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Treating Vietnam as a Non-Market Economy Would Be “Very, Very Bad”

Vietnam, formally known as the Socialist Republic of Vietnam, operates “under the dictatorial one-party rule of the Communist Party of Vietnam,” which, according to Human Rights Watch, “severely restricts the rights to freedom of expression, association, peaceful assembly, movement, and religion.”  Similar to the People’s Republic of China, with whom Vietnam has recently reaffirmed its close relationship, the Government of Vietnam controls virtually all aspects of its economy, while also maintaining restrictions on basic political and human rights.

For instance, the Government of Vietnam employs heavy restraints on the ability of workers to collectively bargain, as well as complete control over the banking and financial sector through the State Bank of Vietnam.  Moreover, as observed by the Embassy of the Socialist Republic of Vietnam in the United States, “[p]rivate ownership of land is not permitted in Vietnam,” as “the people hold all ownership rights with the State as the administrator.”

Nevertheless, despite the fact that Vietnam continues to be run by a totalitarian government, the U.S. Department of Commerce is actively considering whether to recognize the country as operating in accordance with market economy principles for the purposes of our trade remedy laws, reversing the agency’s current treatment of it as being a “non-market economy.”  Vietnam’s Ambassador to the United States, Nguyen Quoc Dzung, recently emphasized the importance of this technical definitional issue to an American audience, arguing that it was unfair for Vietnam to be listed by Commerce as amongst the twelve “worst countries in the world” and predicting that if the agency continued to treat it as a non-market economy “it would be very, very bad for the two countries.”

Yet, contrary to the Ambassador’s statements, there are clear indications that it is not Americans who will benefit should Commerce acquiesce to Vietnam’s request for a “market economy” designation, but rather the Chinese.  Scores of organizations and businesses have submitted comments to the federal agency regarding the government of Vietnam’s request.  As might be expected, a wide range of American industries expressed strident opposition to treating Vietnam as a market economy.  In contrast, there was comparatively less public support voiced publicly by American companies in favor of Vietnam’s request.  Indeed, while American companies appear reluctant to weigh in on behalf of the Communist Party of Vietnam, Commerce received a letter of support from a steel trading company headquartered in Shanghai that emphasizes “very close relationships” with its steel suppliers, several of which are state-owned.  The Chinese steel company wanted Commerce to appreciate the importance of the presence of Vietnamese steel imports in the U.S. market.

The interest of Chinese companies in our treatment of the Socialist Republic of Vietnam comes at a time when Chinese investment in that country is booming, with Reuters reporting that “[r]egistered investment from China and Hong Kong combined rose to $8.2 billion in the first 11 months of this year, according to Vietnam’s official statistics, twice as much as the same period last year when China had pandemic restrictions, making them the biggest investors in Vietnam.”  This investment, in turn, creates another vehicle through which Chinese goods can be sold to the United States, often at the expense of existing U.S. tariffs on Chinese goods, giving Chinese businesses a direct stake in Commerce’s administrative proceeding.

The opportunity available to the Chinese Communist Party is made clear by U.S. import statistics.  After seeing sharp increases in the value of its exports of goods to the United States between 2000 and 2015, China’s exports to the United States have leveled off over the last seven years.

At the same time as China’s exports have flat-lined, Vietnamese shipments to the United States have flooded the market.  As shown in the table below, at the turn of the new millennium, the United States imported less than one billion dollars worth of goods from Vietnam.  Since then, Vietnam’s shipments to the United States have soared, reaching a record $124 billion in 2022, the last full year for which official U.S. import statistics are available.  Thus, while the value of Vietnamese imports was one percent of the value of Chinese imports into the United States in 2000, in 2022, the ratio had grown to twenty-five percent.

As shown in the table below, while the value of U.S. imports of Vietnamese-origin goods has ballooned, U.S. exports to Vietnam have not followed the same trajectory.  Instead, the Free Alongside Ship (“FAS”) value of U.S. exports to Vietnam reached $10 billion in 2016 and has remained near those levels ever since.  In contrast, the value of U.S. imports of Vietnamese-origin goods has nearly tripled since 2016, growing from $42 billion to $124 billion in 2022.

In result, the United States’ trade deficit with Vietnam has exploded over the last seven years, with U.S. imports of Vietnamese goods outstripping U.S. exports to Vietnam by $113 billion in 2022 compared to $32 billion in 2016.

Meanwhile, the influx of Vietnamese imports into the U.S. market over this time has had significant adverse impacts on American industries.  These trade dislocations are likely to substantially increase in the near future as the result of China’s massive investment in Vietnam, facilitating the establishment of Chinese production facilities within that country focused on exporting to the United States.  Since 2018, the United States has imposed thirteen antidumping and countervailing duty orders on eleven different products: tool chests and cabinets; laminated woven sacks; utility scale wind towers; mattresses; walk-behind lawn mowers; passenger vehicle and light truck tires; seamless refined copped pipe and tube; polyester textured yarn; raw honey; gas powered pressure washers; and paper file folders.  At present, Commerce is actively conducting antidumping and countervailing duty investigations of four additional product categories of imports from Vietnam: paper shopping bags; frozen warmwater shrimp; boltless steel shelving units prepackaged for sale; and aluminum extrusions.  This month, two more antidumping and countervailing duty petitions regarding Vietnamese products were also filed, with Commerce currently considering whether to formally initiate these investigations.

Yet, even with all of these indications of harm to American industries resulting from increased imports from Vietnam, Commerce has exercised its discretion to consider making it more difficult for U.S. businesses to obtain trade remedies against unfairly-traded goods from Vietnam.  These are the conditions under which the Communist Party of Vietnam, acting as Petruchio, demands that this Administration, playing Katharina, call the sun the moon. 

Declaring the economic system administered by the Communist Party of Vietnam to be a “market economy” would be good for the Socialist Republic of Vietnam and for the Chinese Communist Party.  In contrast, doing so would be “very, very bad” for American businesses and for American workers.

By welcoming hundreds of billions of dollars in goods from Vietnam into our market, the United States of America has shown its love for the Socialist Republic of Vietnam.  If this gift, for which there has been no recompense, does not make a friend, then we should let the Communist Party of Vietnam use the daylight to attempt to find some other equally generous comrade. 

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