The Socialist Republic of Vietnam is a nation where the economy remains highly controlled by the government. According to a report by the U.S. State Department, Vietnam “is an authoritarian state ruled by a single party, the Communist Party of Vietnam” and its elections are “neither free nor fair.”
Despite the government’s stranglehold on Vietnam’s economy, a group of globalist special interests called on the Biden administration to revoke Vietnam’s non-market economy status. Thankfully, the U.S. Commerce Department rejected these misguided calls, ruling last week against providing Vietnam market economy status.
The last thing the United States needs is for Vietnam, now our third largest trade deficit nation, to be granted market economy status. That would give the myriad collection of Chinese multinationals, from solar panel makers to furniture, a great way to get around tariffs imposed on the goods those companies produce on the mainland. Earlier this year, CPA outlined why the Biden administration should not grant market economy status to Vietnam.
“The misguided effort to classify the Socialist Republic of Vietnam as a market economy is similar to the failed thinking that led to granting permanent normal trade relations status to China — a diplomacy-driven groupthink that fake trade liberalization will persuade a dedicated communist country to become capitalist, democratic, and liberalized,” CPA’s letter states. “It did not work with China. And it won’t work with the Socialist Republic of Vietnam.”
“Vietnam is simply not a market economy by any measure,” CPA’s letter continues. “State-owned firms dominate the economy, and Chinese-owned firms are pervasive. Prices and wages are not set by market forces and are thus arbitrary or simply adjusted to comport with national policy goals. The dong is not a convertible currency. And the Socialist Republic of Vietnam is a superhighway transshipment route for unlawful and duty-evading Chinese projects.”
“Despite Vietnam’s substantive reforms made over the past 20 years, the extensive government involvement in Vietnam’s economy distorts Vietnamese prices and costs and ultimately renders them unusable for the purpose of calculating U.S. antidumping duties,” the U.S. Embassy in Vietnam said.
Non-market status just means anti-dumping duties are calculated at a higher rate than market economies.
CPA’s comment letter also provided evidence of how “Vietnam is engaged in a pattern of violation of U.S. anti-dumping laws.” According to the law firm of Cassidy Levy Kent, “[O]ver the last decade, Vietnam has been the target of a successive dumping investigation seven different times after the original target – the People’s Republic of China (“PRC”) – was found to be engaged in injurious dumping. Within as little as 130 days after the date of the anti-dumping duty order concerning China, new producers in Vietnam were subject to ultimately successful allegations of dumping in the United States.”
Last August, Commerce ruled against four Chinese solar multinationals that they say were circumventing tariffs in Vietnam, along with three other Southeast Asian nations. And on June 7, the International Trade Commission responded to charges of dumping by American solar manufacturers like publicly traded First Solar to investigate Vietnam again. That case is ongoing with a decision expected in October.
There is no reason to think that economic concessions would lead Vietnam to align with the United States over next door neighbor China. The United States agreed to be a “comprehensive strategic partner” with Vietnam, but China and Vietnam had already agreed “to build a Vietnam-China community with a shared future, which holds strategic significance” months earlier. No matter how much Vietnam is being wooed by Washington, it makes sense for them to maintain its close political and economic ties with the world’s No. 2 economy with whom it shares a roughly 800 mile border.
Many members of Congress were against granting Vietnam market economy status.
“Commerce Secretary Gina Raimondo should listen to the concerns of American workers, not jeopardize their job security with bad trade policy. Upgrading Vietnam’s status before its labor standards are improved, including a greenlight for goods produced by forced labor in China, would be a serious mistake,”said Sen. Elizabeth Warren (D-MA) in January.
The Congressional Steel Caucus came out against it on June 27 in a letter to Raimondo.
Giving Vietnam market economy status would devastate U.S. industries already damaged by Vietnam’s dumping and impossible-to-compete low wage and currency differentials.
Vietnam is not a market economy, and today’s decision upholds that fact.
In theory, granting a country market economy status could open it up to more American foreign direct investment. However, in 2015, U.S. companies invested around $1.7 billion into Vietnam, based on Bureau of Economic Analysis data. By 2022 it was $3.4 billion, all without getting market economy status.
Vietnam Already Has A Deep Footprint In U.S. Economy
Vietnam has become the outsourcing nation of choice for China. Many American companies have also contracted manufacturers there in order to avoid geopolitical tensions of doing business in China. This has given Vietnam a solid foothold in the U.S. economy, despite its current status as a non-market economy no different than China.
