Trade

U.S. Opposes Vietnam Market Economy Status

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The U.S. designates Vietnam as a ‘non market economy’ which often leads to the imposition of higher customs duties on Vietnamese exports.

Last year, the Vietnam Minister of Trade and Investment, Tran Tuan Anh, met with U.S. Trade Representative Robert Lighthizer and requested that the Southeast Asian country be recognized as a market economy and lift stringent new inspection regulations for Vietnamese catfish exports.

The U.S. refused the request and noted several issues that needed to be resolved before that could happen.

For starters, President Donald Trump is personally concerned about the $32 billion bilateral trade deficit with Vietnam and has stated he would place a hold on market economy status until that issue is resolved.

When President Trump hosted Prime Minister Nguyen Xuan Phuc in May 2017 they talked about the trade deficit, and the topic came up again when President Tran Dai Quang met President Trump in Hanoi in November 2017.

MARKET ECONOMY STATUS

Vietnam must remain a non market economy under U.S. law for up to 12 years after its accession to the World Trade Organization, which is in 2019.

This is why the dispute over Vietnamese catfish exports to the U.S. is important.

For starters Vietnamese exporters refused to cooperate with the U.S. Department of Commerce and consequently, stiff countervailing and antidumping duties were imposed on imports of the cheap catfish.

However, more importantly, this dispute could and most experts are of the opinion that it will delay the U.S. recognition of Vietnam as a market economy, which would lead to a continuation of high import duties on most ALL exports from Vietnam.

In June 2008 negotiations for a US-Vietnam Bilateral Investment Treaty stalled and experts believe the negotiations will be started later this year, although no official announcement has been made.

Before investing abroad, American businesses want to know if the bilateral investment treaty will be signed because it provides important legal protections for them. Accordingly, the catfish dispute also affects these investment negotiations.

Most of the Vietnamese media do not understand what foreign investment is and there is a lot of fake news regarding it. In Vietnam, if a business suggests they might invest in the country in the future and requests a land use permit, the media reports that as foreign investment.

If a business in 2017 got a land use permit and announced potential plans on investing $5 million in a manufacturing plant in 2025, the Vietnamese press reported it as foreign investment in 2017.

So, the foreign investment figures reported by the media are totally bogus.

But the point of all this is that the refusal of the Vietnamese catfish exporters to cooperate with the U.S. Department of Commerce is a huge deal that will cost Vietnam hundreds of millions if not billions of dollars if not resolved expeditiously.

 

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