by MICHAEL STUMO
While much of Washington frets about China’s rising influence, the Beltway’s globalist crowd is already turning its focus to the Socialist Republic of Vietnam.
In the same way that Congress erred 20 years ago in granting “normalized” trade status to China, insiders are now pressing the Commerce Department to reclassify Vietnam as a “market economy.”
Considering that Vietnam remains a state-run economy — and is a major transshipment point for China’s exports — this would be a huge mistake for America’s domestic producers and manufacturers.
Let’s be clear about what’s under consideration. As Hanoi readily states, the country is called the Socialist Republic of Vietnam.
Under the guise of this socialism, the country maintains an aggressive, top-down form of government. Private ownership of land is prohibited, for example, and Hanoi controls the national economy through a series of state-owned enterprises. Hanoi also deliberately undervalues its currency to maintain an export advantage while prohibiting Vietnamese currency from being exchanged internationally.
That’s hardly the agenda of a country ready for free-market status. But Vietnam also poses yet another challenge for the United States. It provides cover for Chinese exporters looking to avoid U.S. duties. Vietnam has been the focus of seven different investigations by the Commerce Department for such trade violations. And in each case, Vietnam was found to be serving as a way station for Chinese companies looking to bypass U.S. tariffs.
It shouldn’t be surprising that the Socialist Republic of Vietnam would collaborate in this way with China. Only two months ago, China pledged to deepen its bilateral ties with Vietnam. The two nations already have a cozy relationship, wherein Vietnam undertakes minor assembly of Chinese goods that should be subject to U.S. anti-dumping and countervailing duty orders.
The Commerce Department is fully aware of Vietnam’s culpability in helping China evade U.S. trade laws. Vietnam has been so successful in transshipping targeted Chinese goods that U.S. companies have been forced to file new trade cases only months after winning anti-dumping orders against China.
So, why expand “free trade” with Vietnam, since little is “free” about the country? Labor unions are greatly restricted, and there is little bargaining between workers and management.
Democracy itself is also in short supply. According to the State Department, Vietnam has become an “authoritarian state ruled by a single party, the Communist Party of Vietnam,” and its elections are “neither free nor fair.”
Of course, there are reasons why some in the global business community want to aid Vietnam. Granting “market” status would make it harder to investigate Vietnam’s future trade violations. And it would reduce the tariffs that could be imposed on Vietnamese exports. These are precisely the conditions that multinational firms seek when looking to move production to low-wage nations.
Vietnam has already benefited significantly from America’s wide-open consumer market. In the past decade, Vietnam has enjoyed a steadily rising trade surplus with the United States. And in 2022 alone, Vietnam took in more than $122 billion in trade profit from U.S. consumers.
It’s hard to see any tangible benefit that the United States could derive from classifying Vietnam as a market economy. Realistically, such a move would follow the same failed process that resulted in permanent normal trade relations status for China — a naive assumption that trade liberalization can persuade an authoritarian, communist country to become a capitalist, democratic nation.
It won’t work with Vietnam since prices and wages are arbitrarily adjusted to fit Hanoi’s national agenda. And it certainly won’t tackle Vietnam’s ongoing pattern of violating U.S. anti-dumping laws.
If the Department of Commerce wrongly determines that the Socialist Republic of Vietnam is a market economy, the United States will no longer have the ability to fully use U.S. trade laws to prosecute dumping by Vietnamese — and Chinese — companies. That would be a heavy price to pay for the naive goal of trying to democratize another authoritarian regime.
