Producers Say Not to Change Vietnam to Market Economy; Importers, Vietnam Disagree

Companies, labor unions and domestic producer coalitions that support antidumping and countervailing duties on Vietnamese exports all said Vietnam has not changed its practices enough to be considered a market economy in AD/CVD cases in the 21 years since the last evaluation of its status found it wasn't.

But companies that source from Vietnam, chambers of commerce representing businesses in Vietnam, and Vietnamese exporters described progress in all the areas considered under statute -- currency trading, state-owned enterprises, labor rights and openness to foreign direct investment.

Some of the more than 60 commenters in the Commerce Department docket also noted that 72 countries have classified Vietnam as a market economy. Comments close Jan. 18; the department is expected to make a decision in late July.

This is a sampling of the comments received to date.

Samsung said it hasn't been discriminated against in its 15 years manufacturing in Vietnam, and it has become one of the country's largest employers.

"Vietnam increasingly has emerged as a stable, secure supply chain partner, to the ultimate benefit of the U.S. economy. To illustrate, Vietnam now is one of Samsung’s key suppliers to U.S. consumers, alongside our products made in the United States, South Korea, and Mexico, in particular," the company said, and asked that Vietnam be granted market economy status.

The American Association of Exporters and Importers said strengthening the trading relationship with Vietnam is favorable, but didn't address the factors the government should consider.

The National Association of State Departments of Agriculture said Vietnam is the ninth-largest market for agricultural exports. "It is critical that we continue to prioritize actions that nurture this market and enhance opportunities for expanded trade," the group said. It acknowledged that imports of Vietnamese honey -- the trade remedy case that is the foundation for this review -- are sensitive. "Nevertheless, we believe that Vietnam can now be designated as a market economy, and with aggressive oversight to ensure data accuracy, we are confident that Vietnam has progressed to the point where their domestic data can and should be used in ongoing and future antidumping and countervailing duty determinations," NASDA wrote.

The American Chamber of Commerce in Vietnam also didn't address the criteria, but said it supports the petition.

The Retail Industry Leaders Association and the American Apparel and Footwear Association said in a joint filing that changing Vietnam's status would strengthen trade and investment, and reinforce the administration's "messaging about the importance of Vietnam as a trusted partner with respect to U.S. government and business interests."

"The Associations’ members source a variety of goods -- including apparel, footwear, electronics, home goods, furniture, power tools, decorative and holiday items, luggage, and toys -- from trusted partners in Vietnam who meet our members’ rigorous quality and safety standards," the groups wrote. "Many members have been doing business with Vietnam for over 20 years and can attest to the significant progress that Vietnam has achieved with its market-based economic reforms."

Footwear Distributors and Retailers of America said Vietnam has transitioned from a centrally planned economy in 1986 " to a market-based, globally integrated economy...."

FDRA said that Vietnam made binding commitments on collective bargaining, treatment of foreign investors and currency in the Comprehensive and Progressive Trans Pacific Partnership, in its Trade and Investment Framework Agreement with the U.S., and in its free trade agreement with the EU.

"Regarding wage rates, we have seen firsthand labor’s ability to successfully negotiate rates well above Vietnam’s minimum wage. Factory wages in Vietnam have more than doubled since 2011, three times the rate of increase in the United States," FDRA wrote.

The group acknowledged state-owned enterprises dominate energy, technology finance and infrastructure, but said that's also true of India, Saudi Arabia, Indonesia and others that are considered market economies. "Vietnam’s SOEs accounted for 30 percent of GDP in 2019, no more than many of these other emerging economies," the group wrote.

The US-ASEAN Business Council said that it has pushed Vietnam to become more market-oriented, and that Vietnam has adopted "almost all of our recommendations, some faster than others, but all the basics of a market economy are now there in the country."

The council said Vietnam has a “managed floating” exchange rate, and that outside the pharmaceutical sector, "our companies generally do not have any problems investing in Vietnam, even in those industries that are subject to restrictions."

Catfish Farmers of America, in a submission prepared by Wiley, wrote: "As a victim of traditional trade policy, the domestic catfish industry has been decimated by unfairly traded imports from Vietnam over the last 20 years with severe negative consequences for U.S. workers and communities."

