U.S.-Vietnam Economic and Trade Relations:
Issues for the 112th113th Congress
Michael F. Martin
Specialist in Asian Affairs
June 11, 2012April 14, 2014
Congressional Research Service
7-5700
www.crs.gov
R41550
CRS Report for Congress
Prepared for Members and Committees of Congress
U.S.-Vietnam Economic and Trade Relations: Issues for the 112th113th Congress
Summary
Since the resumption of trade relations in the 1990s, Vietnam has rapidlyrapidly has risen to become a
significant trading partner for the United States. Along with the growth of bilateral trade, a
number of issues of common concern, and sometimes disagreement, have emerged between the
two nations. Congress may play a direct role in thedeveloping U.S. policy on some of these issues.
Bilateral trade has grown from about $220 million in 1994 to $21.8629.6 billion in 20112013, transforming
Vietnam into the 30th 27th-largest trading partner for the United States. Vietnam is the second-largest
source of U.S. clothing imports (after China), and a major source for footwear, furniture, and electrical
electrical machinery. Much of this rapid growth in bilateral trade can be attributed to U.S.
extension of
normal trade relations (NTR) status to Vietnam in 2001. Another major contributing
factor is over 20
years of rapid economic growth in Vietnam, ushered in by a 1986 shift to a more
market-oriented
economic system.
Bilateral trade may increase if both nations become members of the Trans-Pacific Strategic
Economic Partnership Agreement (TPP). The United States and Vietnam are among the nine
countries negotiating the terms of expansion of the trade associationPartnership
(TPP), a trade agreement currently being negotiated by 12 countries, including the United States
and Vietnam. Vietnam’s incentive to join
the TPP is largely is contingent on greater market access in
the United States, particularly for
agricultural goods, aquacultural goods, clothing, and footwear.
Vietnam is also a party to
negotiations to form a largerthe Regional Comprehensive Economic Partnership
(RCEP), a pan-Asian regional trade association based on the Association of
Southeast Asian
Nations (ASEAN) that could exclude the United States and prove to be an
alternative to the TPP.
The growth in bilateral trade has not been without its accompanying issues and problems.
Vietnam Vietnam
has applied for acceptance into the U.S. Generalized System of Preferences (GSP)
program and is participating in negotiations of
negotiating a Bilateral Investment Treaty (BIT) with the
United States. Vietnam also would like to be officially recognized
the United States officially to recognize it as a market economy.
There also have have also been problems with U.S. imports of specific products from Vietnam, particularly
catfish-like fish known as basa or tra. In 2008, the 110th Congress passed legislation that
transferred the regulation of catfish from the Food and Drug Administration to the U.S.
Department of Agriculture (USDA) and authorized the Secretary of Agriculture to determine if
basa and tra are to be considered catfish. The Vietnamese government strongly protested the law
as a protectionist measure. On February 24, 2011, the USDA released proposed new catfish
regulations, which did not resolve the status of Vietnam’s basa and tra exports.
An examination of recent trends in bilateral trade reveals that other product categories—such as
footwear, furniture, and electrical machinery—could generate future tension between the United
States and Vietnam. Observers of Vietnam’s economic development have also been critical of
Vietnam’s protection of workers’ rights, its enforcement of intellectual property rights laws and
regulations, and the country’s exchange rate policies.
The 112th Congress may play an important role in one or more of these issues, as have past
Congresses. The 112th Congress would have to consider implementing legislation if a TPP
agreement is concluded. Congressional action on key legislation, such as the Agriculture Reform,
Food, and Jobs Act of 2012 (S. 3240), could have an impact on the TPP negotiations. This report
The proposed
regulations are still pending. The Agricultural Act of 2014 (P.L. 113-79) confirmed the transfer of
inspection to the USDA, and explicitly included basa and tra as catfish.
An examination of recent trends in bilateral trade reveals that other product categories—such as
footwear, furniture, and electrical machinery—could generate future tension between the United
States and Vietnam. Other economic issues have had an indirect effect on bilateral relations, such
as claims of poor working conditions in factories in Vietnam, Vietnam’s designation as a “nonmarket economy,” allegations of inadequate intellectual property rights (IPR) protection in
Vietnam, and Vietnam’s exchange rate policy.
The 113th Congress may play an important role in one or more of these issues, as have past
Congresses. H.R. 1682 would prohibit Vietnam’s inclusion in the GSP program unless certain
human rights conditions are met. Also, Congress would have to consider implementing legislation
if a TPP agreement is concluded. This report will be updated as circumstances require.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th113th Congress
Contents
Introduction...................................................................................................................................... 1
Trans-Pacific Strategic Economic Partnership Agreement (TPP)Partnership (TPP) .................................................... 3
Vietnam’s Generalized System of Preferences (GSP) Application.................................................. 5
Compliance with Eligibility Criteria ......................................................................................... 6
Is Vietnam a “Communist” Country?................3
Vietnam’s Generalized System of Preferences (GSP) Application.................................................................. 6
Workers’ Rights.. 5
Status of Application ................................................................................................................. 7
IPR Protection ......5
Role of Congress ............................................................................................................... 7
Congressional Implications ....................................................................................................... 8........ 6
Bilateral Investment Treaty (BIT) Negotiations .............................................................................. 86
Status of the Negotiations .......................................................................................................... 86
The Role of Congress ................................................................................................................ 97
Non-Market Economy Designation ............................................................................................... 10.. 8
State-Owned Enterprises ......................................................................................................... 10.. 8
Price and Wage Controls ......................................................................................................... 1110
Vietnam’s View........................................................................................................................ 1210
Catfish ............................................................................................................................................ 1210
2008 Farm Bill......................................................................................................................... 1311
The Antidumping Sunset Review .................on Catfish ........................................................................... 15
The Agriculture Reform, Food, and Jobs Act of 2012............................................................. 15 13
Implications for the 112th113th Congress ......................................................................................... 1513
Other Economic Issues .................................................................................................................. 1514
U.S. Clothing Imports from Vietnam ...................................................................................... 1614
Workers’ Rights ....................................................................................................................... 1715
IPR Protection ......................................................................................................................... 1817
Vietnam’s Exchange Rate Policy ............................................................................................. 1917
Key Trends in Bilateral Trade ........................................................................................................ 1917
Merchandise Trade .................................................................................................................. 19
Furniture and Bedding17
Product Interplay ....................................................................................................... 20
Footwear................ 19
Furniture and Bedding....................................................................................................... 19
Footwear ............. 20
Electrical Machinery ......................................................................................................... 21
Product Interplay............ 19
Electrical Machinery ......................................................................................................... 2119
Trade in Services ..................................................................................................................... 2119
Foreign Direct Investment ....................................................................................................... 2120
Figures
Figure 1. U.S. Clothing Imports from Vietnam ............................................................................. 1615
Tables
Table 1. Growth in Bilateral Merchandise Trade between United States and Vietnam ................... 2
Table 2. Top 10 U.S. Exports to Vietnam and Imports from Vietnam ........................................... 1918
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th113th Congress
Contacts
Author Contact Information........................................................................................................... 2220
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th113th Congress
Introduction
For over 20 years, economic and trade relations between the United States and the Socialist
Republic of Vietnam (Vietnam) remained virtually frozen, in part a legacy of the extended
military conflict of the 1960s and 1970s. On May 2, 1975, after North Vietnam defeated U.S. ally
South Vietnam, President Gerald R. Ford extended President Richard M. Nixon’s 1964 trade
embargo on North Vietnam to cover the reunified nation.1 Under the Ford embargo, bilateral trade
and financial transactions were prohibited.
Economic and trade relations between the two nations began to thaw during the Clinton
Administration, building on joint efforts during the Reagan and George H. W. Bush
Administrations to resolve a sensitive issue in the United States—recovering the remains of U.S.
military personnel declared “missing in action” (MIA) during the Vietnam War.2 The shift in U.S.
policy also was spurred by Vietnam’s withdrawal from Cambodia. President Bill Clinton ordered
an end to the U.S. trade embargo on Vietnam on February 3, 1994.3 In 1997, President Clinton
appointed the first U.S. ambassador to Vietnam since the end of the Vietnam War.
Bilateral relations also improved, due in part due to Vietnam’s 1986 decision to shift from a Sovietstyle central planned economy to a form of market socialism. The new economic policy, known
as Doi Moi (“change and newness”), ushered in a period of over 20 years of rapid growth in
Vietnam. Since 1995, Vietnam’s real GDP growth has averaged over 7% per year, second only to
China. Much of that growth has been generated by foreign investment in Vietnam’s
manufacturing sector, particularly its clothing industry.
The United States and Vietnam signed a bilateral trade agreement (BTA) on July 13, 2000, which
went into force on December 10, 2001.4 As part of the BTA, the United States extended to
Vietnam conditional most favored nation (MFN) trade status, now known as normal trade
relations (NTR). Economic and trade relations further improved when the United States granted
Vietnam permanent normal trade relations (PNTR) status on December 29, 2006, as part of
Vietnam’s accession to the World Trade Organization (WTO).5 Over the last three years, the U.S.
Congress Congress
has appropriated approximately $10 million each year to support Vietnam’s economic
reforms.6 In
addition, the two nations have set up a ministerial-level Trade and Investment
Agreement (TIFA)
Council to discuss issues related to the implementation of the Bilateral Investment Treaty (BIT)
and WTO agreements, as well as trade and investment policies in general.
1
1
Office of Foreign Assets Control, Department of Treasury, “Foreign Assets Control Regulations,” 40 Federal
Register 19202-3, May 2, 1975. For more information on the history of U.S. trade sanctions on North Vietnam and the
Socialist Republic of Vietnam, see CRS Report 94-633, Vietnam: Procedural and Jurisdictional Questions Regarding
Possible Normalization of U.S. Diplomatic and Economic Relations, by Vladimir N. Pregelj et al (out of print;
available from the author upon request).
