U.S. officials are considering a request from Vietnam to be removed from a list of “nonmarket” economies, a step that would foster improved diplomatic relations with a potential ally in Asia but would anger some U.S. lawmakers and manufacturing firms.
The Southeast Asian country is on the list of 12 nations identified by the U.S. as nonmarket economies, which also includes China and Russia because of strong state intervention in their economies.
Analysts believe Hanoi is hoping for a decision before the November U.S. election, which could mean a return to power of Donald Trump, who during his previous term as president threatened to boost tariffs on Vietnam because of its large trade surplus with the United States.
Under the Trump administration, the Department of Treasury also put Vietnam on a list of currency manipulators, which can lead to being excluded from U.S. government procurement contracts or other remedial actions. The Treasury, under the Biden administration, removed Vietnam from this list.
On the eve of President Joe Biden's September visit to Hanoi, where he and Vietnamese Secretary-General Nguyen Phu Trong elevated the U.S.-Vietnam relationship to a comprehensive strategic partnership, Vietnam formally asked U.S. Department of Commerce to remove it from the list of nonmarket economies on the grounds that it had made economic reforms in recent years.
The Biden administration subsequently initiated a review of Vietnam's nonmarket economy (NME) status. The Department of Commerce is to issue a final decision by July 26, 270 days after initiating the review.
"Receiving market economy status is the highest diplomatic priority of the Vietnamese leadership this year, especially after last fall's double upgrade in diplomatic relations," said Zachary Abuza, a professor at National War College where he focuses on Southeast Asian politics and security issues.
He told VOA Vietnamese that the Vietnamese “are really linking the implementation of the joint vision statement to receiving that status."
The U.S. is Vietnam's most important export market with two-way trade totaling more than $125 billion in 2023, according to U.S. Census data. But Washington has initiated more trade defense investigations with Vietnam than with any other country, mainly anti-dumping investigations. Vietnam recorded 58 cases subject to trade remedies of the U.S. as of August 2023, in which 26 were anti-dumping, according to the Vietnam Trade Office in the U.S.
Vietnam has engaged a lobbying firm in Washington to help it win congressional support for a status upgrade. A Foreign Agents Registration Act's statement filed to the U.S. Department of Justice shows that Washington-based Steptoe is assisting the Vietnamese Ministry of Industry and Trade and supporting the Vietnamese government in "obtaining market economy status in antidumping proceedings."
"I understand why Vietnamese are lobbying," said Murray Hiebert, a senior associate of the Southeast Asia Program at the Center for Strategic and International Studies (CSIS).
"One reason is U.S.-Vietnam relations have come so far, and to hold the non-market [status] is a little bit disingenuous because most of the countries that have this status are countries like China, Russia, North Korea, who are not so friendly with the United States. So I think [the U.S. recognition of Vietnam as a market economy] would be a sign that relations have improved."
US election key
Both Abuza and Hiebert believe that Vietnam is pushing hard to secure the upgrade before the November U.S. election that could bring Trump back into office.
"Trump began an investigation of Vietnam's dumping just before the end of his administration. He may again start that process," said Hiebert, who was senior director for Southeast Asia at the U.S. Chamber of Commerce before joining CSIS.
But Vietnam's campaign faces opposition from within the U.S.
More than 30 U.S. lawmakers in January sent joint letters to U.S. Secretary of Commerce Gina Raimondo urging the Biden administration not to grant market economy status to Vietnam. They argued that Vietnam did not meet the procedural requirements for a change of status and that granting Hanoi’s wish would be "a serious mistake."
The U.S. designated Vietnam as a nonmarket economy in 2002 during an anti-dumping investigation into Vietnamese catfish exports. Over the past 21 years, the U.S. has imposed anti-dumping duties on many Vietnamese exports, including agricultural and industrial products.
In a request sent to Raimondo to initiate a changed circumstances review, the Vietnamese Ministry of Industry and Trade said that over the past 20 years, the economy of Vietnam "has been through dramatic developments and reforms." It said 72 countries recognize Vietnam as a market economy, notably the U.K., Canada, Australia and Japan.
'Unfairly traded Chinese goods'
U.S. manufacturing groups have expressed opposition to Vietnam's request, arguing that Vietnam continues to operate as a nonmarket economy. In comments sent to Raimondo, the Alliance for American Manufacturing (AMM) said that Vietnam "cannot reasonably be understood to demonstrate the characteristics of a market economy."
"There's still heavy intervention by the governing Communist Party [of Vietnam]," said Scott Paul, president of AMM. "There's a lot of indication that China may be using Vietnam as a platform to also export to the U.S., which is obviously concerning to firms here," he said.
In a letter dated January 28, eight senators wrote "Granting Vietnam market economy status before it addresses its clear nonmarket behavior and the severe deficiencies in its labor law will worsen ongoing trade distortions, erode the U.S. manufacturing base, threaten American workers and industries, and reinforce Vietnam's role as a conduit for goods produced in China with forced labor."
Many Chinese products have been found to be disguised or labeled as "Made in Vietnam" to avoid U.S. tariffs since Trump launched a trade war with China in 2018. Vietnam has promised to crack down on the practice.
Abuza pointed out what he called a contradiction in U.S. policy.
"Vietnam is too important to the United States economically in terms of trade and foreign direct investment, and we cannot look to Vietnam for supply chain diversification out of China if it doesn't have market economy status."
Hiebert said the U.S. "should do this and get moving" as Vietnam is "one of the U.S.' best friends in Asia and Southeast Asia and help stand up to China."
