Since , the foreign invested enterprises FIEs have been also granted the right to export goods other than those they produce. The non-tariff barriers NTBs such as quantitative restrictions and foreign exchange management used to be applied quite substantially to balance "supply and demand of the economy" between domestic production plus imported goods and domestic consumption in order to protect domestic production and regulate consumption.
The quantitative control has been introduced since and the number of such goods under the quantitative control was 5 in , 8 in and , 16 in , and 12 in petroleum, fertilizer, steel, cement, paper, sugar, liquors, motorbike, passenger cars, ceramic and granite tiles, and refined vegetable oil. The year of witnessed a major positive shift in trade policy. In particular, most quantitative restrictions were removed in ahead of schedule and at present there are only two products, namely petroleum and sugar, subject to quantitative restriction. However, in the tariff-rate quotas were introduced and applied for certain agricultural products such as cotton, tobacco materials, and salt.
Before , the FIEs were required to balance their foreign exchange needs except infrastructure or import substitution projects. Since , the FIEs have been able to get foreign currency from domestic banks to pay-off the principal interest and fees on short-term loans from offshore banks. They have been also able to get foreign currency to make repayments on the longer-term loans from offshore banks as long as the loans are registered with the State Bank of Vietnam.
Since then, the frequent changes in tariff system have been taken place. The new Law distinguishes the normal tariffs from the preferential ones. The HS system was introduced first time in Standard deviation as a percentage of the mean Source: Vo Tri Thanh , Athukorala , and data provided by MOF In recent years, while the trading right has been liberalized to a very significant extent and the coverage of NTBs has been reduced substantially, the tariff structure has changed not much Table2. The years from saw a modest increase in simple average tariff rate due to the tariffication of some goods that had been subject to quantitative restrictions.
Moreover, the tariff structure has been characterized by the heterogeneity and high dispersion, in which the high tariffs have been generally applied on several finished or consumer goods. Import protection is a tax on export-competing production. In order to promote export, Vietnam has implemented several measures such as zero export duty, tax exemption, export credit, and especially duty drawback scheme. Under the duty drawback scheme, exporters pay duty on their inputs and are reimbursed for the share of imports used to produce exported goods.
The Duty Suspension System is recognized as not complex, but it still has some problems. The first is the estimation of inputs used for producing exported goods, especially for firms that export only part of their outputs or newcomers to exporting. The second is frequent delays in tax refund due to under-developed communication between Treasury and Customs. Local producers, who supply inputs to export producers, are not eligible for duty rebates on imports used in the production process.
This creates an unnecessary bias in favor of using imported inputs, discouraging local intermediate processing of inputs for export industries. Export credit is a policy tool for granting exporting firms ready access to credit without discrimination. In Vietnam the state-owned commercial banks SOCBs in general have only accepted land and Treasury Bonds as collaterals for lending even they are now allowed to provide credit without collaterals.
The subsided institutional credit facilities offered under the Development Assistance Fund, which was established in , have been hardly used by private firms because the procedure to obtain credit were complicated and time consuming high transaction costs.
Since , however, the areas under the possible provision of credit by the Fund have been significantly narrowed, and from now on they will be subject to change every five years, depending on the Government development goals. It can be said that provision of working capital loans remains perhaps the weakest link in the current policy framework for export promotion and the biding constraint for private firm sector.
Another problem is that these schemes and programs could be not allowed or be challenged by other WTO members when Vietnam joins the WTO rules Wiemann et al Despite a significant progress in trade liberalization, Vietnam's trade regime has still operated within a rather comprehensive framework of trade barriers with efforts to promote exports as well as to protect import-substituting products.
This kind of trade regime has had some problems associated with the efficiency in resource allocation. First, given the cascading tariff structure, the level of manufacturing effective protection in Vietnam has been high Table3. Although this level declined significantly in , it is still higher compared to that of the major East Asian economies and even higher than that enjoyed by the Korean manufacturing at the early stage of export-led industrialization Athukorala Effective rates of protection by sector, Effective Rates of Protection Sector Agriculture 7.
By using the export bias index, Athukorala has shown that while various measures to counterbalance the anti-export bias of the protectionist regime seem to have some effects, they are unlikely to achieve the desired neutrality in the incentive structure. There is even a considerable bias against exports in several sub-sectors where Vietnam has an ample scope of achieving export success such as garments, plastic products, leather goods, ceramics and other manufacturing.
