How the United States and CPTPP Countries Can Stop Vietnam’s Slide Toward China-Like Digital Protection and Authoritarianism

President Biden’s visit to Vietnam on September 10 highlights Vietnam’s critical role in regional defense, economic, and technology issues, given its central proximity and interests in the U.S.-China techno-economic conflict. The newly elevated “strategic partnership” will help Vietnam seize more high-tech economic activity in semiconductors and artificial intelligence, some of which will inevitably come from China. Ironically, despite all of this, Vietnam is pushing ahead with laws that resemble China-like digital authoritarianism and protectionism, such as its draft “Decree 72” on the management, provision, and use of Internet services and online information. The United States should call Vietnam out for these restrictive and regressive digital policies, threaten retaliatory trade measures if necessary, and call on it to play fair if it wants to benefit from U.S. digital and tech cooperation. In parallel, leading members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) should make it clear to Vietnam that they’ll initiate a dispute, given Decree 72 clearly breaches Vietnam’s CPTPP’s e-commerce provisions protecting data flows and prohibiting data localization.

Decree 72 expands Vietnam’s direct and restrictive control over the Internet, content, and data. It includes mobile and fixed-line Internet. It covers Internet service providers and Internet exchange providers, along with all country-level (.vn) domains. It covers online information, video games, “information security,” and the rights and obligations of individuals and organizations that manage, provide, and use Internet services. Most concerningly, Decree 72 would force foreign firms to store data locally (a concept known as data localization). Firms providing websites (article 37), social networks (article 38), content over mobile telecommunication networks (article 44), and online video games (article 66) would all be forced to store data locally. Local servers must pass a government inspection and examination.

The law’s data localization elements enable its regressive, human-rights-infringing provisions. Vietnam, like China, wants to force foreign firms to store data locally as a cudgel to provide easier access to data for surveillance and political purposes. Decree 72 makes firms responsible for strictly managing, identifying, and removing content at the behest of the Vietnamese Communist Party. Firms have to remove content within as little as 24 hours; otherwise, Vietnam may suspend or revoke their license—i.e., shut them down. For individuals, data localization enables political oppression by allowing the government to identify and threaten individuals, impacting privacy, data protection, and freedom of expression.

Beyond data privacy and other human rights concerns, data localization represents a discriminatory barrier to trade as it discriminates against foreign firms—who can’t use global IT systems, forcing them to set up expensive and duplicative local IT systems—in favor of local firms who are more likely to use local data service providers already. Vietnam’s Deree 72 raises clear trade and human rights law concerns for the CPTPP’s leading defenders of digital free trade, especially Australia, New Zealand, Japan, Singapore, and the United States, given the extent of U.S. tech firms operating in Vietnam.

Australia, Canada, Japan, New Zealand, and Singapore should make a clear and coordinated point to Vietnam that Decree 72 breaches its CPTPP trade law commitments and that they’ll initiate trade disputes if Vietnam does not change course. As noted, Decree 72 clearly breaches Vietnam’s CPTPP provisions to protect the free flow of data and prohibit data localization. Vietnam got a five-year grace period from potential enforcement action, but this only relates to its (then)-proposed Cybersecurity Law, which includes a general data localization requirement enacted via Decree 52 in October 2022. This enforcement grace period ends in January 2024. Either way, Decree 72 is not directly related to this Cybersecurity Law.

If CPTPP countries don’t push back against Vietnam’s digital restrictions, other CPTPP countries and prospective CPTPP members (like China) will think the CPTPP’s rules are not going to be enforced, so they, too, can enact restrictions on data flows. Such an outcome would undermine the CPTPP’s supposed position as a “gold standard” trade agreement, given its ambitious and supposedly enforceable e-commerce rules.

President Biden should make clear to Vietnam it will face consequences if it follows through with these restrictive digital policies, including expanded Special 301 investigations. Special 301 investigations have succeeded in getting Vietnam to back down in the past (including on parts of its cybersecurity and insurance business law), but this needs to be made clear again.

The United States should use Vietnam as a test case to address interrelated digital trade and human rights issues. The United States needs to find a way to confront countries like Vietnam—where it has strong ties, interests, and leverage. But to do this, the United States needs to use its leverage if it wants Vietnam to end up in a different position than China. The United States has been too slow, inconsistent, and hesitant to push back against China’s ever-creeping efforts to enact discriminatory and restrictive digital policies. For example, former President Obama raised some issues publicly, such as China’s proposed Counter-Terrorism law. However, this was the exception, not the norm. China saw that the United States wasn’t serious in its pushback and simply waited to try again. While China may never have been serious about pursuing a more open digital economy, the United States, alongside CPTPP countries, have far greater leverage to use with Vietnam than China. However, these countries need to use their leverage if they want Vietnam to reform its Decree 72 policy.

Together, the United States and its like-minded partners in the CPTPP can work together to push Vietnam to remove restrictive and repressive digital policies. But if they fail to act, the challenge of building an open, rules-based, and rights-respecting digital economy will only get harder.