Has the U.S.-Vietnam Bilateral Trade Agreement Led to Higher FDI into Vietnam?

Abstract

In December 2001, a Bilateral Trade Agreement (BTA) came into effect that normalized economic relations between the United States and Vietnam. The resulting surge in trade surpassed most expectations. The impact of the BTA on FDI, however, has been less visible, especially with regard to U.S. FDI into Vietnam. This paper uses new data that accounts for FDI by U.S. subsidiaries resident in third counties to show that U.S. firms have been much more aggressive investors in Vietnam than normally reported in typical bilateral FDI data using Balance of Payments definitions of capital flows. While the U.S. is widely reported as the 11th largest investor into Vietnam, the new data shows that U.S.-related FDI exceeded all other countries in 2004. Although a formal model is not developed, descriptive data supports strongly the conclusion that the BTA has had a major impact on FDI into Vietnam, especially with regard to FDI from U.S. multinationals