Canada pushes for trade in Vietnam as West de-risks from China

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Trade Minister Mary Ng opened the second Canada-Vietnam Joint Economic Committee on Wednesday after meetings with senior Vietnamese leaders in Hanoi.

Ms. Ng is leading the largest-ever “Team Canada” delegation to Vietnam this week, visiting both the capital, in the north, and Ho Chi Minh City, in the south. Both Ottawa and Canadian businesses are seeking closer ties with the Southeast Asian country, with its booming economy, amid a push in the West to diversify supply chains and reduce reliance on China.

“This is a big trade mission,” Ms. Ng said. “I think why we’re seeing this is because the trade relationship and the confidence that the two governments have in each other and the commitment we have to working together really sends a strong signal to the business community.”

Canada is Vietnam’s third-largest trading partner in the Americas, behind the U.S. and Brazil, while Vietnam is Canada’s largest trading partner in Southeast Asia and seventh largest overall. Last year, trade between the two countries hit $14-billion, though growth also slowed for the first time owing to the “impact of geopolitical conflicts and a global recession,” said Ms. Ng’s Vietnamese counterpart, Nguyen Hong Dien.

He predicted renewed expansion this year, however, “as the relationship between Canada and Vietnam has entered a new stage with a lot of opportunities.”

Hoping to take advantage of those opportunities were hundreds of delegates travelling with Ms. Ng, representing more than 100 Canadian businesses and institutions, including from the aviation, agriculture and energy sectors.

Speaking at a luncheon for business leaders in Hanoi, Goldy Hyder, the chief executive officer of the Business Council of Canada (BCC), said, “We are living in very complex times, and businesses are having a challenge in managing geopolitical issues, economic issues and transitions under way [with regard to] climate change.”

In an interview, he noted that “Canadian companies are extremely well positioned” when it comes to addressing global challenges. “Food security, energy security, critical minerals – those continue to be the top three things we hear about in our travels, no matter where in the world, that people look to Canada for.”

He said he hoped that, as the relationship develops, Vietnam would start to buy more products from Canada, as the country currently has an US$8.5-billion trade surplus with Canada.

Vietnam’s chief exports to Canada are primarily manufactured goods – both electronics and textiles – while it mainly imports Canadian agricultural products and wood pulp.

Trevor Kennedy, the BCC’s vice-president for the Indo-Pacific, said that as Vietnam’s manufacturing base grows, with many companies looking to the country as an alternative or addition to their operations in China, “so will demands for energy and particularly clean energy, and Canada has a role to play in that.”

Vietnam has been the biggest Asian beneficiary of a Western drive to diversify or de-risk from China amid increasing geopolitical tensions, slowing economic growth and concerns about Beijing’s direction under President Xi Jinping.

In 2019, Vietnam joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), becoming only the second Asian country to do so after founding member Singapore. That same year, Hanoi and Brussels signed a free-trade agreement, removing most tariffs for Vietnamese exports to the European Union.

In November, Vietnam and the U.S. elevated their relationship to that of comprehensive strategic partnership, and Australia followed suit earlier this month, as both Washington and Canberra court Hanoi as a potential ally in containing China.

At the same time, however, Vietnam has enjoyed strong ties with China, also elevating relations with Beijing last year. The two countries’ ruling communist parties have co-operated closely for decades, despite general antipathy toward China among many Vietnamese, a legacy of historical colonialism and a brief border war in the late 1970s.

“I think Vietnam has managed the great power competition extremely well,” said Nguyen Khac Giang, an expert on Vietnamese politics at Singapore’s ISEAS-Yusof Ishak Institute. He noted that many companies seeking a “China+1″ strategy have turned to Vietnam for the ease of transferring manufacturing resources there and connecting it to existing supply chains, something far tougher in other countries competing to be the next China, such as India or Indonesia.

Vietnam has a reputation for being pro-trade and pro-business and for enjoying a degree of political stability that is not always easy to come by in Southeast Asia.

That was rattled this month, however, when President Vo Van Thuong was removed from office after just 14 months, the latest top official snared by a sprawling anti-corruption campaign that analysts warn has slowed decision-making at the local level and could yet derail just the type of economic engagement Hanoi is trying to promote.

“No one wants to make any decisions or take responsibility right now. It makes things really difficult for foreign investors,” said Linh Nguyen, an expert on Vietnam at consultancy Control Risks. If uncertainty increases, she added, there is a possibility some investors may lose patience and look elsewhere in Southeast Asia, possibly to Malaysia and Indonesia, which are both also courting foreign cash.

But there was no sign of instability in Hanoi on Wednesday, as the Vietnamese government rolled out the red carpet for Ms. Ng and the Canadian delegation. As well as meeting with her trade counterpart, Ms. Ng met with Vietnamese Prime Minister Pham Minh Chinh, not a given for a minister of her level.

In opening remarks, she referenced Vietnam’s importance to Canada as an ally within the CPTPP and in advocating for a free-trade agreement between Ottawa and the Association of Southeast Asian Nations. She also seemed to take a swipe at China, noting Vietnam and Canada “are partners in standing up for the international rules-based trade order.”

Ms. Ng framed her presence in Vietnam as part of Ottawa’s Indo-Pacific Strategy, a much-vaunted pivot to Asia that has stumbled somewhat amid geopolitical tensions with the continent’s two largest countries, China and India.

“Canada is very committed to this region,” she said. “You can count on Canada. We are here and intend to be here for the long term.”