Vietnam Asks Commerce to Review Its Status as Non-Market Economy
Vietnam's Ministry of Industry and Trade asked the Commerce Department to conduct a review of the country's status as a non-market economy, telling the agency that the nation's "achievements in market opening and integration into the regional and global economy" stand as grounds for review. Seeking to build on the back of the 2013 comprehensive partnership agreement between the U.S. and Vietnam, the ministry asked for a changed circumstances review of its NME status.
Commerce first designated Vietnam as an NME country in an antidumping duty proceeding in 2002. The ministry argued that since that time, Vietnam "has been through dramatic developments and reforms," adding that the nation's "commitment period for" World Trade Organization members to dub the country as a non-market economy in AD/CVD cases expired in 2018. As a result, 72 countries have now recognized Vietnam as a market economy.
In its CCR request, the ministry went through all seven of Commerce's criteria the agency considers when declaring whether a country has a non-market economy. The first factor discusses to what extent the foreign state's currency is convertible into the currency of other countries. On this point, Vietnam said its currency "is convertible into the currency of other countries in a transparent manner based on market principles, fairness and non-discrimination." The ministry championed the U.S. Treasury Department's 2021 report finding that Vietnam was no longer manipulating its own currency.
The ministry also claimed that its wage rates are set by free bargaining between labor and management, joint ventures by firms of other foreign states are allowed in Vietnam and the government doesn't "own or control the means of production to a significant extent." Addressing the latter-most point, the Vietnamese government said that when assessing this matter, Commerce must look to the role of the private sector, efforts to promote state-owned enterprise equitization and land-related issues.
Discussing the private sector in Vietnam, the ministry said that as of Dec. 31, 2020, 96.5% of all enterprises in the country were non-state, compared with 35.1% in 2016. In addition, the "capital structure changed in the direction of gradually increasing the proportion of the capital of non-state" firms, the Vietnamese state claimed. The ministry also championed its efforts to restructure and divest from state-owned enterprises to "achieve equitization" in industries that can be claimed by the private sector to boost competition.
The ministry additionally argued that the state "does not have significant control over the allocation of resources or over the price and output decisions of enterprises." On this point, Commerce considers whether a foreign state distorts prices via industrial policies, regulates prices and controls the financial sector. Vietnam argued that its state policies no longer sully these elements of its economy in the way an NME would. The nation listed a series of laws it passed to cede market space for private firms across a host of sectors, including electricity, petrol and oil, and finance.
Global law firm Squire Patton said this development "could be good for Vietnam if done," noting that Western press outlets have reported that "Vietnam has moved to being a" market economy.