STATEMENTS

LETTER TO DEPARTMENT OF COMMERCE REGARDING VIETNAM'S NME STATUS


June 7, 2024

 

Secretary Gina Marie Raimondo

Department of Commerce

1401 Constitution Ave NW
 Washington, DC 20230

 

Re: Socialist Republic of Vietnam’s NME Status

 

Dear Secretary Raimondo,

The US Department of Commerce can designate a foreign country as a non-market economy (NME) if it doesn't operate on market principles of cost or pricing. This means that the sale of goods in that country doesn't reflect their fair value. The US uses six statutory criteria to make this determination:


Currency convertibility

The U.S. Department of the Treasury officially labeled Vietnam as a currency manipulator in December 2020. The accusation was based on Vietnam’s alleged improper intervention in foreign exchange markets to favor its own exports. Specifically, Vietnam was accused of conducting large-scale and protracted intervention to prevent appreciation of the dong, its national currency.1

On November 8, 2023, the U.S. Treasury Department determined that Vietnam does not manipulate its currency.2 Additionally, in July 2021, Vietnam reached an agreement with the United States over charges of currency manipulation, pledging to refrain from “competitive devaluation” of its currency.3 However, Vietnam’s currency is not fully convertible into other currencies. The government-controlled central bank imposes exchange rate controls, limiting its convertibility.

While the removal of the designation as a currency manipulator alleviates friction with a supposedly important US partner in Southeast Asia, the situation remains subject to ongoing monitoring and evaluation. Recent placement on the U.S. Department of the Treasury’s “watch list” for currency manipulation reinforces this concern.4


Free bargaining for wages

Wage rates in Vietnam are not determined by free bargaining between labor and management. The authoritarian government influences wage levels, and state-owned enterprises (SOEs) play a significant role in many sectors.

Workers cannot form independent unions, and the state maintains control over the only trade union available, the Vietnam General Confederation of Labor.


Foreign investment

Foreign ownership in certain sectors is restricted or even prohibited under domestic law. In some sectors, foreign investors are required to cooperate with a Vietnamese party to set up joint ventures.

Most publicly traded Vietnamese companies are still subject to a foreign ownership limitation of 49 percent.

Vietnamese companies often register multiple business lines. Some of these lines may be subject to foreign ownership limitations. When a foreign investor wishes to acquire a business with various registered business lines, the acquisition is possible only if it falls below the lowest foreign ownership limit applicable to any of its business lines. The foreign ownership limit may also apply to subsidiaries of the target company if the foreign investor holds a majority stake in the target company.

A recent Decree 31/2021/ND-CP issued by the Vietnamese government lists 25 business lines in which foreigners are not permitted to invest. These include areas like trading in goods and services subject to state monopoly, press business, and public opinion polls.

Foreign investment in 59 other business lines is subject to various conditions, including foreign ownership limits, investment form requirements, and qualifications applicable to investors.5


Government ownership or control of production

In Vietnam, government ownership and control of production play a significant role in shaping the economy.

1. State-Owned Enterprises (SOEs):

o   State-owned enterprises (SOEs) are essential players in Vietnam’s economic development. They account for a substantial share of the economy and dominate key business sectors.

o   The Vietnamese government provides preferential treatment to SOEs, granting them advantages such as access to credit, natural resources, land, and human resources.

o   Although there are no explicit provisions in Vietnamese law indicating preferential lending rates for SOEs, in practice, state enterprises with higher operational costs than private competitors can benefit from lower borrowing costs due to government guarantees extended by state-owned banks.6

o   As of 2019, there were 2,109 SOEs held by the central government, providing 1.1 million jobs. Additionally, there are around 1,100 SOEs at the subnational level.

2. Land Ownership:

o   In Vietnam, there are two main forms of ownership related to the means of production, including land:

§  State Ownership: Known allegedly as ownership by all the people, state ownership encompasses land controlled by the government.

§  Collective Ownership: This form of ownership applies to cooperatives.

3. Government Promotion of State-Owned Enterprises:

o   Even after privatization, the government still holds significant ownership in most privatized firms. Vietnamese authorities continue to promote their state-owned enterprises over other entities. This includes using price controls, especially in key industries such as petrol, steel, concrete, transport, livestock feed, food, and medical equipment.7

Government ownership and control of production significantly impact Vietnam’s economy, with SOEs playing a crucial role in various sectors.


Government control over the allocation of resources

Vietnam maintains extensive price control across its economy. This intervention influences resource allocation and pricing decisions of enterprises.

Policies such as subsidies, tariffs, quotas, licenses, and multi-year economic plans contribute to government intervention in resource allocation.

Vietnam’s government exerts significant influence over resource allocation, wages, and pricing decisions. The balance between state control and private enterprise remains a critical aspect of Vietnam’s economic landscape.


