.
The port city of Danang hosted a visit by the USS Ronald Reagan, a giant aircraft carrier, in June, not long after several Chinese military vessels spent weeks operating within Vietnamese waters, prompting protests from Hanoi.
“Having friends, especially friends in the region that have similar interests and similar concerns about Chinese hegemony, is always a positive,” said Edmund Malesky, a Vietnam specialist and director of Duke University’s Center for International Development. “Vietnam is going to be a leader in the region.”
But it’s also a region where it’s hard to escape China’s influence. Although data from Vietnam is patchy, many exporters based in the country are Chinese-owned firms that can get around higher US tariffs by producing and shipping out of their neighbor.
“You’ve got this funny situation where the US places these big tariffs on China, Chinese exports of those goods to the US fall and US imports from Vietnam rise,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. “Some of those are literally factories being rolled over the border.”
And whether Chinese-owned or not, many Vietnamese operations are highly dependent on components and materials coming out of China.
“If every dollar imported from Vietnam is seen as lessening the dependence on China, that overstates things,” said Brad Setser, a former US trade official in the Biden administration who’s now at the Council on Foreign Relations. “If China really wanted — in a real economic coercion scenario — to cut off Vietnamese suppliers, they could do that.”
Still, Setser argued that friend-shoring is a long game, and over time, if Vietnam follows the well-worn pattern of other manufacturing hubs, it will gradually source more components locally and become less dependent on China.
Questions over Hanoi’s repressive behavior are more difficult to analyze away.
“Vietnam’s ruling Communist Party varies very little in its crackdown from the heavy-handed actions by Xi Jinping against civil society groups in China,” said Human Rights Watch’s Robertson. “The only difference being that the US considers Vietnam to be a dictatorship friendly to them.”
Speaking Friday in Hanoi, Yellen said, “Let me be very clear: friend-shoring is not for an exclusive club of countries.”
“It is open and inclusive of advanced economies, emerging markets, and developing countries alike,” she said in remarks to the US-ASEAN Business Council.
Stephanie Segal, a senior fellow at the Center for Strategic & International Studies, said Yellen is confronting the fact that the US has conflicting goals when it comes to wooing Vietnam.
“Unfortunately, the reality is you end up having to prioritize some objectives,” she said.