In nature, the trade regime has reflected Vietnam's approach to the strategy of development and industrialization, which has been still driven by both the "picking winner approach" and export-promotion approach.
Vietnam emphasizes also the importance of building an independent and self-reliant economy. Moreover, the state sector should play a leading role in the economy and a monopolized role in some key sectors. As a result of such industrial and trade policies, a salient characteristic of Vietnam's present manufacturing structure is its dualism. On the one hand, export manufacturing firms, especially the FIEs, form the sector with regional and global competitiveness.
Another feature of the CEPT is that members have to eliminate all quantitative restrictions on products on which they receive CEPT concessions and to eliminate other NTBs within a period of five years after receiving concessions. The CEPT also requires the commitments to harmonize customers, investment and standard regulations and procedures. The manufactured commodities to be included in the IL are alcohol, beer, beverages, refined vegetable oils, chemicals, wood products, photocopy paper, refrigerators, washing machines, air conditioning and some transport facilities….
During - , despite the growth in value, the share of ASEAN-5 in Vietnam's total exports decreased continuously, from In fact, the proportion of commodities enjoying preferential tariff rates under Vietnam's CEPT is very low, at only 1. This is due to several reasons. Second, the inclusion of commodities with high import value into the IL has been delayed.
Third, the rule of origin is direct barrier hindering a rapid increase in imports under CEPT.
'China and the Long March to Global Trade is an indispensable source on China's WTO accession. The analysis of China's integration and adjustment process. The Accession of China to the World Trade Organization Alan S. Alexandroff, Revisited for Fairness and Consistency," Emergy International Law Review, vol. Trade Policy Review Mechanism," Michigan Journal of International Law, vo\.
The study of Fukase and Martin a has shown that although AFTA implementation is important as a stepping-stone to the wider liberalization, its economic benefits for Vietnam are likely to be small. Moreover, ASEAN can be seen as a "fitness gym" which allows Vietnam to conduct training "work out" in preparation for the serious exercise of competing in the global economy Freeman ASEAN cooperation and integration is also a means for Vietnam and other members as well to explore stronger relationships with external economic partners and improve their international "bargaining power".
However, how Vietnam can get those benefits depends very much on the reform efforts of Vietnam and the strengthening of ASEAN as a block. The Agreement was prepared on the basis of WTO principles and regulations especially those are related with intellectual property and services trade.
The Agreement contains 63 articles and 14 appendixes with 7 chapters: The key contents of the Agreement include: Vietnam will also reduce import tariff rates on agricultural and industrial products from US within two to seven years, gradually removing all non-tariff measures, following WTO standards. Vietnam has agreed to follow WTO standards on intellectual property protection within 18 months and accept other standards, such as satellite signals, trademarks, and patents.
Vietnam has agreed to open a number of important industries, like telecommunication, finance, banking, distribution, construction, and tourism to US investors. These commitments will be fulfilled in phases within 2 to 10 years. In March , the Government issued Decision No. The Program mostly deals with specific tasks and responsibilities of government agencies in implementing the Agreement. Especially, the Program emphasizes the cooperation between Ministry of Trade with relevant ministries to review market opening measures and proposing ways to handle absolute taxes, anti-dumping tax, countervailing tax, list of goods subject to conditional import, list of special industries, collection of price difference, customs valuation system, and state trading regime.
The result of the study by Fukase and Martin b has revealed that the increased market access to the United States makes Vietnam's export to United States double from the base level. Since , the United States has become the largest market for Vietnam's exports. The experience of the VN-US BTA implementation has shown that the pessimistic view about the capability of Vietnam's firms to penetrate the United States when the Agreement was ratified may be overstated.
Yes, the lack of experience, know-how, and information of a large and sophisticated market as the United States market are the big problems for Vietnam's firms to expand exports to the United States. Here the most challenging problem for Vietnam is to implement the commitments on the intellectual property rights and the opening of the services sectors.
Vietnam needs also to keep more calmly in dealing with the disputes, which could emerge from the trade between two countries. Anti-dumping cases such as "catfish" case are real concerns for Vietnam and other developing countries. But the appropriate ways of handling this issue can minimize the costs for the economy.