2
For more information about the thaw in U.S.-Vietnam relations, see CRS Report R40208, U.S.-Vietnam Relations in
20122013: Current Issues and Implications for U.S. Policy, by Mark E. Manyin.
3
The action came after many months of high-level U.S. interaction with Vietnam in resolving MIA cases and a January
27, 1994 vote in the Senate urging that the embargo be lifted, language that was attached to broad authorizing
legislation (H.R. 2333). The language was controversial in the House, but H.R. 2333 passed Congress; it was signed
into law (P.L. 103-236) on April 30, 1994.
4
For more information about the BTA, see CRS Report RL30416, The Vietnam-U.S. Bilateral Trade Agreement, by
Mark E. Manyin.
5
CRS Report RL33490, Vietnam PNTR Status and WTO Accession: Issues and Implications for the United States, by
Mark E. Manyin, William H. Cooper, and Bernard A. Gelb.
6
USAID correspondence with CRS.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
Investment Treaty (BIT) and WTO agreements, as well as trade and investment policies in
general.
113th Congress
In contrast to some other nations (for example, China), official U.S. and Vietnamese trade data
are comparatively close and reflect a similar pattern in the growth of bilateral trade (see Table 1).
For the first few years following the end of the U.S. embargo, trade between the two nations grew
slowly, principally because of Vietnam’s lack of NTR. However, following the granting of
conditional NTR in December 2001, trade flows between the United States and Vietnam grew
quickly. Merchandise trade nearly doubled between 2001 and 2002, regardless of which nation’s
figures one uses. Bilateral trade jumped again in 2007, following the United States granting
PNTR status to Vietnam. Total trade declined slightly in 2009 as U.S. imports from Vietnam slid
4.7% because of the economic recession, but has rebounded in 2010 and 2011since 2010.
Table 1. Growth in Bilateral Merchandise Trade between United States and Vietnam
(in millions of U.S. dollars)
U.S. Trade Data
Year
Exports to
Vietnam
Vietnamese Data
Imports from
Vietnam
Exports to
United States
Imports from
United States
1994
173
50
NA
NA
1995
253
199
170
130
1996
616
319
204
246
1997
278
388
287
252
1998
274
553
469
325
1999
291
609
504
323
2000
368
822
733
363
2001
461
1,053
1,065
411
2002
580
2,395
2,453
458
2003
1,324
4,555
3,939
1,143
2004
1,163
5,276
5,025
1,134
2005
1,192
6,630
5,924
863
2006
1,100
8,566
7,845
987
2007
1,903
10,633
10,105
1,701
2008
2,790
12,901
11,869
2,635
2009
3,108
12,290
11,356
3,009
2010
3,710
14,868
14,238
3,767
2011
4,341
17,485
16,928
4,529
2012
4,623
20,266
19,668
4,827
2013
5,013
24,649
23,869
5,232
Source: U.S. data from International Trade Commission (ITC); Vietnamese data from General Statistics Office
of Vietnam and Vietnam Customs.
Notes: U.S. data valued at F.A.S. and customs value; Vietnam data valued at F.O.B. and C.I.F.
The growth in bilateral trade has not been without its accompanying issues and problems. Both
Both nations are negotiating membership in the Trans-Pacific Strategic Economic Partnership
AgreementPartnership (TPP), a proposed
multilateral trade group. For its part, Vietnam has indicated a desire to foster
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closer trade relations
by applying for acceptance into the U.S. Generalized System of Preferences
(GSP) program and participating in negotiations of
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negotiating a bilateral investment treaty (BIT). The
United States has alsoalso has expressed an interest in
closer economic relations, but has told Vietnam
that it needs to make certain changes in itsthe legal,
regulatory, and operating environment of its
economy to conclude either the TPP or the BIT
agreement, as well as to qualify for the GSP
program.
The growth in bilateral trade has alsoalso has created sources of trade friction. A rapid increase in
Vietnam’s clothing exports to the United States led to the implementation of a controversial
monitoring program from 2007 to 2009. The growth in Vietnam’s export of basa and tra has alsoalso has
generated tensions between the two nations. Other economic issues have had an indirect effect on
bilateral relations, such as claims of poor working conditions in factories in Vietnam, Vietnam’s
designation as a “non-market economy,” allegations of inadequate intellectual property rights
(IPR) protection in Vietnam, and Vietnam’s exchange rate policy.
This report will examine each of these trade issues, discussing their main elements and exploring
their potential implications for the 112th113th Congress. This will be followed by Following this will be an analysis of key
trends in bilateral trade to discern any potential sources of future trade friction.
Trans-Pacific Partnership (TPP)
In 2008, thetrade friction in the future.
Trans-Pacific Strategic Economic Partnership
Agreement (TPP)
The Bush Administration notified Congress of its intention to enter into negotiations with the
the four members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP) on September 22,
2008.7 The TPP—previously known as the P4—is a multilateral free trade agreement between
—Brunei,
Chile, New Zealand, and Singapore that came into force in 2006.8 The U.S.
—to form a larger and more ambitious trade agreement. The
U.S. announcement of interest in joining the TPPrenamed Trans-Pacific Partnership was quickly
followed by similar expressions of
interest by Australia, Malaysia, Peru, and Vietnam.9
In the President’s 2010 Annual Report on the U.S. trade agreements program, the Obama
Administration stated that U.S. participation in the TPP “is the strongest vehicle for achieving
economic integration across the Asia-Pacific region and advancing U.S. economic interests with
the fastest-growing economies in the world.”10 Vietnam’s Deputy Prime Minister and Foreign
Minister Pham Gai Khiem listed negotiations to join the TPP—along with the U.S. BIT talks and
Partnership and Cooperative Agreement with the European Union—as among Vietnam’s top trade
7
For more information on U.S. interest in the TPP Agreement, see CRS Report R40502, The Trans-Pacific Partnership
Agreement, by Ian F. Fergusson and Bruce Vaughn.
8
Because of differences in the timing of the agreement’s approval, the TPP Agreement came into force on different
dates in 2006 for the four current members—May 1 for New Zealand and Singapore, June 12 for Brunei Darussalam
and November 8 for Chile.
9
Since then, other nations – including Indonesia, Japan, the Philippines, South Korea, and Thailand – have expressed
an interest in the TPP, but are not parties to the ongoing negotiations.
10
Office of the U.S. Trade Representative, 2010 Trade Policy Agenda and 2009 Annual Report of the President of the
United States on the Trade Agreements Program, Washington, DC, March 2010.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
priorities in 2009.11 During an April 2010 speech in Washington, DC, Prime Minister Nguyễn Tấn
Dũng made particular note of both countries’ participation in the TPP negotiations.12
The first meeting of the nine negotiating parties was held in Melbourne, Australia, on March 1519, 2010. Since then, 11 subsequent rounds have been held, with the latest talks occurring in May
2012 in Dallas, TX interest by Australia, Malaysia, Peru, and Vietnam.6 The nine
countries formally agreed to accept Mexico and Canada into the ongoing negotiations on June 18
and 19, 2012, respectively. Japan was accepted into the negotiations on April 21, 2013.
Vietnam’s participation in the TPP negotiations could complicate the U.S. negotiation position.
Whereas the other parties involved in the negotiations are generally viewed as having
comparatively open trade policies, Vietnam remains a mixed economy with considerable
government intervention. Given that the apparent U.S. goal is to create a more open and
comprehensive free trade area in the Asia-Pacific, Vietnam’s participation in the talks could
constrain U.S. efforts to expand the scope and depth of the TPP. Backers of Vietnam’s
participation in the negotiations maintain that it further opens a sizeable market to U.S. exports
and investments, and could accelerate economic reforms in Vietnam. According to U.S. trade
statistics, Vietnam is the second fifth-largest U.S. trading partner (after Canada, Mexico, Japan, and
Singapore) among the nations
currently involved in the TPP negotiations.
According to ana 2010 interview with key Vietnamese analysts, Vietnam is pressing for the following
following provisions in the TPP agreement:137
•
Designation as a market economy prior to 2018;148
6
Since then, other nations—including Indonesia, the Philippines, South Korea, and Thailand—have expressed an
interest in the TPP, but are not parties to the ongoing negotiations.
7
“TPP—Vietnam’s New Game in the Global Integration,” Vietnam Net, December 6, 7, and 8, 2010.
8
Vietnam will be granted market economy status as of 2018 under the provisions of its WTO accession agreement.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress
•
Liberalization of trade in services (including certification and licensing);
•
Relaxation of U.S. “yarn forward” rules on clothing trade;
•
Prohibition on discrimination against state-owned enterprises; and
•
Special consideration for developing economies.
Vietnam is also interested in greater market access for its agricultural and aquacultural exports,
particularly in the United States. The United States, in turn, would like Vietnam to undertake the
necessary economic and regulatory reforms necessary to fulfill its obligations under the TPP
agreement, which the Obama Administration hopes will be a model trade agreement for the 21st
Century. The United States is particularly concerned about Vietnam’s ability to achieve the
necessary TPP standards for such topics as sanitary and phytosanitary (SPS) measures, workers’
rights, IPR enforcement, and state-owned enterprises (SOEs).
According to a Vietnamese official close to the TPP negotiations, the United States is pressing the
other nations for concessions in many of the proposed 2029 chapters in the trade agreement, but has
not offered much in exchange. Access to the U.S. market is one of the most important potential
benefits of the TPP for Vietnam, particularly for Vietnam’s leading exports, such as clothing,
footwear, agricultural goods, and aquacultural goods (see “Key Trends in Bilateral Trade”).
Vietnam opposes the inclusion of “yarn-forward” conditions for clothing in the TPP agreement; it
prefers the adoption of “cut and sew” rules. Vietnam is also concerned that provisions may be
11
“Vietnam to Pursue Foreign Policy of Peace in 2009,” Vietnam News Agency, January 23, 2009.
Prime Minister Dũng’s speech at a breakfast held by the U.S.-ASEAN Business Council on April 14, 2010.