The group said about 90% of catfish processors in the U.S. are black or Hispanic, and work in poor rural areas in the South, and that Biden's worker-centric trade policy has to protect "these persistent poverty and underserved communities from unfairly traded Vietnamese imports, including retaining Vietnam’s non-market economy status."

The group said that even with antidumping duties in place, Vietnamese catfish exports have gained "more than 65 percentage points of market share [at the expense of] domestic producers since 2000."

The Southern Shrimp Alliance wrote that Vietnam's fish and shellfish exports, both farmed and caught, are fifth most valuable for that country, at about $9 billion a year. They said farmed fish is subsidized by government rent fee and tax reductions, and that Vietnamese fishing boats are likely to employ child and forced labor, according to the U.S. Department of Labor.

The Vietnam Association of Seafood Exporters and Producers, in a submission prepared by Akin Gump, noted that antidumping duties have been in place on its frozen fish filet exports since 2003 and on frozen shrimp since 2005.

The group said third-party analysis of foreign direct investment regulation found that Vietnam is less restrictive than India, Indonesia, Thailand and Iceland -- all classified as market economies.

It rebutted some of the domestic interests' arguments about Vietnam's return to the currency manipulation monitoring list in 2022.

"The inclusion of Vietnam to the Monitoring List does not mean the Government of Vietnam is conducting some suspicious behavior. It merely reflects that Vietnam, along with other market economies including Germany, Singapore, and Taiwan, met two of the three criteria provided under the Trade Facilitation and Trade Enforcement Act of 2015 by achieving a 'significant bilateral trade surplus with the United States' and 'material current account surplus,' neither of which themselves are indicative of any restrictions on currency exchange, let alone its manipulation."

"There are multiple countries that Commerce treats as market economies whose governments are just as involved in their economies as the Vietnamese Government is involved in its economy, if not more so," the association said.

Mattress manufacturers and the United Steelworkers, which represents unionized mattress company employees, said that Vietnam subsidizes priority industries. "There are currently 27 active orders or ongoing investigations into dumping from Vietnam, and four active orders or ongoing investigations into subsidization," including on mattresses, the mattress manufacturers said.

The submission said that while FDI is growing in Vietnam, much of it is coming from China. They also said Vietnam is a bad actor in trade remedy circumvention. Just in the last six months, "the Department issued four additional affirmative determinations of Chinese circumvention through Vietnam, one affirmative preliminary determination, and self-initiated an inquiry into an additional circumvention scheme through Vietnam."

The Coalition for a Prosperous America wrote that "Vietnam is simply not a market economy by any measure. 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.

"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. It did not work with China. And it won’t work with the Socialist Republic of Vietnam."

The Alliance for American Manufacturing said that "graduating Vietnam to market economy status would jeopardize the United States’ economic and national security interests because the government of Vietnam is formally connected to China politically, defensively, and economically. Specifically, Vietnam is a hub for forced labor and Uyghur Forced Labor Prevention Act ('UFLPA') circumvention."

The American Iron and Steel Institute pointed specifically to hardwood plywood circumvention and to stainless steel sheet and strip trade remedy circumvention -- both products made in China and minimally processed in Vietnam.

The group said that Vietnam undervalues its currency to help its exporters -- and pointed to the fact that the Commerce Department treated that currency practice as a subsidy in its case on Passenger Vehicle and Light Trucker Tires from Vietnam.

The Steel Manufacturers Association said granting market economy status could harm "the domestic steel industry and other U.S. industries that rely on robust trade remedy enforcement to level the playing field against unfair trade.

"In the Vietnamese steel industry in particular, decades of [Vietnamese] industrial policy planning have resulted in the provision of extensive state support and a rapid buildup of steelmaking capacity that is entirely untethered from domestic demand."

The SMA noted that even after 25% tariffs were applied to Vietnamese steel, it still exports 850,000 metric tons to the U.S. -- up from 40,000 metric tons in 2010, and only down 15% from the peak before the tariffs were imposed.

"Since 2018, the Department has found in at least 11 instances that steel producers in Vietnam were circumventing U.S. trade remedy orders," the SMA said.