In January , Vietnam applied formally for WTO membership and from then till December had held 9 rounds of negotiations. During the first four rounds of negotiations from to , Vietnam basically completed its clarification of Vietnam's economic and trade policies with WTO members. This document has served as an important foundation for Vietnam to undertake the followings rounds of negotiations. At the fifth round of negotiations in , Vietnam conducted bilateral negotiations with several interested parties based on documents submitted the Revised Offers on Import Duties, services and other non-tariff measures.
The year of witnessed Vietnam's efforts to continue process of negotiations with two rounds, the 6th and the 7th. However, these negotiating sessions did not see much progress for Vietnam's WTO accession and it was required that Vietnam needs to revise substantially its Offer. The 8th round of negotiations in June seen to have an important breakthrough step and to bring a hope for Vietnam to be a WTO member by the end of as it wishes.
The main commitments by Vietnam in the Offers for this round are as follows: The number of items subject to the tariff rate quotas are reduced from 13 in previous offer to 6 by HS - 4 classification - Non-tariff barriers: All import restriction licenses and most quantitative restrictions will be removed as Vietnam joins the WTO Especially, the ban on cigarette import will also be eliminated immediately - Agriculture: Export subsidies are to be eliminated for coffee immediately on joining the WTO; for other products such as rice, pork, fruits and vegetables after 3-years transition - Services: Some access to services in 10 sectors or 92 sub-sectors are provided.
Vietnam has also supplied a considerable amount of additional information in response to members' requests In general, Vietnam assesses that its commitments to services sectors opening are not lower than that of new WTO members - Customs valuation: The SPS Agreement will be implemented when it joins the WTO, except in three areas "harmonization"; "equivalence"; and control, inspection, and approval procedures , where it wants a transition period until Vietnam argues that it needs this because it lacks resources and the issues are complicated. At the same time, it is to retain investment incentives as a means of developing, and because investors from the major working party members demand the incentives - Intellectual property: They supported the Vietnam's objective of joining the WTO "as soon as possible".
At the same time, the Working Party members also stressed that a lot of works still remains and asked Vietnam for improvement in terms of market access and clarification of regulations and policies. They raised concerns about Vietnam's use of "specific" import duties and tariff quotas on agricultural products , proposed transition periods for implementing parts of the SPS Agreement, and apparent lack of progress on its own schedule for applying TRIPS Agreement. Several members of the Cairn Group want Vietnam to remove agricultural export subsidies immediately. ASEAN and some other developing countries support the arguments that Vietnam should be treated leniently and eligible for exception under the Subsidies Agreement.
But some developed countries stressed that Vietnam should be also seen as a vibrant economy with strong potential. According to the chairperson of the Working Party, Mr. Seung Hohim, the pace of Vietnam's WTO accession depends on the pace at which the Vietnam's Government manages to implement the acceleration of the laws and enforcement regulations. At the 9th round of negiotiation in December , Vietnam committed to remove all agricultural export subsidies when it joins the WTO. At the 8th round, the members worked through the "elements" of a draft report and a Draft Report was first time discussed at the 9th round in December Although Vietnam attempts to become a member of WTO by the end of , there is still a substantial debate about how Vietnam can take full advantage of the global economic system?
To answer this question, using a multi-sector, dynamic applied general equilibrium model, the study by Roland-Holst et al has assessed the long-term economic effects of Vietnam's accession to the WTO under five different scenarios for Vietnam's economy during the period The first scenario calibrates the Vietnam's economy for this period based upon the Business as Usual trends for productivity growth "BaU scenario" , which is viewed as the baseline for the dynamic counterfactuals of different types.
The other four scenarios include: These five scenarios are run to forecast the economic growth for the period Figure 1. The result shows that the passive WTO-style opening of the economy "WTO scenario" brings about marginal contribution to the aggregate growth effects. This kind of growth dividend justifies more determined negotiating efforts with the key trading partners. Capital insufficiency further undermines Vietnam's gain from trade expansion.
Trade and economic growth: Real GDP to Source: Thus, not surprisingly, the development of the maritime economy is viewed in Hanoi as a precondition to strengthen the country's national security and defense, which should be promoted in the spirit of international cooperation. Given the great power predisposition exhibited by Chinese foreign policy in the new millennium, a disposition which has been supported by its strong economic weight and political leverage, relations with China represent a fundamental factor in Hanoi's strategic calculations.