Other appropriate factors, such as human rights and forced labor

According to the latest Uyghur Forced Labor Prevention Act Statistics from the US Customs and Border Protection website, Vietnam currently has the highest shipment metrics of goods made with Uyghur forced labor.8.9  As we focus on China for the ongoing genocide in Xinjiang, much of the forced labor products from this region is now being exported to the rest of the world through Vietnam.10

As the United States increasingly sees Vietnam as a key partner in its efforts to diversify supply chains,11 it is important to remind ourselves that the Vietnamese authorities do not share our core values regarding trade and labor rights. When Vietnam illegally re-routed Chinese exports from Xinjiang, it also facilitated the genocide.

As we continue to push for more business with communist Vietnam, many of our small businesses in our diaspora after COVID-19 are struggling and needing help. We want to ask that the Department of Commerce prioritizes elevating businesses from our communities before the state-sponsored businesses from Vietnam, with a heavily subsidized and non-market economy.

We, the undersigned organizations, strongly recommend keeping Vietnam on the Department of Commerce’s NME list.


Sincerely,

(in alphabetical order)

1. Advocates for Faith and Justice in Vietnam

2. Alliance for Vietnam’s Democracy

3. Alliance for Democracy in Vietnam

4. Alumni Association of Quoc Hoc- Dong Khanh Southern California

5. Bloc 8406 International

6. Đại Việt Nationalist Party

7. Federation of Vietnamese American Communities in the USA

8. Minh Van Foundation

9. Republic of Vietnam Next Generation

10. Thắng Nghĩa Society

11. The Greater Philadelphia Vietnamese American Community

12. The Vietnamese American Community of The USA

13. United Council of Vietnamese in Homeland and Overseas

14. United Vietnamese American Community of Pennsylvania

15. Việt 2000 Foundation

16. Vietnam Democracy Center

17. Vietnam Human Rights Day - May 11 Organization

18. Vietnamese Americans for Human Rights

19. Vietnamese Community of Pomona Valley (California)

20. Vietnamese Nationalist Party

 


REFERENCES:

1.          Strangio, Sebastian. US Government Officially Labels Vietnam a Currency Manipulator. The Diplomat, 17 Dec. 2020, https://thediplomat.com/2020/12/us-officially-labels-vietnam-a-currency-manipulator. 05 Jun.

2.          The US Treasury Department determined that Vietnam does not manipulate currency. Vietnam, 11 Aug 2023, https://www.vietnam.vn/en/bo-tai-chinh-my-xac-dinh-viet-nam-khong-thao-tung-tien-te. 05 Jun.

3.          Strangio, Sebastian. Vietnam, US Reach Accord on Alleged Currency Manipulation. The Diplomat, 20 Jul 2021, https://thediplomat.com/2021/07/vietnam-us-reach-accord-on-alleged-currency-manipulation. 06 Jun.

4.          DeLauro, Rosa. Congress of Unted States, 29 Jan. 2024, https://delauro.house.gov/sites/evo-subsites/delauro.house.gov/files/evo-media-document/delauro_signed_letter-to-department-of-commerce-regarding-vietnams-status-as-non-market-economy-version-2-01-26-2024-11-.pdf. 06 Jun.

5.          Foreign ownership limits in Vietnam. Freshfields Bruckhaus Deringer, 08 Sep. 2021, https://www.freshfields.com/en-gb/our-thinking/knowledge/insight/2021/09/foreign-ownership-limits-in-vietnam. 07 Jun.

6.          Overview of the Vietnamese state-owned sector. OECD iLibrary, https://www.oecd-ilibrary.org/sites/25daa14a-en/index.html?itemId=/content/component/25daa14a-en. 06 Jun.

7.          Brotherton-Bunch, Elizabeth. There’s Growing Bipartisan Opposition to Granting Vietnam Market Economy Trade Status. Alliance for American Manufacturing, 29 Jan. 2024, https://www.americanmanufacturing.org/blog/theres-growing-bipartisan-opposition-to-granting-vietnam-mar. 07 Jun.

8.          Uyghur Forced Labor Prevention Act Statistics. US Customs and Border Protection, 15 May 2024, https://www.cbp.gov/newsroom/stats/trade/uyghur-forced-labor-prevention-act-statistics. 06 Jun.

9.          Hai, An. Vietnam Overtakes China as Largest Exporter of Goods Made With Uyghur Forced Labor. VOA, 31 Jan. 2024, https://www.voanews.com/a/vietnam-overtakes-china-as-largest-exporter-of-goods-made-with-uyghur-forced-labor/7466067.html. 06 Jan.

10.   Abdulla, Hannah. Vietnam allegedly “laundering” Xinjiang cotton. Just Style, 01 Apr. 2022, https://www.just-style.com/news/vietnam-allegedly-laundering-xinjiang-cotton/#:~:text=US%20Customs%20%26%20Border%20Protection%20is,Uyghur%20Forced%20Labor%20Prevention%20Act. 06. Jun.

11.   US’ crackdown on Chinese transshipment via Vietnam has no practical significance: analyst. Global Times, 23 Nov. 2020, https://www.globaltimes.cn/content/1207786.shtml. 06 Jun.