Kamala Harris Should Offer “Market Economy” Status to Vietnam
Fall of Kabul drew comparisons with America’s chaotic pullout from Saigon, raising concerns over vice president’s timetable Kamala harrisKamala Harris Sleeping guard dogs? Some rating agencies don’t bark amid debt ceiling deadlock Harris visits Singapore and Vietnam amid turmoil in Afghanistan BIPOC’s life really matters in new census report MOREvisit to Vietnam. His trip aims to reassure Southeast Asian countries that the United States views the region as more than real estate in its rivalry with China. This is a difficult task at the best of times, and it is not it. There is something Harris can do to get the job done: give Vietnam “market economy” status.
Vietnam is one of 11 countries that the United States refers to as a “marketless economy”. This means that Washington does not believe that the Vietnamese economy operates on “market principles of costs or price structures …”. Rather, Washington says the visible hand of government orchestrates economic performance, not the invisible hand of the market. It’s not just a slight. The result of being designated as a non-market economy is that Vietnamese exporters are highly exposed to US trade remedies, especially anti-dumping duties. Let me explain.
Imagine that an American company claims that a foreign company is selling for less than its cost price. This is called dumping, the remedy for which is an anti-dumping duty, or tariff, to compensate for this discount. One would think that dumping would be welcome, given that it means cheaper imports. But the United States, like other countries, is fighting back over it. This is because of the fear of predation: a foreign company can sell at a low price to drive out its competitors, then price like a monopoly.
If this foreign company is from a “market economy” like Canada, it is allowed to defend itself with its own cost data. But if the foreign company is from a non-market economy, like Vietnam, then it cannot, because this data is believed to be tainted with government intervention. So, like other countries, the United States can use a third country as an indicator of the cost structure of the business. This choice of a proxy is politically charged because if its cost structure does not really match, the outcome of the investigation is likely to be predicted in advance.
The United States was expected to designate Vietnam as a market economy in 2019. The idea was that Vietnam would be able to transition from a “socialist-oriented market economy” as it is called. the constitution of the country, to a market economy. within 12 years of joining the World Trade Organization (WTO).
But in 2019, the United States’ trade relationship with Vietnam was on the rocks. President TrumpDonald TrumpDemocrats sound the alarm over loss in Connecticut suburb Abbott Laboratories orders employees to dispose of COVID-19 testing equipment promptly Sunday shows sneak peek: chaos in Kabul hampers US evacuation efforts United PLUS saw Vietnam as a major economic threat, saying in an interview that the country “is almost the worst – it’s much smaller than China, a lot – but it’s almost everyone’s worst aggressor.” It was, and is, nonsense.
The United States is certainly complaining about access to the Vietnamese market. But if you just count the 2021 Foreign Trade Barrier National Trade Estimate Report pages devoted to each US trading partner, the US trade representative spends only 10 for Vietnam. To put this in perspective, there are seven pages on Canada, 35 on China and 50 on the European Union (EU). Also, if you take a close look at what these complaints are about, they mostly relate to the kind of complex measures that cloud U.S. trade relations with all countries, like food safety standards.
Or look at WTO litigation as a measure. The United States has never sued Vietnam. No country has. For its part, Vietnam has filed four WTO complaints against the United States, three for anti-dumping duties on seafood and one for food safety standards on pangasius. Vietnam’s only other case at the WTO was against Indonesia, also for anti-dumping duties. More tellingly, about two-thirds of Vietnam’s 34 third-party appearances in WTO litigation relate to trade remedies, and anti-dumping duties in particular. That says a lot about the weight of the matter.
Designating Vietnam as a market economy will not end US anti-dumping duties against the country, especially on catfish. It will simply mean that Vietnamese producers can use their own cost data to defend themselves. It may not seem like a big deal, but it will mean everything to Vietnam.
From Vietnam’s point of view, this would be the most credible signal that the United States is finally interested in “normalizing” bilateral trade. Countries like Australia, India, Japan and South Korea have already granted Vietnam market economy status. Nor would the message be lost on China, the other non-market economy the United States was due to reclassify in 2016, but failed to do so. There are few gestures, if any, that would have this same political signal-to-noise ratio.
Additionally, the Biden administration does not have a long list of economic concessions it can credibly offer Vietnam at this time. A bilateral investment treaty has been in the works since 2008, but it’s not on Biden’s radar. The United States is also apparently in no rush to join the Trans-Pacific Partnership, much to Vietnam’s regret. Perhaps something could be done to deepen the 2007 framework for trade and investment between the United States and Vietnam. But compared to Vietnam’s free trade agreements with Canada, the EU and Mexico, for example, this will seem trite.
The optics of visiting Vietnam this week are far from ideal. But Harris can achieve the purpose of the trip by promising to give the country market economy status.
Marc L. Busch is Karl F. Landegger Professor of International Trade Diplomacy at the Walsh School of Foreign Service at Georgetown University. Follow him on Twitter @marclbusch.