13
“TPP - Vietnam’s New Game in the Global Integration,” Vietnam Net, December 6, 7, and 8, 2010.
14
Vietnam will be granted market economy status as of 2018 under the provisions of its WTO accession agreement.
12
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added to the Agriculture Reform, Food, and Jobs Act of 2012 (S. 3240) that would create nontariff trade barriers to the import of basa and tra from Vietnam (see “Catfish (see “U.S. Clothing Imports from Vietnam”).
Another complicating factor is Vietnam’s support for ASEAN’s discussions with other nations to
form a pan-Asian trade association that could exclude the United States.159 Over the last several
years, ASEAN has organized meetings with various configurations of Asian nations—such as the
ASEAN + 3 (China, Japan, and South Korea), and ASEAN + 6 (Australia, China, India, Japan,
New New
Zealand, and South Korea), and more recently, the Asian Regional Comprehensive Economic
Partnership (RCEP)—to discuss the formation of a free trade area that would include
only Asian
nations. However, inIn an April 2010 meeting with CRS, Vietnamese trade officials
indicated that Vietnam
would like to see the United States take a more active role in a possible
ASEAN + 8 (Australia,
China, India, Japan, New Zealand, Russia, South Korea, and the United
States) forming the basis
for a larger regional trade association. Some observers have speculated
that the U.S. decision
formally to to formally join the East Asia Summit (EAS) in 2011,1610 which includes all the
ASEAN +8
nations, may indicate a willingness to consider modes for Asian economic integration
other than
the TPP.
If a TPP agreement is concluded, the 112th Congress would have to consider implementing
legislation to revise current U.S. law to make it consistent
amend any U.S. law inconsistent with the terms of the agreement.
Unlike the ratification of
international treaties, the implementing legislation for trade agreements must be approved by
both the House of Representative and the Senate.17
Vietnam’s Generalized System of Preferences (GSP)
Application18
In May 2008, Vietnam formally requested to be added to the U.S. Generalized System of
Preferences (GSP) program as a “beneficiary developing country” (BDC). On June 20, 2008, the
office of the U.S. Trade Representative (USTR) announced that it was initiating a formal review
of Vietnam’s eligibility for GSP benefits and would accept public comments on the application
until August 4, 2008. Since then, there has been no formal announcement from USTR regarding
the status of Vietnam’s GSP application.
The U.S. GSP program authorizes the President to grant duty-free treatment for any eligible
product from any beneficiary country.19 Initially created by Title V of the Trade Act of 1974 (P.L.
15 both
the House of Representative and the Senate.11
9
For more about the complicated dynamics of regionalism in Asia, see CRS Report RL33653, East Asian Regional
Architecture: New Economic and Security Arrangements and U.S. Policy, by Dick K. Nanto
16.
10
According to ASEAN’s official webpage,the Kuala Lumpur Declaration of 2005 establishing the East Asia Summit, it is “a forum for dialogue
on broad strategic, political
and economic issues of common interest and concern with the aim of promoting peace,
stability and economic
prosperity in East Asia.” The current EAS members are the 10 ASEAN members, plus
Australia, the People’s Republic of
China, the Republic of India, Japan, the Republic of Korea, and New Zealand., Russia ,
and the United States are set to become
members in 2011.
17.
11
The proposed TPP agreement would be presented to Congress as a Congressional-Executive Agreement, not as a
treaty. For more information on Congressional-Executive Agreements, see CRS Report 97-896, Why Certain Trade
Agreements Are Approved as Congressional-Executive Agreements Rather Than as Treaties, by Jeanne J. Grimmett.
18
For a more detailed examination of Vietnam’s GSP application, see CRS Report RL34702, Potential Trade Effects of
Adding Vietnam to the Generalized System of Preferences Program, by Vivian C. Jones and Michael F. Martin.
19
For background information on the U.S. GSP program, see CRS Report RL33663, Generalized System of
Preferences: Background and Renewal Debate, by Vivian C. Jones.
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93-618) for a 10-year period, the GSP program has been repeatedly renewed by Congress, most
recently via P.L. 112-40, which extended the program until July 31, 2013. The statute also
provides the President with specific political and economic criteria to use when designating
eligible countries and products.
Inclusion in the U.S. GSP program is a major(continued...)
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Vietnam’s Generalized System of Preferences (GSP)
Application12
In May 2008, Vietnam formally requested to be added to the U.S. Generalized System of
Preferences (GSP) program as a “beneficiary developing country” (BDC). On June 20, 2008, the
office of the U.S. Trade Representative (USTR) announced that it was initiating a formal review
of Vietnam’s eligibility for GSP benefits and would accept public comments on the application
until August 4, 2008. Since then, there has been no formal announcement from USTR regarding
the status of Vietnam’s GSP application.
The U.S. GSP program, which is currently expired, authorizes the President to grant duty-free
treatment for any eligible product from any beneficiary country.13 Initially created by Title V of
the Trade Act of 1974 (P.L. 93-618) for a 10-year period, the GSP program repeatedly has been
renewed by Congress, most recently via P.L. 112-40, which extended the program until July 31,
2013. The statute also provides the President with specific political and economic criteria to use
when designating eligible countries and products.
Inclusion in the U.S. GSP program is an important trade priority for the Vietnamese government.
Vietnam has already been accepted into several other GSP programs, including those of Canada,
the European Union (EU), and Japan. Vietnam has repeatedly askedcontinues to inquire about the status of its GSP
application, including during Deputy Prime Minister Vu Van Ninh’s official meetings with
Secretary of Commerce John Bryson and U.S. Trade Representative Ron Kirk in February 2012but reportedly sees inclusion in the proposed TPP as a preferable alternative.
According to sources in Vietnam’s Ministry of Foreign Affairs (MOFA), the Vietnamese
government sees its acceptance into the GSP program as another step in the normalization of
bilateral relations.
Compliance with Eligibility CriteriaStatus of Application
The United States has indicated to Vietnam that there are several problems with respect to its
compliance with the program’s eligibility criteria. In theory, there is a question whether Vietnam
is a “Communist” country. Under the provisions of the Trade Act of 1974, a “Communist”
country is ineligible for the GSP program unless it meets certain additional conditions.14 Another
area of possible non-compliance with the GSP program’s eligibility criteria is whether Vietnam
has “taken steps to provide its workers with internationally recognized worker rights.” There are
also indications that Vietnam’s IPR protection is not adequate to satisfy GSP eligibility. Current
U.S. law allows the President to waive compliance with the worker rights and IPR protection
criteria, but not the “Communist” country criterion.
Is Vietnam a “Communist” Country?
In its present form, the GSP program excludes “Communist” countries unless the President
determines three conditions have been met. First, the United States must have conferred NTR
status to the country. Second, the country must be a member of both the International Monetary
Fund (IMF) and the World Trade Organization (WTO). Third, the country must be “not
dominated or controlled by international communism.”
U.S. law does not provide any general definition of a “Communist” country. Some observers
point to Vietnam’s official name—the Socialist Republic of Vietnam—and the government’s
control by the Communist Party of Vietnam (Đảng Cộng sản Việt Nam) as prima facie evidence
that Vietnam is a “Communist” country. Other observers counter that after over two decades of
doi moi,20 Vietnam no longer is a “Communist” country in terms of its economic system. In
addition, even if Vietnam was a “Communist” country, according to these observers, it is “not
dominated or controlled by international communism” because no such entity exists following the
collapse of the Soviet Union.
20
Doi Moi, which literally means “change and newness” and is often translated as “renovation,” is the Vietnamese
Communist Party’s term for reform and renovation in the economy. This term was coined in 1986 for Vietnam’s
transition from the centrally planned command economy to a “market economy with socialist direction.”
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Workers’ Rights
Among the GSP eligibility criteria, Vietnam’s recognition of internationally accepted workers’
rights has proven to be the most problematic. Prior to the 1986 advent of doi moi, there were
many allegations about substandard working conditions in Vietnam, including “sweatshop”
working conditions, the use of child labor, and severe restrictions on the right of association and
collective bargaining.21 Since then, the Vietnamese government is generally perceived to have
made concerted efforts to comply with many internationally recognized labor standards.
In its application for GSP designation, the Vietnamese government focused on its partnership with
the International Labor Organization (ILO) and its ratification of several of the ILO’s conventions
as demonstrating its commitment to comply with international labor rights standards. With the
assistance of the ILO, Vietnam’s National Assembly is working on a new labor law. Despite these
efforts by the Vietnamese government, critics still maintain that working conditions remain below
international standards. In particular, Vietnam has been criticized for its failure to allow
independent labor unions and respect the right of association (see section on “Workers’ Rights”
below).
IPR Protection
Vietnam remained on the U.S. Special 301 Watch List in 2012, with the official report noting that
online piracy is a “growing concern.”22 The 2012 National Trade Estimate Report on Foreign
Trade Barriers (NTE)23 states that
While recognizing the strides Vietnam has made in intellectual property rights (IPR)
protection and enforcement over the past several years, the United States noted that
enforcement efforts have not kept pace with rising levels of IPR infringement and piracy in
the country. Furthermore, administrative enforcement actions and penalties, the most
commonly used means of enforcing IPR in Vietnam, have not served as a sufficient
deterrent.
The NTE report also notes that in 2009 Vietnam revised its IPR Law, as well as IPR-related
provisions in the Criminal Code, to provide criminal penalties for IPR infringement conducted on
a commercial scale. In addition, the NTE noted that the Vietnamese government issued a new
decree in September 2010 on administrative penalties for industrial property violations.
Statements by past U.S. officials indicated that Vietnam’s IPR protection was playing a role in the
decision on its GSP application. In an interview on March 9, 2009, Jay L. Eizenstat, ex-director
for customs affairs for USTR in the Bush Administration, pointed out that “intellectual property
rights violations are easily seen in Vietnam and this is the reason for the unlikelihood of gaining
21
For more information about pre-Doi Moi working conditions in Vietnam, see CRS Report RL30896, Vietnam’s
Labor Rights Regime: An Assessment, coordinated by Mark E. Manyin.