That being said, the increase in tension due to territorial disputes over the SCS has triggered a dilemma that has thus far hindered a positive evolution in the bilateral relations between the two countries. These tensions exacerbated in , when a number of incidents occurred against the backdrop of the renewed assertion of sovereignty by the People's Republic of China PRC State Council. This was especially reflected in the declaration on Sansha as an integral part of the province of Hainan; as well as the political emphasis placed upon the country's territorial rights and, consequently, China's sovereign power to use force to protect national territories.
In early summer of , China has requested further oil and gas firms to stop their exploration-oriented activities with the Vietnamese partners in the SCS, while threatening these companies with unspecified consequences for their business dealings with China in case they failed to meet the request. In addition, the imposition of unilateral fishing bans in the SCS in was also one of the causes behind the rising political tension.
The new and more forceful posture of the Chinese leadership has been challenging the idea of Beijing's foreign policy as one being built on the "peaceful rise" formula. In fact, it seems that the achievement of "China's Dream," i. Nevertheless, it should be stressed that the Sino-Vietnamese disputes also have a distinct economic dimension due to the prospects of further exploitation of hydrocarbon resources in the SCS. From a security perspective, the potential militarization of the SCS disputes that threaten the stability and prosperity of the SEA states, including Vietnam, represents the principal concern of the countries in the region.
Vietnam is a case in point since it has been involved in intensive and escalating tensions linked to territorial disputes with China in the SCS. In addition, the actions, measures, and policies adopted by China towards enhancing its influence in the region might generate negative effects upon the process of regional integration via undermining the consolidation of an intra-ASEAN unity.
A unified and strong ASEAN's position towards China has the potential to mitigate Chinese leverage in the region as a whole since ASEAN institutions and activities are given special attention by authorities in Beijing, as platforms where the dialogue over critical regional issues is taking place. While most of the literature devoted to the rise of China examines its origins and implications for the balance of power in the region and in world politics, this study aims at investigating how Vietnam has been coping with the complex challenge represented by the "rise of China.
This article, on the contrary, points that other major actors have been emerging as a part of SEA states hedging strategies. The article thus explores the role which the EU and Russia have been playing in Vietnam's hedging approach, while highlighting particular features of the Vietnamese strategy, which has acquired a specific nuance that calls for the use of the notion of strategic hedging. The fact that Vietnam is overlooked by mainstream literature focusing on the SEA is intriguing for a variety of different reasons.
The country represents a case of a middle power 10 which, due to its geostrategic position, is expected to play an increasingly relevant role in shaping SEA's security environment. As an important strategic player in the SEA and Asia-Pacific regions, Vietnam is in a position to contribute more positively to regional maritime security both alongside other middle powers and major powers in the Asia-Pacific. It is also a key player in ASEAN-centric architecture, helping to shape the future contours of the regional integration dynamics.
Finally, the relevance of this case study springs from the fact that "China's Dream" causes Vietnam to face stark choices, difficult dilemmas and acute challenges regarding its relationship with China.
However, these negotiating sessions did not see much progress for Vietnam's WTO accession and it was required that Vietnam needs to revise substantially its Offer. Enterprises suggest keys to boosting Vietnam-Russia trade August 4. All the above-mentioned constraints and dilemmas which Hanoi has been facing in light of the new assertive posture of a rising China have been critical to Vietnam's foreign policy choices in the complex SEA region. They have been established to discuss regional security issues, including maritime security, and are therefore critical to Hanoi's objective of dealing with the SCS disputes by moving them from a bilateral to a multilateral agenda. These commitments will be fulfilled in phases within 2 to 10 years. Accordingly, Vietnam is expected to continue to further develop relationships with major external players in addition to ASEAN, as part of its quest for economic growth and security.
At the same time, given the geographical proximity and the social-culture affinities, China's influence in Vietnam's economic and political security, in addition to the country's cultural and social life, is sizeable. Consequently, the country has seen its room for maneuver in both the regional and international sphere being dramatically reduced, increasing the feeling of necessity to notably turn the situation around by undertaking what this study calls "strategic hedging. Vietnam's foreign policy in the regional context.
The current political choices of Vietnam's foreign policy should be viewed as a consequence of the experience of both political and economic isolation which Vietnam underwent in the late s.
