Export risks could be tamed with market economy status, illustration photo/ Source: freepik.com

The Ministry of Foreign Affairs reported that during the working visit over a week ago to the US by Vietnamese Vice State President Vo Thi Anh Xuan, who is now the acting state president, she met with Patty Murray, president pro tempore of the US Senate.

“Vietnam stands ready to hold dialogue and exchanges with the US side on remaining differences, and Vietnam suggests that the US government and congress continue prioritising cooperation in facilitating trade and investment relations with the country, and promptly recognising Vietnam as a market economy,” acting State President Xuan said.

Murray stated her strong support for US efforts to promote its friendship and cooperation with Vietnam over recent times, and took notes of Vietnam’s proposals.

The Ministry of Industry and Trade’s (MoIT) Department for European and American Markets also reported that during the visit, MoIT Deputy Minister Phan Thi Thang met with Sarah Elleman, deputy assistant US trade representative for Southeast Asia-Pacific, to mobilise the US to soon lift Vietnam out of its list of nations having a non-market economy.

“Thang continues reiterating the importance for relevant agencies of the US government to have a substantive voice and support Vietnam’s early removal from the list of countries with a non-market economy,” said the department. “She also stated that recognising Vietnam as a market economy will allow Vietnamese firms to be treated more fairly, without affecting the legal rights of the US domestic manufacturing industry.”

In addition, according to the MoIT, the US’ recognition of Vietnam’s efforts in economic reform will create motivation for other economies as well as produce bigger momentum for Vietnam in improving the domestic investment and business climate, creating a stable supply chain for the import and consumption needs of US businesses and individuals.

Last week, Vietnamese National Assembly Chairman Vuong Dinh Hue welcomed the first Vietnam visit by a high-ranking delegation from the US-ASEAN Business Council (USABC). He spoke highly of the US government’s commitment to consider granting the market economy status to Vietnam, while also calling it “a practical and significant step that will lay a premise for all-around cooperation and benefit businesses and citizens of both countries.”

USABC President and CEO Ted Osius said the USABC has provided evidence of Vietnam’s market economy and submitted recommendations and reports to the US Department of Commerce (DoC).

In September, Vietnam filed an official request that the DoC consider it a market economy, citing the country’s economic reforms made in recent years. The following month, the DoC announced it will begin reviewing the non-market economy status of Vietnam.

“The DoC will carefully review the information submitted by the Vietnamese government concerning its market reforms, and will complete a review as expeditiously as possible, in accordance with US law. The DoC has 270 days to complete this review, which includes a public comment period before a determination is made,” it said.

Since the first anti-dumping investigation involving Vietnam in 2002, the US has considered Vietnam a non-market economy. According to US regulations, the determination of a market economy status is based on six criteria set by the DoC.

These criteria include the currency conversion rate, wage and labour negotiation issues, foreign investment levels, state and private ownership, government control over resources and prices, and other relevant factors.

At present, the US categorises 12 countries, including Vietnam, as non-market economies in trade defence cases, which has a significant impact on Vietnamese businesses, especially in anti-dumping investigations.

The US assesses a Vietnamese product’s value based on what it is worth in a third country (a market economy) and then assumes this is the likely production cost to a Vietnamese company, rather than using data provided by the company itself.

This calculation causes the dumping margin to be pushed up very high and does not actually reflect the status of Vietnamese companies.

If recognised, the market economy status will help Vietnam avoid anti-dumping duties by the US, and Vietnam would be able to make their products more competitive in the US market, also meaning that Vietnam’s export-oriented manufacturing sector will develop further.

Currently, the US is among the key export markets of Vietnam. Two-way trade between Vietnam and the US soared from $450 million in 1995 when the two countries established their diplomatic relations, to $110.6 billion last year. The figure hit $19.6 billion in the first two months of 2024, up from $15 billion recorded in the same period last year.

“While there may be some disagreement over whether Vietnam has adequately addressed each of the statutory criteria commerce uses to evaluate a country’s market economy status, it is certain that Vietnam’s economy is very different to the other 11 countries on the non-market economy list,” Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, told VIR.

“We believe that sufficient progress has been made and that promoting Vietnam to market economy status serves the interests of both of our great countries,” he said.

According to Vietnam’s Ministry of Planning and Investment, cumulatively as of February 20, the US was Vietnam’s 11th largest foreign investor with total registered capital of over $11.83 billion for nearly 1,350 valid ventures.

Chairman Hue stated that Vietnam encourages US businesses to increase investment and cooperation with Vietnamese counterparts in the sectors of green transition, clean and renewable energy, transport infrastructure, digital economy, high technology, healthcare and pharma, electronics, manufacturing, finance-banking, logistics, and quality workforce training.