22
For the complete text of the 2010 Special 301 Report, see http://www.ustr.gov/about-us/press-office/reports-andpublications/2012-2.
23
Office of the U.S. Trade Representative, The 2012 National Trade Estimate Report on Foreign Trade Barriers,
Washington, DC, March 2010.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
GSP although Vietnam satisfies basic criteria.”24 It is unclear to what extent this attitude is held in
the Obama Administration.
Besides the specified eligibility criteria in the GSP law, the TPP negotiations are also a factor in
U.S. consideration of Vietnam’s GSP application. Since the GSP program effectively eliminates
tariffs for over 3,400 types of goods, USTR is concerned that accepting Vietnam into the GSP
program will undermine U.S. effectiveness in the TPP negotiations.
Congressional Implications
Under U.S. law, Congress has no direct role in the determination of whether Vietnam is to be
accepted into the U.S. GSP program; the authority to make that decision has been delegated to the
President of the United States. The President is required to notify Congress of his intention.
There are, however, several ways by which Congress could indicate its preferences on this issue.
In addition to hearings and communications to the Administration from Members of Congress,
Congress could authorize or instruct the President to designate—or not to designate—Vietnam as
a beneficiary developing country (BDC), either as part of the legislation to extend
(...continued)
treaty. For more information on Congressional-Executive Agreements, see CRS Report 97-896, Why Certain Trade
Agreements Are Approved as Congressional-Executive Agreements Rather Than Treaties, by Jane M. Smith, Daniel T.
Shedd, and Brandon J. Murrill.
12
For a more detailed examination of Vietnam’s GSP application, see CRS Report RL34702, Potential Trade Effects of
Adding Vietnam to the Generalized System of Preferences Program, by Vivian C. Jones and Michael F. Martin.
13
For background information on the U.S. GSP program, see CRS Report RL33663, Generalized System of
Preferences: Background and Renewal Debate, by Vivian C. Jones.
14
The conditions are: it has normal trade relation status with the United States; is a member in the World Trade
Organization (WTO) and the International Monetary Fund (IMF); and it is “not dominated or controlled by
international communism.”
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U.S. law allows the President to waive compliance with the worker rights and IPR protection
criteria, but not the “Communist” country criterion.
Role of Congress
Under Title V of the Trade Act of 1974, Congress has no direct role in the determination of
whether Vietnam is to be accepted into the U.S. GSP program; the authority to make that decision
has been delegated to the President of the United States. The President is required to notify
Congress of his intention.
There are, however, several ways by which Members of Congress could indicate their preferences
on this issue. In addition to hearings and communications to the Administration from Members,
Congress could authorize or instruct the President to designate—or not to designate—Vietnam as
a beneficiary developing country (BDC),15 either as part of the legislation to reinstate the GSP
program or in separate legislation. Alternatively, Congress could pass legislation stipulating
additional eligibility criteria for the President to consider when deciding to confer BDC status to
Vietnam. Both versions of the Vietnam Human Rights Act introduced during the 111th Congress
(H.R. 1969 and S. 1159) would have Each chamber of Congress could also pass a resolution calling on the President to
approve or deny Vietnam’s application for inclusion in the U.S. GSP program. During the 111th
Congress, both versions of the Vietnam Human Rights Act (H.R. 1969 and S. 1159) would have
prohibited the inclusion of Vietnam in the GSP program
unless the President determines and
certifies that Vietnam has met certain specified workers’
rights criteria. In the 112th113th Congress,
H.R. 51571682 would deny Vietnam being accepted’s acceptance into the GSP
program unless the President certifies certified
to Congress that Vietnam has met certain human rights
conditions. Each chamber of Congress could also pass a resolution calling on the President to
approve or deny Vietnam’s application for inclusion in the U.S. GSP program. conditions.
Bilateral Investment Treaty (BIT) Negotiations
During their June 2008 meeting, President Bush and Prime Minister Dũng announced the launch
of talks to establish a bilateral investment treaty (BIT).2516 BITs are designed to improve the
climate for foreign investors by establishing dispute settlement procedures and protecting foreign
investors from performance requirements, restrictions on transferring funds, and arbitrary
expropriation. The United States is currentlycurrently is a party to 41 BITs in force; Vietnam has signed over
50 BITs.
Status of the Negotiations
The first round of BIT negotiations was held in Washington, DC, from December 15-18, 2008.
The Vietnamese delegation included representatives from the Ministry of Planning and
Investment, the Ministry of Industry and Trade, the Ministry of Finance, the Ministry of Justice,
24
“Exporters Must be Good at Product Valuation, Seminar,” Vietnam Business Forum, March 9, 2009.
For more information about BITs and the U.S. BIT program, see CRS Report RL33978, The U.S. Bilateral
Investment Treaty Program: An Overview, by Martin A. Weiss.
25
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and the State Bank of Vietnam. The U.S. delegation included representatives of the U.S. Trade
Representative’s Office, the Department of State, the Department of Commerce, and the Treasury
Department. Since then, two more rounds of talks have been held—one on June 1-2, 2009, in
Hanoi, and another on November 17-19, 2009, in Washington, DC. A proposed fourth round of
15
For an explanation of BDC status, see CRS Report RL33663, Generalized System of Preferences: Background and
Renewal Debate, by Vivian C. Jones.
16
For more information about BITs and the U.S. BIT program, see CRS Report RL33978, The U.S. Bilateral
Investment Treaty Program: An Overview, by Martin A. Weiss and Shayerah Ilias Akhtar.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress
talks that was to be held in early 2010 did not happen. According to the State Department,
bilateral BIT talks have not been held since the two nations joined the TPP negotiations.
The Vietnamese government appears interested in concluding a BIT with the United States, both
because it could foster greater inward FDI from the United States and because it could serve as a
stepping-stone to a possible freebilateral trade agreement (FTABTA) with the United States.17 The U.S.
government’s interest in BIT negotiations appears primarily focused on providing better
protection and access for U.S. investors in Vietnam, while avoiding compromising domestic
economic priorities and needlessly relinquishing national sovereignty. Representatives of the
business communities in both the United States and Vietnam have expressed interest in the
successful conclusion of the BIT negotiations.
The United States has generally has based its past BIT negotiations on a model BIT. In 2004, the
Bush Administration revised the model BIT, partially in response to provisions in the Trade Act of
2002 (P.L. 107-210). In the Trade Act of 2002, Congress mandated several negotiating objectives
to narrow the scope of investment protection. The act stated that the principal U.S. negotiating
objective on foreign investment is to reduce or eliminate barriers to investment, “while ensuring
that foreign investors in the United States are not accorded greater substantive rights with respect
to investment protections than United States investors in the United States, and to secure for
investors important rights comparable to those that would be available under United States legal
principles and practice.” TheIn 2012, the Obama Administration recently released a new model BIT, which
presumably would be used in any future talks with Vietnam.2618
In addition, the existing 2001 Bilateral Trade Agreement (BTA) between the United States and
Vietnam included provisions in Chapter 4 governing investment and the future negotiation of a
bilateral investment treaty.2719 Article 2 commits both nations to providing national and MFN
(NTR) treatment to investments. Article 4 provides for a dispute settlement system for bilateral
investments. Article 5 requires both nations to ensure that the laws, regulations, and
administrative procedures governing investments are promptly published and publicly available.
Article 11 pertains to compliance with the provisions of WTO Agreement on Trade-related
Investment Measures (TRIMs). Article 13 states that both nations “will endeavor to negotiate a
bilateral investment treaty in good faith within a reasonable period of time.” If the TPP
negotiations appear to be running into problems, Vietnam may seek to restart the BIT talks.
The Role of Congress
If the United States and Vietnam successfully complete the negotiations of a BIT during the 112th113th
Congress, the treaty will be subject to Senate ratification. Action on the part of Congress as a
whole may be required if the terms of the BIT require changes in U.S. law.
26
17
Previous U.S. trade agreements have included language similar to that of the U.S. model BIT.
A copy of the new model BIT is available online at http://www.ustr.gov/sites/default/files/
BIT%20text%20for%20ACIEP%20Meeting.pdf.
2719
For the complete text of the 2001 BTA, go to http://www.usvtc.org/trade/bta/text/.
18
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th113th Congress
Non-Market Economy Designation
Vietnamese leaders would like the United States to change Vietnam’s official designation from
“nonmarket economy” to “market economy.” Under U.S. trade law (19 U.S.C. 1677), the term
“nonmarket economy country” means “any foreign
foreign country that the administering
Vietnam’s Economy at a Glance
authority determines
does not operate on market
In 1986, Vietnam started the transformation of its Sovietmarket principles of cost or
pricing structures,
style centrally planned economy into a market-oriented
so that sales of merchandise in
such country do not reflect the fair value of the
merchandise.” In making such a determination, the
administrating authority of the executive branch is
to consider such criteria as the extent of state
ownership of the means of production, and
government control of prices and wages.
For over 20 years, Vietnam has been transitioning
from a centrally planned economy to a market
economy. Under its doi moi policy, Vietnam has
allowed the development and growth of private
enterprise and competitive market allocation of
most goods and services. Although most prices
have been deregulated, the Vietnamese government
still retains some formal and informal mechanisms
to direct or manage the economy.
State-Owned Enterprises
For the United States, one of the main concerns
about Vietnam’s economy is the continued
importance of state-owned enterprises (SOEs) in
the nation’s industrial sector. Between 1995 and
2010, the portion of Vietnam’s real industrial
output produced by SOEs declined from 50.3% to
22.1%.28 However, SOEs continue to dominate key
sectors of Vietnam’s economy, such as mining and
energy. In addition, according to a study by the
Vietnam Report Company, 46% of the 500 largest
enterprises in Vietnam are SOEs. The five largest
enterprises—Vietnam Oil and Gas Group, Vietnam
National Petroleum Corporation, Vietnam
Electricity, Vietnam Post and Telecommunications
Group, and Vietnam National Coal and Mineral
Industries Group—are all SOEs.