As a result of that, greater importance came to be ascribed to the expansion of foreign relations as the necessary condition, not only for overcoming political isolation and economic blockade, but also for building up a strong economy. Vietnam's economic reforms, which were inaugurated in , started to reflect this outlook: Hanoi recognized the importance of expanding foreign relations with all countries while paying special attention to its neighboring states and big powers. Lessons learned from the experience of isolation became part of a new foreign policy thinking, whose emphasis was now placed on the country's integration into regional and international markets on the basis of a new division of labor.
Eventually, this new thinking entailed the adoption by the Vietnamese leadership of a new concept: Reinforced by the "being-a-friend-to-all" approach, which Vietnam has consistently pursued since the end of Cold War, 12 the concept of "comprehensive security" has guided Vietnam's foreign policy until today. Since , as part of the new foreign policy thinking, the country has continuously promoted a rapprochement with China. In addition to this, Hanoi has been increasingly interested in participating in regional organizations, notably ASEAN.
In line with both the aspiration to open the country's economy and with the "being-a-friend-to-all" approach underlying national foreign policy, participation in such organizations has been viewed as crucial to both national security and economic development. However, Vietnam's bilateral relationship with China has not been free of tensions.
The legacy resulting from the border war in and the military conflicts linked to territorial disputes over the Spratly Islands in left their marks on the current Sino-Vietnamese relationship. Therefore, relations between the two countries represent a fundamental factor in Hanoi's strategic calculations, as it will be discussed later in the article. These historical legacies have aggravated the perception of complex security challenges confronting Hanoi.
Nowadays, they still shape the Vietnamese position regarding the SCS, hinder the positive evolution of the bilateral relations between Vietnam and China, and exacerbate the situation around the SCS conflicts. Nevertheless, the same historical legacies help explain some decisions and statements which may appear to be, to some observers, a diplomatic "overreaction.
In order to understand Vietnamese policy regarding the protection of its national interests in the SCS, it is important to take into account that, historically speaking, the relationship between Vietnam and China has always been embedded in a structure of persistent asymmetry. At the same time, the room of maneuver for the Vietnamese authorities has been rapidly decreasing, calling for a reaction on the part of Hanoi.
For example, the SCS disputes touch upon Vietnam's core national and security issues, as well as its economic development. With the adoption of this Law, the country for the first time has a document legally defining Vietnam's sovereign rights in the SCS. However, the Law clarifies that Vietnam's policy is oriented towards the principle of resolving the disagreements and disputes over the islands and seas by peaceful means, in accordance with the UNCLCS and international law and practices.
At the same time, it should be noted that the foreign policy options available to Hanoi have been limited. Both options which could be considered as an alternative to hedging, i. As for the ASEAN option, it represents a heterogeneous group of countries which do not necessarily support an overt objective of acting as a counterweight to China. A potential reordering of objectives stemming from a rethinking of the ASEAN relationship with China would put in danger the region's integration process.
The latter is clearly not an objective of the Vietnamese leadership. They have been established to discuss regional security issues, including maritime security, and are therefore critical to Hanoi's objective of dealing with the SCS disputes by moving them from a bilateral to a multilateral agenda. Furthermore, the discussion of the SCS issue entails the involvement of external players in their capacity as members of these fora to portray their commitment to strive towards peace, stability, and prosperity of the region.
Finally, it is important to note that when dealing with SCS issues, the Vietnamese authorities have been facing the need to strike a balance between domestic and international politics surrounding this matter. Internally, the Vietnamese government has been under pressure to introduce effective measures to protect the country's territorial integrity, to secure maritime interests, and to promote the welfare of its people. Hence, the government had to show a firm position on the SCS disputes in order to forge domestic consensus regarding a matter critical for national security. Externally, the government has attempted to avoid exacerbating the situation while trying to avoid being seen as adopting a confrontational approach with regard to the other claimants.
The reasons behind this foreign policy stance are twofold. All the above-mentioned constraints and dilemmas which Hanoi has been facing in light of the new assertive posture of a rising China have been critical to Vietnam's foreign policy choices in the complex SEA region. These choices ultimately culminate in the adoption of a position, which can be called "strategic hedging.
Hedging in Vietnam's foreign policy. Contemporary academic literature has paid little attention to the hedging strategy. That being said, hedging is defined as "a purposeful act in which a state seeks to insure its long term interests by placing its policy bets on multiple countering options that are designed to offset risks embedded in the international systems. Strategic hedging behavior, which may assume various forms, notably economic, diplomatic, or even military, "helps states cope with the threats and constraints they are likely to encounter under conditions of unipolarity, while simultaneously preparing them for new threats and opportunities that are likely to emerge as the system leader falls farther into relative decline.
