Austria and Vietnam: Trade opportunities in times of geopolitical tension

Geopolitical tensions are reshaping global trade. Trade relations are increasingly aligned along geopolitical lines. The risk of disruptions is rising, and supply chains are becoming more fragile. For small, highly open economies such as Austria, this development entails considerable risks. At the same time, so-called connector countries are gaining in importance. These are states that adopt a geopolitically neutral stance. They are highly open to international trade and can play a stabilising, bridge-building role in an increasingly fragmented global trading system.

What role can connector countries play for Austria? What opportunities arise for companies and economic policy if trade relations with these countries are deliberately expanded?

Eva Willer, project manager in the field of macroeconomics, addresses these questions in her article “Connector Countries as a Response to Geopolitical Tensions: Austria’s Opportunities in Vietnam”, published in the spring issue of Wirtschaftspolitische Blätter (WPBI), which focuses on international trade. Using Vietnam as an example, she analyses how the targeted expansion of trade relations can strengthen Austria’s external economic resilience.

Connector countries strengthen external economic resilience

• Growing geo-economic fragmentation: The strategic rivalry between the United States and China is gradually reshaping global trade. Direct trade between the two major powers is becoming more difficult, increasing the importance of trade flows via third countries.
• Role of connector countries: Connector countries are characterised by a high degree of openness to foreign trade and close economic relations with different geopolitical blocs. They build bridges between potential blocs and thus help to maintain trade and investment linkages.
• Austria’s particular vulnerability: With a foreign trade ratio of around 77 percent, Austria is highly export-oriented. Trade disruptions caused by geopolitical tensions can therefore have severe economic impacts. In recent years, trade with countries geopolitically aligned with China has declined significantly. At the same time, trade with neutral states such as Vietnam has grown strongly.
• Vietnam as a strategic partner: Vietnam is regarded as one of the most important connector countries. It pursues a geopolitically balanced foreign policy, is deeply integrated into international trade agreements, and is among the fastest-growing economies in South-East Asia. This combination creates stable and predictable conditions for trade.
• Opportunities for key Austrian industries: In major export-oriented Austrian industries such as mechanical engineering, motor vehicle manufacturing and metal products, there is substantial potential for expansion in the Vietnamese market. At the same time, Vietnam offers Austria opportunities to further diversify the sourcing of intermediate inputs.
• Strategic integration required: Austria should integrate connector countries such as Vietnam more strongly into its external economic strategy. This can help reduce dependencies, spread risks and secure access to growth and procurement markets – even under conditions of increasing geo-economic fragmentation.

Methodological approach

The analysis draws on international trade data, empirical studies on geo-economic fragmentation, and model-based forecasts of Vietnam’s economic development. The focus is on selected sectors of particular importance to Austria’s foreign trade.

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