United States of America (USA), the world's most powerful country and Vietnam, an emerging economy share a complicated relationship. All the economies in the world need to keep an eye on this relationship. This is because it indefinitely going to affect many countries of the world in some way or the other. All the countries probably realize this fact and are doing the needful without any influence.


The interference of USA in the Vietnamese war severed the relationship between the two countries. A cold war condition prevailed between the two countries for almost 20 years. The former US president, Bill Clinton announced diplomatic relations between the two countries in 1995. Relations between the two in terms of military and trade have constantly improved since then! They now see a longways together.


The Trans-Pacific Partnership (TPP) pact brought the two together. USA joined its negotiations on January, 2008. Vietnam joined the negotiations in November of the same year.The pact aims at encouraging free trade between the two countries and the other member countries, as well. It is believed to be beneficial to the future ofboth the countries. But it is a case of worry for the other countries.


This agreement will encourage free trade or trade liberalization between the two countries. It will make it easier for US corporate set ups to open offices in Vietnam and Vietnamese entrepreneurs to import their manufactured products in USA. USA is the biggest importer of textile products and Vietnamese textile industry is developed considerably. The global textile industry is going to be affected considerably by this agreement.


Vietnam has a strong textile industry that is continuously expanding. It is the second largest exporter to USA after China in terms of textile products. With the liberalization of trade laws between Vietnam and USA, it can become the largest exporter of textile products to USA. Other emerging economies that are dependent on its textile exports for revenue, like India and China, may lose a major share of the market.

The corporate giants in USA will have a good time with the implementation of this agreement. They can outsource labor intensive work to Vietnam for a comparatively lower price. This will increase their overall profits. USA may not feel the need to import textile products. Cheaper textile products may be secured in the country. But it can also lead to job losses and unemployment in the country.


The face of the global textile industry may change. Vietnam and USA may dominate the textile industry in whole. India and China earn a large chunk of their revenue by their export of textile products to USA, Canada, Australia, New Zealand, and Japan. This agreement can lead to movement of business opportunities from these countries to Vietnam. The economy of the two countries can also get negatively affected.


The economists in USA worry about one likely outcome of free trade between Vietnam and USA. Vietnam mostly imports its yarns and fibers from China. The relationship between the two had not been impressive up till now. But Vietnam is trying its level best to improve its relations with China. If free trade between USA and Vietnam takes place, the US market would be filled with Vietnamese clothes made out of Chinese yarns and fabrics.


China has been seen as a competition by USA since a long time. This is true economically as well as politically. Encouraging free trade between USA and Vietnam is believed to make China stronger by US economists. They also fear that it will reduce US exports of textiles. But this may not be entirely true. In fact, many researches indicate that the opposite is likely to take place. Vietnam can also become the biggest textile export market for USA.

Cass Johnson, President, National Council of Textile Organizations (NCTO) said that Vietnam should be excluded from free trade agreement with USA in testimony before the U.S. International Trade Commission in March. He said that it will create another China problem in the country as Vietnamese economy is largely (almost one quarter) dependent on exports and labor prices in the country are very cheap, as well.


It cannot be said for sure that USA and Vietnam relations, especially through the Trans-Pacific Partnership (TPP) pact, will be beneficial to USA or not. It has immense to gain and a lot to lose, as well! It will definitely benefit Vietnam. And the likely scenario is that China may also get benefitted along with Vietnam. But this is just an assumption. How it turns out for sure can be said only after the agreement is signed and free trade started.


The impact of USA-Vietnam relations will affect the global textile industry for sure. It is a possibility that the currently reigning economies in terms of textile industry may lose position. USA and Vietnam may occupy the center stage. A lot of business is sure to be lost and a lot more to be gained. It might also affect the overall economies of certain countries (especially the ones that majorly depend on textile trade).


References:

  1. Wikipedia.org
  2. Brookings.edu
  3. Usaita.com
  4. Specialtyfabricsreview.com