As far as Vietnam being a buyer of U.S. goods, commodities or manufactured goods, the Vietnamese currency is worth less than half a penny. They cannot afford to purchase U.S. goods of any significance, but instead can be a magnet for foreign direct investment by U.S. companies looking to manufacture there and ship here. This decision by Commerce does not change that fact.
Vietnam’s economy is more state run than China’s.
Based on 2018 numbers by the Asian Development Bank, some 30% of Vietnam’s GDP is generated by state owned enterprises (SOE), which is a little more than China SOEs.
Last year, our 2023 trade deficit with Vietnam was $104.5 billion, down from the 2022 record of $116.1 billion. Only our trade deficit with Mexico ($152 billion) and China ($279 billion) is larger.
Those who say Commerce’s decision was wrong-headed and protectionist are wrong, as Vietnam’s share of the U.S. goods deficit has grown rapidly all the while not being a market economy.
The China-Vietnam Connection
China was Vietnam’s biggest trade partner in the first half of 2024, with a total trade value of $94.8 billion, followed by the U.S. at $61.4 billion. China was also Vietnam’s largest import market, while the U.S. was Vietnam’s biggest export destination.
Vietnam imported $67 billion worth of goods from China, a 34.7% year-over-year increase, and shipped $27.8 billion in exports to China in the first half of the year, up 5.3%. Vietnam’s exports to the U.S. rose 22.1% year-over-year in the first half to $54.3 billion suggesting another $100 billion-plus deficit is in the works. By comparison, U.S. imports rose 2.8% to $7.1 billion. Vietnam is clearly yet another source of low-wage goods, enmeshed with the Chinese economy, and the perfect spot to evade tariffs imposed on the same mainland China companies that have either set up shop there or are contract manufacturing and exporting from there. The U.S. is still doing Vietnam large favors as it remains their go-to market. Commerce did not need to grant them any more benefits than they have now – which is rising FDI from the U.S., and greater interest in Vietnamese imports. What more do they need?
“Vietnam has a unique combination of state support for industry, low wages, poor working conditions, and an export-led growth strategy,” CPA chief economist Jeff Ferry said. “Anything we do to encourage trade with Vietnam will be at the expense of U.S. workers and U.S. businesses.”
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
Vietnam is Not a Market Economy. Commerce Gets it Right, and Here’s Why.
The Socialist Republic of Vietnam is a nation where the economy remains highly controlled by the government. According to a report by the U.S. State Department, Vietnam “is an authoritarian state ruled by a single party, the Communist Party of Vietnam” and its elections are “neither free nor fair.”
Despite the government’s stranglehold on Vietnam’s economy, a group of globalist special interests called on the Biden administration to revoke Vietnam’s non-market economy status. Thankfully, the U.S. Commerce Department rejected these misguided calls, ruling last week against providing Vietnam market economy status.
The last thing the United States needs is for Vietnam, now our third largest trade deficit nation, to be granted market economy status. That would give the myriad collection of Chinese multinationals, from solar panel makers to furniture, a great way to get around tariffs imposed on the goods those companies produce on the mainland. Earlier this year, CPA outlined why the Biden administration should not grant market economy status to Vietnam.
“The misguided effort to classify the Socialist Republic of Vietnam as a market economy is similar to the failed thinking that led to granting permanent normal trade relations status to China — a diplomacy-driven groupthink that fake trade liberalization will persuade a dedicated communist country to become capitalist, democratic, and liberalized,” CPA’s letter states. “It did not work with China. And it won’t work with the Socialist Republic of Vietnam.”
“Vietnam is simply not a market economy by any measure,” CPA’s letter continues. “State-owned firms dominate the economy, and Chinese-owned firms are pervasive. Prices and wages are not set by market forces and are thus arbitrary or simply adjusted to comport with national policy goals. The dong is not a convertible currency. And the Socialist Republic of Vietnam is a superhighway transshipment route for unlawful and duty-evading Chinese projects.”
“Despite Vietnam’s substantive reforms made over the past 20 years, the extensive government involvement in Vietnam’s economy distorts Vietnamese prices and costs and ultimately renders them unusable for the purpose of calculating U.S. antidumping duties,” the U.S. Embassy in Vietnam said.
Non-market status just means anti-dumping duties are calculated at a higher rate than market economies.