U.S. Steel noted that Vietnam is the 13th largest steel producer globally, and produced 29.3 million tons of finished steel in 2022. That year, Vietnam only consumed 22.2 million tons -- and half its consumption was supplied by imported steel.

The company quoted a recent article about the outlook for the Vietnamese steel sector in 2024 that said the Vietnam Steel Association asked the government "to assist the industry in the wake of falling prices … 'due to gloomy real estate market, slow public investment disbursement, and fierce competition from China' by infusing the Vietnamese steel market with 'public capital.'"

Nucor, Cleveland-Cliffs and other domestic steel producers said "graduating Vietnam to market economy status is inconsistent with the six statutory factors, would primarily benefit China, and will devastate U.S. industries already competing with large volumes of unfairly traded Vietnamese imports. This is especially apparent in the steel industry. As discussed below, the Government of Vietnam has spent more than two decades rapidly expanding capacity, production, and exports through direct incentives, preferential financing, and state ownership. Prematurely granting Vietnam market economy status will result in significantly larger volumes of unfairly traded steel imports from Vietnam, including steel produced by Chinese companies."

The Vietnam Steel Association said the Vietnamese dong is fully convertible, there are no restrictions on FDI and unions are free to organize in their industry. They said that among six categories of steelmaking, two have virtually no state investment, three have less than 10% state ownership and only construction steel has 19% state investment.

The Vietnam Chamber of Commerce and Industry acknowledged that the government manages the exchange rate, but said it lets it float within 5% up or down daily.

"In the efforts to make Vietnam a beneficial and safe destination for FDIs, Vietnam does unilaterally grant all foreign investors, including U.S. investors, treatments of the highest standards that are committed to its FTA partners in new-generation FTAs such as CPTPP, EVFTA, etc. (including but not limited to the full compensation in cases of expropriation, the freedom of capital and profit transfers, the promise to refrain from imposing or enforcing any requirement that interferes into the business autonomy of foreign investors, etc.)," the Chamber wrote. It said the Biden administration's decision to upgrade its relationship with Vietnam to a comprehensive strategic partnership is proof of its progress.

Vietnam Cotton and Spinning Association said that Vietnam is the U.S.'s largest export market for cotton, buying about 25% of cotton exports, and that the U.S. is the largest importer of Vietnam's textiles -- and all those deals are done in dollars.

In the textile and apparel industry, VCASA wrote, there is no discrimination in favor of state-owned enterprises, 80% of companies have unionized workforces, and there is no restriction on foreign investment -- in fact, foreign firms account for about two-thirds of the output in the sector.

"One of the most critical issues is to prevent forced labor in the industry. Cotton is mainly imported from the markets that the United States does not determine to have the practice of forced labor. For example, Vietnam imported most cotton from the US (31%), Australia (29%), Brazil (20%), and India (7%) in 2022," VCASA wrote.

Unions came out against the idea of re-classifying Vietnam.

The American Federation of Labor and Congress of Industrial Organizations wrote: "In 2022, Vietnam contributed $115 billion to our trade deficit. This translates to lost jobs, shuttered factories and struggling communities. There are currently over 20 antidumping duty orders and investigations against producers in Vietnam that could be adversely impacted by a change of status. This problem is likely to grow more acute as Vietnam continues, and potentially expands, its role as a final assembly destination for intermediate products manufactured in China."

The United Steelworkers union said it "believes the overwhelming evidence indicates Vietnam does not meet the necessary substantive criteria Commerce must consider for it to be designated a market economy.

"The premature granting of market economy status to Vietnam, without addressing its unmistakable non-market behavior and other significant deficiencies, would worsen existing trade distortions and undermine trade remedies for U.S. workers and industries. This would diminish the U.S. manufacturing base, and bolster Vietnam's position as a platform for unfairly traded Chinese goods," the union wrote.

The USW said workers cannot form independent unions "and the state maintains control over the only trade union available," and state-owned enterprises have a "pervasive role" in shaping the economy, particularly in banking, energy and transportation. "Government intervention extends to the allocation of resources, and influences the pricing and output decisions of enterprises through a range of policies, including subsidies, tariffs, quotas, licenses, and multi-year economic plans."