It can enhance a given state's capabilities, impossible to obtain through other strategies, e. Moreover, strategic hedging can also improve the ability of the hedging state to decrease its dependence on public goods or direct subsidies which are provided by the country that is being hedged against.
The Vietnamese government saw the Chinese investment both as a solution to the problem of deficit reduction and as precondition of the increase of its exports, which had become critical after Vietnam's accession to the World Trade Organization WTO in However, the encouragement of Chinese investments in Vietnam had negative consequences. Eventually, China's leverage has increased with the possibility of introducing sanctions against Vietnam in the context of tensions in the SCS. Furthermore, encouraging the Chinese economic investment on national territory has been a double-edged sword for Vietnam's government also due to the prevailing strong anti-China domestic feelings.
Symptomatic of this is the criticism that has been voiced against the Prime Minister Nguyen Tan Dung by such high-ranked figures as the year-old General Vo Nguyen Giap, that is a national military icon. At the same time, the support given to the project by many of the most powerful members of the Vietnamese Communist Party was interpreted as a result of the Chinese bribery of these officials, viewed as being kowtowing to China and selling themselves out to Beijing and to capitalism.
Along these lines, the strategic hedging presented itself as an especially valuable political option to the Vietnamese government. That being said, strategic hedging is no panacea for the resolution of the SEA problems and involves risks. These risks are not only linked to Vietnam's foreign policy autonomy, but also to the formidable balance of power that has been promoted and safeguarded by ASEAN. The risks are exacerbated by the growing arm race in the region. According to Evan S. Medeiros, "hedging is fraught with complications and dangers that could precipitate a shift toward rivalry and regional instability," 27 mainly due to the increasing competitive engagement of external players in the Southeast Asia region, at the cost of the marginalization of ASEAN.
To be sure, this is a scenario that does not correspond to Vietnam's national interests. Finally, it should be said that in order to be a viable option the former requires flexibilities of alignments, 28 and a skillful implementation of the strategy involved. This hedging research stream suggests that Vietnam walks a very fine line in its strategy towards the US, ASEAN, and China, and makes adjustments depending on its national interest.
It also does not want to court trade only with American firms, nor does it want to court US support in security relations in the SEA region. Furthermore, Vietnam does not simply bandwagon with China. Therefore, given this preference for hedging dynamics, Vietnam has been opting for the following twofold strategy. On the one hand, Vietnam's foreign policy has sought to engage China while aiming to repair and deepen the relationship between the two countries.
On the other hand, Hanoi's strategy has been designed to buttress this foreign policy option by seeking to engage other great powers in the region, notably the US, India, Japan, the EU, and Russia, in order to counterweight Chinese ambition. While supporting this twofold strategic orientation, Vietnamese foreign policy has paid special attention to regional institutions, predominantly to ASEAN, due to its capacity of keeping China engaged while simultaneously restraining Beijing's assertive and sometimes even aggressive behavior in the SCS.
Economic relations are part of this twofold strategy: Vietnam uses its economic relations to deepen both bilateral ties with China and engage it in multilateral fora, such as ASEAN. Accordingly, Vietnam is expected to continue to further develop relationships with major external players in addition to ASEAN, as part of its quest for economic growth and security. An illustration of Vietnam's strategic hedging is the position adopted by the Vietnamese leadership on the issue of the Cam Ranh port.
The latter is strategically located in the SEA and Western Pacific and is only 1, km away from the Hainan Island, where the Chinese government established the Sansha administrative district. The importance of the base stems from the fact that this base can be used to encircle China, blocking its access to Asia-Pacific, thus diminishing China's extensive influence over Vietnam.
An upgraded Cam Ranh base might thus allow for naval force projections into disputed areas in the SCS. In the past years, especially since , Vietnam has strengthened its security cooperation and relationships with naval forces from the US, Russia, and India, among others, thereby reinforcing its strategic role in the region. However, instead of choosing one particular country and granting access to the latter, Hanoi's tactic has been to adopt strategic hedging.
