Vietnam is asking President Joe Biden to urgently change its “non-market economy” classification to “market economy” to avoid high taxes imposed by the United States on imports from the southeastern country. .
nevertheless Vietnam has emerged as one of the US’s largest trading partners It has been on Washington’s list of non-market economies for more than two decades because it helped stem China’s growing influence in the region. The list includes a total of 12 non-market economies, including Russia, China, and some countries that were part of the former Soviet Union.
What is a “non-market economy”?
The United States designates countries as non-market economies based on several factors. If the country’s currency is convertible. When wage rates are determined through free negotiations between labor and management. Where joint ventures and other foreign investments are permitted. whether the means of production are owned by the state; and whether the state controls the allocation of resources and the determination of prices and output. Other factors such as human rights are also taken into account.
Non-market economy labels allow the United States to impose “antidumping” duties on goods imported from designated countries. In international trade, dumping refers to when a country’s export prices are intentionally set lower than its domestic prices, thereby harming the importing country’s industry. Anti-dumping duties basically cover the difference between the export price and the normal value of imported goods.
The level of anti-dumping duties is determined by third countries with market economies, such as Bangladesh. The United States values products imported from non-market economies like Vietnam based on their value in Bangladesh and assumes that this is the Vietnamese company’s assumed cost of production. The company’s own data on costs is not taken into account.
Why does Vietnam want to achieve the status of a “market economy”?
Vietnam has argued in recent years that it has implemented enough economic reforms to be removed from the list of non-market economies. This country meets a number of criteria for the status to change. For example, according to a report by the Center for Strategic and International Studies (CSIS), Vietnam allows foreign investment, wages are determined through free labor-management negotiations, and most means of production are not state-owned.
This status change would also help Vietnam eliminate anti-dumping duties and make its products more competitive in the US market. According to reports, Vietnam’s WTO International Trade Center has said that the method of calculating anti-dumping duties is flawed, resulting in “dumping margins being pushed up very high” and not really reflecting the situation of Vietnamese companies. Stated. D.W.
What are the challenges?
Vietnam’s path to acquiring the market economy tag is littered with obstacles. U.S. steelmakers and the U.S. Shrimp Processors Association called on the Biden administration not to change Vietnam’s status. The association cites Vietnam’s land ownership restrictions, the country’s weak labor laws and lower shrimp tariffs that hurt its members.
The move could also be opposed in Congress, with eight U.S. senators and 31 U.S. representatives saying that changing Vietnam’s status would “help Chinese state-owned enterprises that have significant investments in Vietnam.” “It will make it easier to avoid U.S. tariffs.” It is their product,” a Reuters report said.
The US Department of Commerce is currently reviewing Vietnam’s status, a process that began last year. The review is expected to be completed by the end of July.
© Indian Express Private Limited
Date first uploaded: August 5, 2024 18:04 IST