Vietnam’s Economy at a Glance
In 1986, Vietnam started the transformation of its
Soviet-style centrally planned economy into a
market-oriented economy. Its agricultural sector,
which was decollectivized in the 1990s, remains
the main source of employment in the country, but
provides about 20% of GDP. The industrial sector,
which contributes about 40% of GDP, has also
undergone a gradual shift from state-owned to
privately owned production. Vietnam’s industrial
output currently is produced by foreign-owned
enterprises (about 45% of industrial output),
privately owned domestic companies (about 35%
of industrial output), and state-owned enterprises
(about 20% of industrial output). Vietnam’s
services sector (about 40% of GDP) has also
transitioned from primarily government-run to
primarily private providers. Most goods and
services are now distributed using market
mechanisms, but there remains significant
government intervention via subsidies for key
industries and selected consumer goods. Vietnam’s
financial system is still dominated by state-owned
banks, but some private banks have emerged.
Vietnam’s real GDP grew by 5.89% in 2010, fueled
by industrial and service sector growth. Vietnam’s
consumer price index (CPI) rose by 18.58%. The
unemployment rate remained low, but Vietnam
continues to suffer from significant
underemployment. Vietnam’s total exports were
$96.3 billion; imports were $105.8 billion.
Although the shift in economic policy has led to
rapid growth, it has also brought many of the
traditional problems of market-oriented
economies. Vietnam has periodically struggled with
inflation, fiscal deficits, trade imbalances, and other
cyclical economic phenomena common to market
economies. Vietnam has also seen a rising income
and wealth disparity, that at times has fueled
discontent among Vietnam’s poor and lowerincome population. Vietnam’s economic priorities
for 2012 are to stabilize economic growth and
contain inflation.
Source: General Statistics Office of Vietnam.
Many of Vietnam’s SOEs have been converted into quasi-private corporations through a process
known as “equitization,” in which some shares are sold to the public on Vietnam’s stock
28
Based on data from Vietnam’s General Statistics Office.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
exchange, and most of the shares remain owned by the Vietnamese government. Twenty years
ago, there were about 12,000 SOEs in Vietnam. By the end of 2011, the number of SOEs had
been reduced to 1,309 by either restructuring or equitization.29 To some analysts, however, the
retention of a controlling interest in the shares of the companies provides the Vietnamese
government with the means to continue to manage the operations of the equitized SOEs.
In August 2010, Prime Minister Dũng announced a plan for the reorganization of the remaining
SOEs.30 Prime Minister Dũng has such country
economy. Its agricultural sector, which was
decollectivized in the 1990s, remains the main source of
do not reflect the fair value of the
employment in the country, but provides about 20% of
merchandise.” In making such a
GDP. The industrial sector, which contributes about 40%
determination, the administrating authority of
of GDP, has also undergone a gradual shift from statethe executive branch is to consider such
owned to privately owned production. Vietnam’s
industrial output currently is produced by foreign-owned
criteria as the extent of state ownership of the
enterprises (about 45% of industrial output), privately
means of production, and government control
owned domestic companies (about 35% of industrial
of prices and wages. However, the General
output), and state-owned enterprises (about 20% of
Agreement on Tariffs and Trade (GATT)
industrial output). Vietnam’s services sector (about 40%
implicitly defines a “non-market economy”
of GDP) has also transitioned from primarily
government-run to primarily private providers. Most
for purposes of trade as “a country which has
goods and services are now distributed using market
a complete or substantially complete
mechanisms, but there remains significant government
monopoly of its trade and where all domestic
intervention via subsidies for key industries and selected
20
prices are fixed by the State.”
consumer goods. Vietnam’s financial system is still
For over 20 years, Vietnam has been
transitioning from a centrally planned
economy to a market economy. Under its doi
moi policy, Vietnam has allowed the
development and growth of private enterprise
and competitive market allocation of most
goods and services. Although most prices have
been deregulated, the Vietnamese government
still retains some formal and informal
mechanisms to direct or manage the economy.
State-Owned Enterprises
dominated by state-owned banks, but some private banks
have emerged.
Vietnam’s real GDP grew by 5.4% in 2013, fueled by
industrial and service sector growth. Vietnam’s consumer
price index (CPI) rose by 6.6%. The unemployment rate
remained low, but Vietnam continues to suffer from
significant underemployment. Vietnam’s total exports
were $132 billion; imports were $131 billion.
Although the shift in economic policy has led to rapid
growth, it has also brought many of the traditional
problems of market-oriented economies. Vietnam has
periodically struggled with inflation, fiscal deficits, trade
imbalances, and other cyclical economic phenomena
common to market economies. Vietnam has also seen a
rising income and wealth disparity, that at times has
fueled discontent among Vietnam’s poor and lowerincome population. Vietnam’s economic priorities for
2013 are to increase economic growth and lower
inflation.
For the United States, one of the main
concerns about Vietnam’s economy is the
continued importance of state-owned
Source: General Statistics Office of Vietnam.
enterprises (SOEs) in the nation’s industrial
sector. Between 1995 and 2012, the portion of
Vietnam’s real industrial output produced by SOEs declined from 50.3% to 18.4%.21 However,
SOEs continue to dominate key sectors of Vietnam’s economy, such as mining and energy. In
addition, according to a study by the Vietnam Report Company, 46% of the 500 largest
20
21
Ad Note to Art. VI:1 of the GATT.
Based on data from Vietnam’s General Statistics Office.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress
enterprises in Vietnam are SOEs. The five largest enterprises—Vietnam Oil and Gas Group,
Vietnam National Petroleum Corporation, Vietnam Electricity, Vietnam Post and
Telecommunications Group, and Vietnam National Coal and Mineral Industries Group—are all
SOEs.
Many of Vietnam’s SOEs have been converted into quasi-private corporations through a process
known as “equitization,” in which some shares are sold to the public on Vietnam’s stock
exchange, and most of the shares remain owned by the Vietnamese government. Twenty years
ago, there were about 12,000 SOEs in Vietnam. By the end of 2011, the number of SOEs had
been reduced to 1,309 by either restructuring or equitization.22 Attempt to sell shares in 25 SOEs
in early 2014 via initial public offerings (IPOs) were largely rebuffed, as over 70% of the offered
shares went unsold.23 To some analysts, however, the retention of a controlling interest in the
shares of the companies provides the Vietnamese government with the means to continue to
manage the operations of the equitized SOEs.
In August 2010, Prime Minister Dũng announced a plan for the reorganization of the remaining
SOEs.24 Prime Minister Dũng called on every government agency responsible for the
administration of a SOE to submit a report on its economic performance by the end of 2010.
Plans for the equitization of the SOEs were confirmed during the 11th National Party Congress in
January 2011. The stated goal is to restructure and reorganize all the SOEs to increase their
efficiency and reduce the number of wholly owned SOEs to 692 by the end of 2015.3125 The Asian
Development Bank (ADB) is providing Vietnam with a $630 million loan to help it reform its
SOEs and improve corporate governance.3226
The urgency to reform Vietnam’s SOEs is being driven, in part, by the financial problems of
Vietnam Shipbuilding Industry Group (Vinashin). Vinashin nearly went bankrupt in 2010, after a
series of poor investments in non-shipbuilding ventures.3327 The company had run up $4.4 billion in
debts by June 2010, and was having trouble servicing its debt to both Vietnamese and nonVietnamese banks. On December 8, 2010, Planning and Investment Minister Võ Hồng Phúc
stated that Vinashin was responsible for its own debt, but that the government would help lead the
company back to profitability.3428 Following Minister Phúc’s statement, the state-owned
Development Bank of Vietnam offered Vinashin interest-free loans to help the company with its
cash flow problems.3529 In March 2012, nine former Vinashin executives were sentenced to up to
20 years in jail and were ordered to pay substantial fines for “intentionally violating state rules on
economic management with serious consequences.”36
Price and Wage Controls
The doi moi process has led to the gradual deregulation of most prices and wages in Vietnam.
However, the Vietnamese government maintains controls over key prices, including certain major
industrial products (such as cement, coal, electricity, oil and steel) and basic consumer products
(such as meat, rice, and vegetables). In December 2010, Prime Minister Dũng tightened controls
on various products to reduce inflationary pressure.37 Vietnam’s year-on-year consumer price
index (CPI) in November 2010 was 11%.
The Vietnamese government also maintains control over some wages. Government workers are
paid according to a fixed pay scale, and all workers are subject to a national minimum wage law.
29
“150 SOEs Must Be Equitized Every Year,” Viet Nam Net, May 14, 2012.
30
22
“150 SOEs Must Be Equitized Every Year,” Viet Nam Net, May 14, 2012.
“IPO Shares of State-owned Enterprises Unsalable,” Vietnamnet, April 8, 2014.
24
Kim Tan, “Government Shakes Up State-owned Companies,” Dantri International News, August 23, 2010.
3125
“150 SOEs Must Be Equitized Every Year,” Viet Nam Net, May 14, 2012.
3226
For details, see ADB’s webpage—http://www.adb.org/projects/project.asp?id=39538&p=vieproj.
3327
Leigh Murray, “Vinashin May Hurt Vietnam Banks,” Wall Street Journal, December 13, 2010.
3428
“Vietnam Minister Says Vinashin Should Make Its Own Debt Payment,” Bloomberg, December 8, 2010.
3529
“Vietnam Offers Loans to Ailing Shipbuilder Vinashin,” BBC, December 28, 2010.
3630
“Vietnam Jails Former Vinashin Executives After Downfall,” Reuters, March 30, 2012.
37
“Vietnam to Set Price Controls on Commodities,” Vietnam Business News, December 2, 2010.
