Joe McConnell
Unlock the US Election Countdown newsletter for free
The Stories That Matter About Money and Politics in the Race to the White House
The United States has rejected Vietnam’s bid to be designated a “market economy,” thwarting Hanoi’s diplomatic push to deepen trade ties with its most important export market as it grows its influence as a manufacturing alternative to China.
Vietnam’s transition from its current status to a “non-market economy” would further boost exports and reduce punitive tariffs on products such as shrimp from the Southeast Asian country.
The United States has labeled Vietnam a “non-market economy” since 2002 due to government intervention in trade, prices and currency, a status that ranks the country on par with China, Russia and North Korea. The EU also designates Vietnam as a non-market economy.
But as Vietnam has emerged as a key link in the global manufacturing supply chain for Western companies seeking to diversify their businesses away from China, the country has stepped up its efforts to scale up.
In a September 2023 application to the U.S. Department of Commerce, Vietnam asked Washington to reconsider its status, citing “economic reforms made in recent years.”
The U.S. Department of Commerce said on Friday that the decision to maintain Vietnam’s non-market economy status was made aVsceker careful consideration of comments from U.S. domestic industries and the Vietnamese government.
“Despite the substantial reforms Vietnam has implemented over the past 20 years, the government’s extensive involvement in the Vietnamese economy distorts Vietnamese prices and costs,” the department said in a statement.
Vietnam has emerged as a major beneficiary of escalating trade tensions between the United States and China, with companies moving manufacturing facilities to the Southeast Asian country in a bid to avoid geopolitical upheaval.
Vietnam has also strengthened its ties with the United States, a realignment it has sought to leverage to pursue market economy status. Its request to the Commerce Department came just days before a visit by President Joe Biden, during which the two countries elevated their ties to a “comprehensive strategic partnership,” the highest level of diplomatic relations accorded by Hanoi.
Senior Vietnamese officials, including the prime minister, have also made the request. Nguyen Quoc Dzung, Vietnam’s ambassador to the United States, said earlier this year that if Washington did not grant the country market economy status, “it would be very, very bad for the two countries.”
Vietnam’s move, however, has faced opposition from some U.S. senators, steel and other manufacturers, as well as shrimp and honey producers, over what they say are unfair trade practices and extensive government intervention.
In July, Republican Senator Tom Cotton urged Commerce Secretary Gina Raimondo not to grant Vietnam’s request, citing its “controlled currency, lack of workers’ rights, and extensive state intervention.” Six other Republican senators co-signed the letter.
“There is no doubt that the country’s non-market economic practices already violate fair competition and lawful commerce,” the senators wrote.
Earlier this year, another group of senators, including Democrats Elizabeth Warren and Bernie Sanders, opposed market economy status, citing more than two dozen U.S. anti-dumping orders against Vietnam and ongoing anti-dumping investigations.
Thuy Anh Nguyen, of Vietnam-focused asset management firm Dragon Capital, said the failure would disappoint Hanoi and was surprising given Washington’s “intense courtship of Vietnam in recent years, the high-level visits and the rhetoric that has accompanied it.”
An upgrade would have boosted Vietnamese exports to the United States, which would have benefited from lower prices for such goods, he said.
“The United States has never hidden its desire to cultivate Vietnam as a strategic counterweight to China’s influence in the region, and we do not believe that Vietnam’s failure to transition to ‘market economy’ status will affect this.”