Eventually, this option would allow maximizing the benefits brought about from using the base. The decision has been backed up by two carefully calculated steps. Eventually, the hedging illustrated by the case of the Cam Ranh port allowed Hanoi to achieve two goals. Firstly, in line with its foreign policy objectives, Hanoi avoided direct confrontation with China or any other party. The decision has also enabled Hanoi to profile itself as a "reliable partner," something that can help draw attention of major external players with geopolitical interests in the region.
Eventually, this increasing interest on the part of the external powers is expected to produce the necessary containment effect over Chinese behavior in the SCS. It comes as no surprise that Vietnam has been increasingly anxious about the growing power of the "Giant of the North" and its consequences for its national economic interests. China is currently one of the biggest economic partners of Vietnam and therefore holds an important position in the country's economy. Moreover, aid and financial assistance originating from Beijing and flowing to Vietnam indicate that finding out solutions regarding how to deal with Vietnam's increasingly powerful neighbor is far from an easy task.
The growing economic dependence on China has led to a drastic reduction of leverage for Hanoi's authorities i.
This considerably thwarts the capacity of Vietnam to resolve the SCS disputes on equal footing with China. In this regard, EU has the potential to profile itself as an economic partner able to ultimately counterbalance the economic leverage of China in the Vietnamese economy, favoring Hanoi. The latter's cooperation with Vietnam in the critical export-oriented rubber, tire, and coffee industries has increasingly transformed Vietnam into one of China's manufacturing and resource-saturated "provinces.
The rapport with the EU has been highly valued by Hanoi's authorities. Assessing bilateral cooperation between the EU and Vietnam, particularly in the fields of trade and investment, Vietnamese National Assembly Chairman Nguyen Sinh Hung referred to the EU's "privileged position in Vietnamese foreign policy. Due to the importance attached by both parties to the bilateral relationship, they have endeavored to strengthen their rapport so as to move it to a more advanced level.
The entry into force and subsequent implementation of the PCA and the eventual establishment of an FTA are recognized by Vietnam's Foreign Affairs Minister Pham Binh Minh as important new milestones in the evolution of relations between Vietnam and the EU, both bilaterally and multilaterally. Vietnam's exports to the EU have increased by The considerable trade turnover between the European companies and the regional states, including Vietnam, is closely connected to the freedom of navigation and the stability of the SCS. This fact has urged stronger EU engagement in regional security matters, and especially into the maritime security in the SCS.
In contrast, the EU is unwilling to have any significant military force in the region, which could further complicate the already puzzling regional military equation while sending wrong signals for both insiders and outsiders. The EU declines to participate in the region's militarization arguing that the region's realist thinking as well as its trends towards militarization and confrontational policies might lead the region into disastrous wars similar to the ones Europe experienced during the 20 th century. The latter provides guiding principles for solutions to the SCS disputes among claimants, which should be found through the application of "peaceful means, without resorting to the threat or use of force, through friendly consultations and negotiations by sovereign states directly concerned, in accordance with universally recognized principles of international law, including the UN Convention on the Law of the Sea.
Finally, the EU has declared that it was ready to share its own experiences with regards to maritime disputes and fishing rights. Thus, the EU strengthens its position in the SEA as a mediator in the current tensions and any potential conflict. As this strategic situation develops, the EU may be a useful element of balance. It is not difficult to find examples that illustrate the increasing role of the EU in the domain of the SCS issues. On the one hand, the EU has promoted the rapprochement with Vietnam. On February 29, , the 1 st EU-Vietnam political dialogue at the Vice-Minister level was established to exchange views on promoting convergence regarding several issues of common interest, including developments in the SCS.
On the other hand, at the 19 th ARF meeting held in Cambodia on July 12, , the EU, together with the US, reached a joint statement in which it was stated that they "will cooperate with Asian partners to enhance maritime security based on international law as specified in United Nations Convention on the Law of the Sea, as well as contribute to confidence building measures to increase trust in order to reduce the risks of crisis and conflicts.
However, an ever closer relationship between Vietnam and the EU has been critical to the Hanoi's approach marked by strategic hedging. In other words, it has been vital to diminish the country's economic dependence on China while generating further support to the existing regional security institutions which tend to restrain China's behavior. At the military-political level, the US remains the only external player in the SEA with the capacity of counterweighing China's powerful influence.
The military expenditure of the US exceeds that of China sevenfold and that of Russia tenfold. That being said, it is important to emphasize the significant role played by Russia when it comes to the issue of SCS disputes in which Vietnam has been involved.