30
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress
Price and Wage Controls
The doi moi process has led to the gradual deregulation of most prices and wages in Vietnam.
However, the Vietnamese government maintains controls over key prices, including certain major
industrial products (such as cement, coal, electricity, oil and steel) and basic consumer products
(such as meat, rice, and vegetables). In December 2010, Prime Minister Dũng tightened controls
on various products to reduce inflationary pressure.31
The Vietnamese government also maintains control over some wages. Government workers are
paid according to a fixed pay scale, and all workers are subject to a national minimum wage law.
Workers for private enterprises, foreign-owned ventures and SOEs receive wages based largely
on market conditions. Vietnam’s recent inflation has given rise to upward pressure on wages. The
Prime Minister’s anti-inflation policy is supposed to alsoalso to curb wage increases.
The Vietnamese government asserts that most of the prices and wages in Vietnam are marketdetermined, especially the prices of goods exported to the United States. In addition, Vietnamese
exports face strong competitive pressure from other Asian nations, such as Bangladesh, China,
Malaysia, and Thailand. As such, the Vietnamese government maintains that it should be
considered a market economy, particularly in anti-dumping and counterveiling duty cases.
Vietnam’s View
The Vietnamese government maintains that its economy is as much a market economy as many
other nations around the world, and has actively has sought formal recognition as a market economy
from its major trading partners. A number of trading partners—including ASEAN, Australia,
India, Japan, and New Zealand—have designated Vietnam a market economy for purposes of
international trade. Under the terms of its WTO accession agreement with the United States,
Vietnam is to remain a non-market economy for up to 12 years after its accession or (i.e., 2018) or
until it meets
U.S. criteria for a “market economy” designation.3832
Designation as a market economy has both symbolic and practical value for Vietnam. The
Vietnamese government views market economy designation as part of the normalization of trade
relations with the United States. In addition, Vietnam’s designation as an NME generally makes it
more likely that antidumping and countervailing duty cases will result in adverse rulings against
Vietnamese companies. In theory, the 112th113th Congress could consider legislation weighing in on
the designation of Vietnam as a market or non-market economy by amending or superseding
existing U.S. law.
Catfish
Catfish have been a regular source of trade friction between the United States and Vietnam for the
past decade. Vietnam is a major exporter of frozen fish fillets using certain varieties of fish—
known as basa and tra in Vietnamese—that are commonly referred to as catfish in the global fish
market.3931
“Vietnam to Set Price Controls on Commodities,” Vietnam Business News, December 2, 2010.
Other countries considered non-market economies by the United States include Armenia, Azerbaijan, Belarus, China,
Georgia, Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan.
32
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress
market.33 Since 1999, Vietnamese exports of basa and tra frozen fish fillets have secured a
growing share of the U.S. market, despite the objections of the U.S. catfish industry and the
actions of the U.S. government. In 20112013, the United States imported over $304339 million of basa
and tra from Vietnam.4034
Over the last 10 years, the United States has taken several actions that were designed to have an
impact on the import of Vietnamese basa and tra. In 2002, Congress passed legislation that
38
Other countries considered non-market economies by the United States include Armenia, Azerbaijan, Belarus, China,
Georgia, Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan.
39
Basa (pangasius bocourti) and tra (pangasius hypophthalmus) are fresh-water fish from the Mekong River basin of
Vietnam. U.S. catfish (ictalurus punctatus)—also known as channel catfish—are also fresh-water fish, typically raised
for commercial purposes in aquaculture ponds. All three species are siluriformes, with the characteristic barbels
(whiskers) from which the name catfish was derived.
40
Based on U.S. International Trade Commission (USITC) online trade database (http://dataweb.usitc.gov/).
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
prohibited the labeling of basa and tra as “catfish.”41 In August 2003, the U.S. government
imposed antidumping duties on “certain frozen fish fillets from Vietnam,” including basa and
tra.42 Despite these measures, Vietnam’s exports of basa and tra continued to riseprohibited the labeling of basa and tra as “catfish.”35 In August 2003, the U.S. government
imposed antidumping duties on “certain frozen fish fillets from Vietnam,” including basa and
tra.36 Despite these measures, U.S. imports of basa and tra from Vietnam continued to rise.
The ongoing tensions around catfish trade were heightened by the passage of the 2008 Farm Bill
(P.L. 110-246) by the 110th Congress on May 22, 2008, and the ITC’s determination on June 15,
2009, to keep in place the antidumping duties on certain frozen fish fillet imports from Vietnam
“for the foreseeable future.” The Agricultural Act of 2014 (P.L. 113-79) confirmed the 2008 Farm
Bill transfer of catfish inspection to the U.S. Department of Agriculture, including basa and tra.
In the eyes of the Vietnamese government, the U.S. response to the growth of Vietnam’s basa and
tra exports constitutes a case of trade protectionism designed to shelter U.S. catfish producers
from legitimate competition. Vietnam also points to U.S. anti-dumping measures on Vietnamese
shrimp and plastic bags as an indications of U.S. protectionism (see “Non-Market Economy
Designation”).4337 Supporters of U.S. trade policies against Vietnam’s exports of basa and tra say
the measures are designed to defend U.S. consumers and businesses from the unsafe products and
unfair business practices of Vietnam. In November 2010, the Vietnam Association of Seafood
Exporters and Producers (VASEP) cautioned Vietnam’s seafood processors about carcinogenic
residuals from herbicides in shrimp, after Japan tightened its inspections of Vietnamese exports.44
The ongoing tensions around catfish trade were heightened by the passage of the 2008 Farm Bill
(P.L. 110-246) by the 110th Congress on May 22, 2008, and the ITC’s determination on June 15,
2009, to keep in place the antidumping duties on certain frozen fish fillet imports from Vietnam
“for the foreseeable future.” The issue has resurfaced in the deliberations of the Agriculture
Reform, Food, and Jobs Act of 2012 (S. 3240).38
2008 Farm Bill
The legal status of Vietnam’s basa and tra exports to the United States was brought into question
by the provisions of section 11016 of the 2008 Farm Bill (P.L. 110-246), enacted on June 18,
2008. The section, entitled “Inspection and Grading,” established a voluntary fee-based grading
program for “catfish (as defined by the Secretary).” The law also stipulated specific aspects of the
examination and inspection of catfish, including the conditions under which the fish were raised
and transported. By these provisions, the 2008 Farm Bill effectively transferred the regulation of
imported catfish from the Food and Drug Administration (FDA) to the USDA, which is generally
viewed as maintaining stricter inspection standards than the FDA.
The possibility that the Secretary of Agriculture may redefine catfish to include basa and tra,
thereby making them subject to the stricter USDA inspection standards, brought forth objections
from Vietnam’s Ambassador to the United States, its Minister of Agriculture and Rural
Development, and Vietnam’s catfish industry (including their trade association, the Vietnam
Association of Seafood Exporters and Producers, or VASEP). Ambassador Le Cong Phung sent a
41Section 11016 of the 2008 Farm Bill (P.L. 110-246), enacted on June 18,
33
Basa (pangasius bocourti) and tra (pangasius hypophthalmus) are fresh-water fish from the Mekong River basin of
Vietnam. U.S. catfish (ictalurus punctatus)—also known as channel catfish—are also fresh-water fish, typically raised
for commercial purposes in aquaculture ponds. All three species are siluriformes, with the characteristic barbels
(whiskers) from which the name catfish was derived.
34
Based on U.S. International Trade Commission (USITC) online trade database (http://dataweb.usitc.gov/).
35
Language was introduced into the Farm Security and Rural Investment Act of 2002 (P.L. 107-171) that restricted the
legal definition of catfish to the family Ictaluridae, effectively banning the use of the term “catfish” for basa and tra.
4236
International Trade Administration, “Notice of Antidumping Duty Order: Certain Frozen Fish Fillets from the
Socialist Republic of Vietnam,” 68 FR 47909, August 12, 2003.
4337
Starting in 2005, the United States began imposing anti-dumping duties on “certain frozen and canned warmwater
shrimp” from Vietnam after the International Trade Administration (ITA) determined that they were being sold at “less
than fair market value.” Because Vietnam is a non-market economy, the ITA used cost estimates from Bangladesh to
determine “fair market value.” In November 2010, the United States extended the anti-dumping duties for another five
years. Vietnam is appealing this determination to the World Trade Organization, citing the U.S. use of “zeroing,” a
controversial method for calculating anti-dumping duties. In March 2010, the ITA issued a final determination on
antidumping and countervailing duties on polyethylene retail carrier bags from Vietnam. For this decision, the ITA
used India as the surrogate nation to determine fair market value.
4438
“Toxic Residues Could Shrivel Shrimp Exports: Experts,” Vietnam Economy News, November 12, 2010.
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113th Congress
2008. The section, entitled “Inspection and Grading,” established a voluntary fee-based grading
program for “catfish (as defined by the Secretary).” The law also stipulated specific aspects of the
examination and inspection of catfish, including the conditions under which the fish were raised
and transported. By these provisions, the 2008 Farm Bill effectively transferred the regulation of
imported catfish from the Food and Drug Administration (FDA) to the USDA, which is generally
viewed as maintaining stricter inspection standards than the FDA.
The possibility that the Secretary of Agriculture could have redefined catfish to include basa and
tra, thereby making them subject to the stricter USDA inspection standards, brought forth
objections from Vietnam’s Ambassador to the United States, its Minister of Agriculture and Rural
Development, and Vietnam’s catfish industry (including their trade association, the Vietnam
Association of Seafood Exporters and Producers, or VASEP). Ambassador Le Cong Phung sent a
letter to nearly 140 Members of Congress, suggesting that a reclassification of basa and tra as
catfish would call into question the U.S. commitment to the WTO and endanger the jobs of more
than 1 million Vietnamese farmers and workers. In addition, an opinion article in the Wall Street
Journal referred to the possible reclassification of basa and tra as catfish as “protectionism at its
worst.”4539 Supporters of the provisions of the 2008 Farm Bill state that it provides greater
protection to U.S. consumers.