CPA’s comment letter also provided evidence of how “Vietnam is engaged in a pattern of violation of U.S. anti-dumping laws.” According to the law firm of Cassidy Levy Kent, “[O]ver the last decade, Vietnam has been the target of a successive dumping investigation seven different times after the original target – the People’s Republic of China (“PRC”) – was found to be engaged in injurious dumping. Within as little as 130 days after the date of the anti-dumping duty order concerning China, new producers in Vietnam were subject to ultimately successful allegations of dumping in the United States.”
Last August, Commerce ruled against four Chinese solar multinationals that they say were circumventing tariffs in Vietnam, along with three other Southeast Asian nations. And on June 7, the International Trade Commission responded to charges of dumping by American solar manufacturers like publicly traded First Solar to investigate Vietnam again. That case is ongoing with a decision expected in October.
There is no reason to think that economic concessions would lead Vietnam to align with the United States over next door neighbor China. The United States agreed to be a “comprehensive strategic partner” with Vietnam, but China and Vietnam had already agreed “to build a Vietnam-China community with a shared future, which holds strategic significance” months earlier. No matter how much Vietnam is being wooed by Washington, it makes sense for them to maintain its close political and economic ties with the world’s No. 2 economy with whom it shares a roughly 800 mile border.
Many members of Congress were against granting Vietnam market economy status.
“Commerce Secretary Gina Raimondo should listen to the concerns of American workers, not jeopardize their job security with bad trade policy. Upgrading Vietnam’s status before its labor standards are improved, including a greenlight for goods produced by forced labor in China, would be a serious mistake,” said Sen. Elizabeth Warren (D-MA) in January.
The Congressional Steel Caucus came out against it on June 27 in a letter to Raimondo.
Giving Vietnam market economy status would devastate U.S. industries already damaged by Vietnam’s dumping and impossible-to-compete low wage and currency differentials.
In theory, granting a country market economy status could open it up to more American foreign direct investment. However, in 2015, U.S. companies invested around $1.7 billion into Vietnam, based on Bureau of Economic Analysis data. By 2022 it was $3.4 billion, all without getting market economy status.
Vietnam Already Has A Deep Footprint In U.S. Economy
Vietnam has become the outsourcing nation of choice for China. Many American companies have also contracted manufacturers there in order to avoid geopolitical tensions of doing business in China. This has given Vietnam a solid foothold in the U.S. economy, despite its current status as a non-market economy no different than China.
As far as Vietnam being a buyer of U.S. goods, commodities or manufactured goods, the Vietnamese currency is worth less than half a penny. They cannot afford to purchase U.S. goods of any significance, but instead can be a magnet for foreign direct investment by U.S. companies looking to manufacture there and ship here. This decision by Commerce does not change that fact.
Vietnam’s economy is more state run than China’s.
Based on 2018 numbers by the Asian Development Bank, some 30% of Vietnam’s GDP is generated by state owned enterprises (SOE), which is a little more than China SOEs.
Last year, our 2023 trade deficit with Vietnam was $104.5 billion, down from the 2022 record of $116.1 billion. Only our trade deficit with Mexico ($152 billion) and China ($279 billion) is larger.
Those who say Commerce’s decision was wrong-headed and protectionist are wrong, as Vietnam’s share of the U.S. goods deficit has grown rapidly all the while not being a market economy.
The China-Vietnam Connection
China was Vietnam’s biggest trade partner in the first half of 2024, with a total trade value of $94.8 billion, followed by the U.S. at $61.4 billion. China was also Vietnam’s largest import market, while the U.S. was Vietnam’s biggest export destination.
Vietnam imported $67 billion worth of goods from China, a 34.7% year-over-year increase, and shipped $27.8 billion in exports to China in the first half of the year, up 5.3%. Vietnam’s exports to the U.S. rose 22.1% year-over-year in the first half to $54.3 billion suggesting another $100 billion-plus deficit is in the works. By comparison, U.S. imports rose 2.8% to $7.1 billion. Vietnam is clearly yet another source of low-wage goods, enmeshed with the Chinese economy, and the perfect spot to evade tariffs imposed on the same mainland China companies that have either set up shop there or are contract manufacturing and exporting from there. The U.S. is still doing Vietnam large favors as it remains their go-to market. Commerce did not need to grant them any more benefits than they have now – which is rising FDI from the U.S., and greater interest in Vietnamese imports. What more do they need?
“Vietnam has a unique combination of state support for industry, low wages, poor working conditions, and an export-led growth strategy,” CPA chief economist Jeff Ferry said. “Anything we do to encourage trade with Vietnam will be at the expense of U.S. workers and U.S. businesses.”
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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