Washington — The relationship between the United States and Vietnam has been steadily improving in recent years, with the two countries elevating their partnership to a comprehensive strategic level during President Joe Biden’s visit to Hanoi in September. Now, Vietnam is seeking to take this relationship to the next level by requesting to be removed from the list of “nonmarket” economies, a move that could have significant implications for both nations.
Vietnam is currently one of 12 countries on the U.S. list of nonmarket economies, alongside China and Russia. This designation is due to the strong state intervention in their economies, which can create unfair advantages in trade. However, Vietnam has been making significant economic reforms in recent years and believes that it is time for the U.S. to recognize these changes and grant them market economy status.
The Biden administration has initiated a review of Vietnam’s nonmarket economy status, with a final decision expected by July 26. This decision could have a major impact on the economic relationship between the two countries, as the U.S. is Vietnam’s most important export market with two-way trade totaling more than $125 billion in 2023.
Vietnam’s formal request to be removed from the list of nonmarket economies comes at a crucial time, as the country hopes to secure this status before the November U.S. election. This is because during his previous term, President Donald Trump had threatened to increase tariffs on Vietnam due to its large trade surplus with the U.S. Additionally, the Trump administration had designated Vietnam as a currency manipulator, which can lead to exclusion from U.S. government procurement contracts. However, the Biden administration has since removed Vietnam from this list, signaling a potential shift in policy towards the country.
Vietnam’s efforts to secure market economy status have also faced opposition from within the U.S. More than 30 lawmakers sent joint letters to U.S. Secretary of Commerce Gina Raimondo in January, urging the Biden administration not to grant this status to Vietnam. They argued that Vietnam did not meet the procedural requirements for a change in status and that granting their request would be “a serious mistake.”
However, many experts believe that granting Vietnam market economy status would be a positive step for both countries. Zachary Abuza, a professor at National War College, believes that this decision would be a sign of improved relations between the U.S. and Vietnam and could potentially open up new opportunities for trade and investment. He also noted that Vietnam’s request for market economy status is closely tied to the joint vision statement issued during President Biden’s visit to Hanoi, making it a top priority for the Vietnamese leadership.
Moreover, granting Vietnam market economy status could also benefit the U.S. economy. Murray Hiebert, a senior associate at the Center for Strategic and International Studies, believes that this decision would be a sign of improved relations between the two countries and could help the U.S. diversify its supply chain away from China. This is especially important as Vietnam is seen as a potential ally in the region and could help the U.S. stand up to China’s economic influence.
While some U.S. manufacturing groups have expressed opposition to Vietnam’s request, arguing that the country continues to operate as a nonmarket economy, others believe that Vietnam has made significant progress in recent years. In a letter to Secretary Raimondo, the Alliance for American Manufacturing stated that Vietnam “cannot reasonably be understood to demonstrate the characteristics of a market economy.” However, Vietnam has pointed out that 72 countries, including the U.K., Canada, Australia, and Japan, have already recognized it as a market economy.
It is also important to note that granting Vietnam market economy status could help address the issue of Chinese goods being disguised or labeled as “Made in Vietnam” to avoid U.S. tariffs. This practice has been a major concern for the U.S. since Trump launched a trade war with China in 2018. Vietnam has promised to crack down on this practice, and granting them market economy status could further incentivize them to do so.
In conclusion, Vietnam’s request to be removed from the list of nonmarket economies is a significant step towards strengthening the economic relationship between the U.S. and Vietnam. While there may be some opposition to this decision, many experts believe that it would be a positive move for both countries. Granting Vietnam market economy status would not only signify improved relations between the two nations but could also have economic benefits for both parties. As the U.S.