Draft regulations for catfish food safety inspection were delivered to the Office of Management
and Budget (OMB) by the USDA on November 13, 2009. On February 24, 2011, the USDA
published in the Federal Register its proposed rule for mandatory inspection of catfish and catfish
products.4640 The USDA is “proposing to apply the requirements for the inspection of imported
meat products (21 U.S.C. 620) to the inspection of imported catfish products….” The proposed
rule, however, leaves some of the key issues related to Vietnamese imports unresolved, including
the definition of catfish. The USDA requested public comments on the proposed rule, to be
delivered on or before June 24, 2011.4741 Since the period for public comment ended, no further
action has been taken on the proposed rule.
If adopted, the proposed rule would require all imported catfish and catfish products come from a
facility that complies with USDA sanitation standards. To qualify for import into the United
States, foreign countries would have to demonstrate that their laws, regulatory administration,
evaluation system, and standards are equivalent to U.S. standards administered by the USDA
Food Safety and Inspection Service (FSIS). As drafted, the FSIS would review the inspection
systems of other nations to determine their equivalency with U.S. standards; these reviews may
include periodic onsite visits to overseas catfish facilities.
The proposed catfish rule would be implemented in four phases. During Phase One, foreign
countries exporting catfish to the United Sates would have to document that they have the legal
authority to regulate catfish. In addition, FSIS would conduct onsite audits of foreign countries.
By Phase Three, foreign (and domestic) establishments will have to be in compliance with USDA
sanitation requirements. By Phase Four, foreign countries will have to have implemented a catfish
39
“A Fish by Any Other Name,” Wall Street Journal, May 20, 2009.
U.S. Department of Agriculture, “Mandatory Inspection of Catfish and Catfish Products,” 76 Federal Register
10434- 10469, February 24, 2011.
41
Comments may be submitted online at http://www.regulations.gov, or by mail to: Docket Clerk, U.S. Department of
Agriculture (USDA), FSIS, Room 2-2127 George Washington Carver Center, 5601 Sunnyside Avenue, Beltsville, MD
20705. All submissions must include the agency’s name and the docket number FSIS-2008-0031.
40
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress
inspection program that is the equivalent of the U.S. inspection program. The proposed rule does
not set a timeline for the four phases.
As a possible preparation for heightened U.S. inspection requirements, Vietnam’s Ministry of
Agriculture and Rural Development (MOARD) tightened export hygiene standards for basa and
tra. Effective April 12, 2010, all basa and tra exported from Vietnam will need certificates for
hygiene and food safety issued by the National Agro-Forestry-Fisheries Quality Assurance
Department.4842 In addition, MOARD and the Ministry of Industry and Trade have contracted U.S.based Mazzetta Company to train Vietnamese fish breeders how to comply with U.S. standards.49
Prime Minister Dũng reportedly has approved a 10-year, $2 billion “master plan” for the
45
“A Fish by Any Other Name,” Wall Street Journal, May 20, 2009.
U.S. Department of Agriculture, “Mandatory Inspection of Catfish and Catfish Products,” 76 Federal Register
10434- 10469, February 24, 2011.
47
Comments may be submitted online at http://www.regulations.gov, or by mail to: Docket Clerk, U.S. Department of
Agriculture (USDA), FSIS, Room 2-2127 George Washington Carver Center, 5601 Sunnyside Avenue, Beltsville, MD
20705. All submissions must include the agency’s name and the docket number FSIS-2008-0031.
48
“Catfish Quality Tests Tightened for Export Hygiene Standards,” Vietnam News, April 15, 2010.
49
“US Firm to Help Train Vietnamese Fish Farmers,” Thanh Nien News, March 27, 2010.
46
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development of Vietnam’s fish farming industry that will promote infrastructure and
technological development, disease control, and environmental improvement.50
The Antidumping Sunset Review43
Prime Minister Dũng reportedly has approved a 10-year, $2 billion “master plan” for the
development of Vietnam’s fish farming industry that will promote infrastructure and
technological development, disease control, and environmental improvement.44
The catfish controversy reemerged after the passage of the Agricultural Act of 2014 (P.L. 113-79).
Section 12106 amended Section 1(w) of the Federal Meat Inspection Act (21 USC 601(w)) to
require “all fish of the order Siluriformes” be inspected by the USDA, confirming the change
made in the 2008 Farm Bill. In addition, the Agricultural Act of 2014 requires that the FDA and
the USDA coordinate their inspection activities to avoid duplication of efforts.
The Antidumping Sunset Review on Catfish
While the USDA prepared the new catfish rule, the ITC issued on June 15, 2009, a final
determination in its five-year (sunset) review of the existing antidumping duties on “certain
frozen fish fillets from Vietnam.”5145 In a unanimous decision, the six ITC commissioners voted to
continue the antidumping duties “for the foreseeable future.” The Vietnamese government and the
Vietnam Fishery Association expressed their opposition to the ITC’s decision. Vietnam’s deputy
minister of trade and industry, Nguyen Thanh Bien, was quoted as saying, “in this economic
context, this decision shows the heavy protectionism of the U.S. judicial and executive
agencies.”52
The Agriculture Reform, Food, and Jobs Act of 2012
The lack of a final rule to implement the catfish inspection provisions of the 2008 Farm Bill is a
source of frustration for some Members of Congress. They support amending the Agricultural
Reform, Food, and Jobs Act of 2012 (S. 3240) to support the implementation of the USDA catfish
inspection program. Other Members of Congress, however, consider the transfer of catfish
inspection from FDA to USDA a needless expense, and wish to amend S. 3240 to return the
responsibility to inspect catfish back to FDA. They also are concerned that the implementation of
the USDA catfish inspection program will be harmful to the ongoing TPP negotiations.46
Implications for the 112th113th Congress
Two of the last four Congresses haveprevious five Congresses passed legislation containing provisions that critics assert
are designed to restrict or prevent the import of basa and tra from Vietnam and protect the U.S.
catfish industry from foreign competition. Earlier inIn the 112th Congress, legislation was
introduced – introduced—
H.R. 4296 and S. 496 – —to return the inspection of catfish back to the FDA. The
issue has also been raised during consideration of the Agricultural Reform, Food, and Jobs Act of
2012 (S. 3240) inclusion of
Section 12106 in the Agricultural Act of 2014 has renewed discussion of the supposed U.S. trade
protectionism. According to some observers, congressional action on the treatment of catfish
imports could have broader implications for bilateral trade relations with Vietnam, as well as the
success of the TPP negotiations.
Other Economic Issues
The preceding issues are topics where there has been or continues to be direct bilateral
interaction. In addition, there are several economic issues that indirectly influence relations
between the United States and Vietnam. Of these, the most prominent issues for the 112th
50
42
“Catfish Quality Tests Tightened for Export Hygiene Standards,” Vietnam News, April 15, 2010.
“US Firm to Help Train Vietnamese Fish Farmers,” Thanh Nien News, March 27, 2010.
44
“Vietnam to Inject US$2 Billion into 10-Year Fisheries Plan,” CPA VIetnamVietnam, March 11, 2011.
45
Under the provisions of the Uruguay Round Agreements Act (P.L. 103-465), antidumping duties must be revoked
after five years unless the DOC and the ITC determine that revoking the duties would lead to the continuance or
recurrence of dumping and cause material injury within a foreseeable time period.
5246
“Vietnam Criticizes US Duties on Catfish as Protectionist,” Earth Times, June 17, 2009.
5143
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113th Congress
Other Economic Issues
The preceding issues are topics where there has been or continues to be direct bilateral
interaction. In addition, there are several economic issues that indirectly influence relations
between the United States and Vietnam. Of these, the most prominent issues for the 113th
Congress likely include clothing imports from Vietnam, workers’ rights, IPR protection, and
Vietnam’s exchange rate policy.
U.S. Clothing Imports from Vietnam
Vietnam’s clothing exporters to the United States were among the greatest beneficiaries of the
U.S. decision to grant Vietnam conditional NTR status in December 2001 (see Figure 1).5347
Vietnam has become a major source of U.S. clothing imports, second only to China. Up until
2002, U.S. imports of clothing from Vietnam were small both in value (below $50 million) and as
a share of total imports from Vietnam (below 10%). Following the U.S. extension of conditional
NTR to Vietnam, U.S. clothing imports from Vietnam shot up in value and share. As a share of
total imports, clothing peaked in 2003 at 51.4%. The value of U.S. clothing imports from Vietnam
continued to rise every year until 2009, with the largest year-on-year increases occurring in 2003
and 2007—the first full years after the U.S. granted Vietnam conditional and permanent NTR
status, respectively. Following a slight decline in 2009, the value of clothing imports from
Vietnam once again began to rise. However, since its peak in 2003, the share of clothing in total
U.S. imports from Vietnam has declined.
Figure 1. U.S. Clothing Imports from Vietnam
Value ($ billions) and Share of Total U.S. Imports from Vietnam
60.0%
7.0
6.0
50.0%
5.0
40.0%
4.0
30.0%
3.0
20.0%
2.0
10.0%
1.0
0.0%
0.0
1996
1997
1998
1999
2000
2001
2002
2003
Value
2004
2005
2006
2007
2008
2009
2010
2011
Share
Source: U.S. International Trade Commission.
53
For purposes of this section of the report, clothing imports and exports will be defined as commodities traded under
chapters 61 and 62 of the U.S. Harmonized Tariff System (HTS), unless otherwise noted.
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Notes: Imports valued using General Customs method.
The two spikes in clothing imports gave rise to efforts to restrict clothing trade with Vietnam, first
in the form of a separate bilateral textile agreement and later in the form of a unilateral
monitoring program that expired in January 2009.5448 In both cases, Vietnam initially protested U.S.
efforts to restrict clothing trade, but in the end complied with the U.S. policies. Several Members
of Congress, and in particular Members with significant clothing and textile manufacturing in
their districts or states, voiced concern that a “surge” in Vietnamese clothing exports to the
United States could cause damage to U.S. textile companies and workers. However, major U.S.
retailers and importers maintained that these two programs would restrict trade from Vietnam,
causing harm to U.S. companies and consumers.
