New Market Economy Status Could Transform Economic and Trade Relations
In This Article:
- Overview of the U.S. Department of Commerce Review
- Advocates’ Arguments for Vietnam’s Market Economy Status
- Concerns from U.S. Industries
- Broader Economic and Geopolitical Implications
The United States is considering a significant economic move for upgrading Vietnam from a non-market economy (NME) to a market economy.
This change seeks to end high anti-dumping and countervailing duties on Vietnamese imports, while boosting Vietnam’s economy and its struggling VND currency exchange rate with the US Dollar.
Overview of the U.S. Department of Commerce Review
The U.S. Department of Commerce is set to complete its review of Vietnam’s economic status by late July 2024.
Currently, Vietnam is among 12 countries designated as NMEs, subjecting its goods to higher duties. Proponents argue that Vietnam has made substantial progress in currency convertibility, labor rights, and openness to foreign investment, qualifying it for an upgrade.
Want to read: Why the Vietnam Dong (VND) Will Likely RV First
Advocates’ Arguments for Vietnam’s Market Economy Status
Vietnam’s Ministry of Industry and Trade (MOIT) and other proponents highlight several key improvements.
They point to enhanced currency convertibility, improved labor rights, and increased openness to foreign investments.
Major investors such as Samsung, Intel, and Nike have significantly contributed to Vietnam’s economic landscape, demonstrating confidence in its market reforms.
Concerns from U.S. Industries
Opponents, including U.S. steelmakers and agricultural groups like the Southern Shrimp Alliance, express concerns about potential negative impacts on American industries.
They argue that ongoing state intervention and unfair trade practices in Vietnam could harm U.S. businesses.
The decision also faces scrutiny from U.S. domestic politics, particularly in swing states like Pennsylvania, where the impact on local industries is a critical consideration.
Broader Economic and Geopolitical Implications
Changing Vietnam’s status holds broader implications beyond trade.
Economically, it would strengthen the VND and enhance Vietnam’s position in the global market. Geopolitically, it could counterbalance China’s influence in the region, fostering closer U.S.-Vietnam economic relations.
The potential upgrade also reflects Vietnam’s infrastructural and business reforms, offering growth prospects for U.S. firms and increasing foreign direct investment, which rose to $3.5 billion in 2022.
The Bottom Line
The potential upgrade of Vietnam’s economic status by the U.S. Department of Commerce could significantly impact trade relations and strengthen the Vietnamese dong.
The decision, expected by late July 2024, will play a crucial role in shaping the future of U.S.-Vietnam economic and geopolitical dynamics.