There continues to be congressional and commercial interest in the growth of clothing imports
from Vietnam. For the TPP negotiations, supporters of the U.S. textile industry are advocating
using a “yarn-forward” rule 55rule49 in the clothing and textile chapter of the proposed agreement.
Backers of major U.S. retailers and apparel distributors, as well as the Vietnamese government,
would prefer a more liberal approach, such as a “cut and sew” rule,56 in the agreement.
50 in the agreement.
47
For purposes of this section of the report, clothing imports and exports will be defined as commodities traded under
chapters 61 and 62 of the U.S. Harmonized Tariff System (HTS), unless otherwise noted.
48
For more information on the bilateral textile agreement and the monitoring program, see CRS Report RL34262, U.S.
Clothing Imports from Vietnam: Trade Policies and Performance, by Michael F. Martin.
49
A yarn-forward rule would require that the production of the yarn and all subsequent manufacturing activity for the
item of apparel occur in a TPP-member country.
50
A cut and sew rule would require that the cutting of the fabric and the sewing of the fabric into an item of apparel
occur in a TPP-member country. The fabric and/or the yarn could come from other non-TPP nations.
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Figure 1. U.S. Clothing Imports from Vietnam
Value ($ billions) and Share of Total U.S. Imports from Vietnam
9.0
60%
8.0
50%
7.0
6.0
40%
5.0
30%
4.0
3.0
20%
2.0
10%
1.0
Value
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0%
1996
0.0
Share
Source: U.S. International Trade Commission.
Notes: Imports valued using General Customs method.
Workers’ Rights
The U.S. government and a number of non-governmental organizations (NGOs) such as Human
Rights Watch have been critical of Vietnam’s restrictions on workers’ rights. There is a general
recognition that Vietnam has made significant improvements in its labor laws, but that local
government enforcement and business compliance remain ongoing problems. The State
Department’s 20112013 human rights report on Vietnam singled out problems with suppression of
independent labor unions, failure to enforce laws governing the right to organize, forced or
compulsory labor, child labor, and unacceptable working conditions.51
Workers in Vietnam have the legal right to collective bargaining. At present, all labor unions in
Vietnam must be a member of the Vietnam General Confederation of Labor (VGCL). The VGCL
is supposed to organize a union within six months of the establishment of any new business,
regardless of its ownership—state, foreign, or private. Human Rights Watch has also raised
concern about the ability of Vietnamese workers to call an official strike, especially at stateowned enterprises (SOEs).57
Efforts to organize independent unions in Vietnam reportedly have been thwarted by government
suppression, including the arrest and imprisonment of union leaders. Other observers, however,
counter that since the launch of doi moi, worker rights have made progress despite the restrictions
on their independent right to organize. These observers point out that hundreds of unaffiliated
(and therefore unofficial) “labor associations” have sprouted without significant repression, that
the VGCL has evolved into a more aggressive advocate for workers, and in many recent cases,
54
For more information on the bilateral textile agreement and the monitoring program, see CRS Report RL34262, U.S.
Clothing Imports from Vietnam: Trade Policies and Performance, by Michael F. Martin.
55
A yarn-forward rule would require that the production of the yarn and all subsequent manufacturing activity for the
item of apparel occur in a TPP-member country.
56
A cut and sew rule would require that the cutting of the fabric and the sewing of the fabric into an item of apparel
occur in a TPP-member country. The fabric and/or the yarn could come from other non-TPP nations.
57
Human Rights Watch, Not Yet a Workers’ Paradise, New York, NY, May 2009.
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Vietnamese workers have gone on strike reportedly because they felt that they were not wellrepresented by the official union.51
Department of State, Country Reports on Human Rights Practices for 2013: Vietnam, http://www.state.gov/j/drl/rls/
hrrpt/humanrightsreport/index.htm#wrapper.
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is supposed to organize a union within six months of the establishment of any new business,
regardless of its ownership—state, foreign, or private.
Vietnamese workers are not legally allowed to form unions independent from the VGCL, and
efforts to organize independent unions in Vietnam reportedly have been thwarted by government
suppression, including the arrest and imprisonment of union leaders. Some analysts have argued
that restrictions of the right of association in Vietnam have impeded the improvement of labor
rights in other areas. Other observers, however, counter that since the launch of doi moi, worker
rights have made progress despite the restrictions on their independent right to organize. These
observers point out that hundreds of unaffiliated (and therefore unofficial) “labor associations”
have sprouted without significant repression, that the VGCL has evolved into a more aggressive
advocate for workers, and in many recent cases, Vietnamese workers have gone on strike
reportedly because they felt that they were not well-represented by the official union. Human
Rights Watch, however, has raised concern about the ability of Vietnamese workers to call an
official strike, especially at state-owned enterprises (SOEs).52
The Vietnamese government appears to tacitly accept that it has problems with the enforcement
of its labor laws. Vietnam’s official news agencies—Thanhnien News, Vietnam Net, and Voice of
Vietnam News—ran a series of reports in 2008 and 2009 describing problems with Vietnam’s
protection of workers’ rights, the flaws of the VGCL, and efforts to improve working conditions
in Vietnam.5853 The humanitarian aid agency of the Australian Council of Trade Unions, which has
worked closely with the VGCL on workers’ education, wrote in a letter to Human Rights Watch,
“Our experience in workers’ education in Vietnam also leads us to believe that the government,
far from trying to lower workers’ conditions or repress workers, is sensitive to the needs of
women and men workers.”5954
The Vietnamese government is working with various international organizations to improve its
labor laws, regulations and enforcement. Vietnam’s Ministry of Labour, Invalids, and Social
Affairs (MOLISA) and the VGCL are currently workingworked with the International Labor
Organization (ILO) to
finalize a new Labour Code and Trade Union Law.6055 In MayJune 2012,
Vietnam’s National Assembly discussed some possible changes in the draft legislation, but no
final vote was taken
approved the new law, which took effect on May 1, 2013. The ILO and MOLISA are also
working with Spain’s Agency for
International Development Cooperation on a program to
eliminate child labor in Vietnam. In
addition, the United Nations is providing $2 million for a
program to help the VGCL improve its
grassroots relations.61
IPR Protection
The U.S. government remains critical of Vietnam’s record on intellectual property rights (IPR)
protection. Vietnam was included in the “Watch List” in the U.S. Trade Representative’s 2012
Special 301 Report, an annual review of the global state of IPR protection and enforcement.62
Vietnam remained on the Watch List because of its continuing problems with IPR piracy and
trademark infringement. The report does state that “Vietnam improved its regulatory framework
in 2011 by passing decrees to strengthen copyright protection and border enforcement..” The
report also noted that the U.S. government had funded IPR enforcement training in Vietnam in
2009. The perceived continuing problems with Vietnam’s IPR protection may play a role in the
TPP and BIT negotiations, as well as any consideration of Vietnam’s GSP application.
58 grassroots relations.56
52
Human Rights Watch, Not Yet a Workers’ Paradise, New York, NY, May 2009.
Among these articles are: “Impotent Labour Unions Don't Help Workers,” Thanhnien News, June 22, 2008;
“Government Units to Tackle Labour Disputes,” Vietnam Net, February 21, 2009; “Vietnam Works for Harmonious
Labour Relations,” Voice of Vietnam News, March 18, 2009; Minh Nam, “Flouting of Labor Laws Rife in HCMC:
Report,” Thanhnien News, December 2, 2008; and Minh Nam, “HCMC Officials call to Strengthen Unions, Tighten
Labor Laws,” Thanhnien News, February 12, 2009.
5954
Peter Jennings, Re: Human Rights Watch Report ‘Not Yet a Workers’ Paradise’ of May 4, 2009, Australian People
for Health, Education and Development Abroad, Inc., Sydney, June 17, 2009.
6055
The new labor law was to have been submitted in October 2010 (see “Labour Law Reform to Boost Integration,”
Vietnam News, April 2, 2010), but MOLISA and the VGCL requested a postponement from the National Assembly to
permit more consultation with stakeholders. MOLISA is overseeing the drafting of the proposed law, but has assigned
VGCL the responsibility of preparing the law’s trade union provisions.
6156
“UN Aid Helps Improve Trade Union Capacity,” Voice of Vietnam News, April 1, 2010.
62
For a copy of the 2012 report, see http://www.ustr.gov/about-us/press-office/reports-and-publications/2012-2.53
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IPR Protection
The U.S. government remains critical of Vietnam’s record on intellectual property rights (IPR)
protection. Vietnam was included in the “Watch List” in the U.S. Trade Representative’s 2013
Special 301 Report, an annual review of the global state of IPR protection and enforcement.57
Vietnam remained on the Watch List because of its continuing problems with IPR piracy and
trademark infringement. The report states, “Although Vietnam took certain steps to improve its
regulatory framework in the last two years by passing decrees and issuing circulars to strengthen
copyright protection and enforcement, significant areas of concern remain.” The perceived
continuing problems with Vietnam’s IPR protection may play a role in the TPP and BIT
negotiations, as well as any consideration of Vietnam’s GSP application.
Vietnam’s Exchange Rate Policy
One aspect of Vietnam’s economic system that has not been changed by doi moi is its exchange
rate policy. Vietnam continues to maintain a government-managed exchange rate relative to the
U.S. dollar. The State Bank of Vietnam (SBVN) sets a range in which the value of the Vietnamese
dong can fluctuate relative to the U.S. dollar. In March 2009, the SBVN has widened the daily
band to
±5% from the official exchange rate, and has devalued the dong several times. In
addition, the
SBVN has taken steps to reduce downward pressure on the dong, including
tightening the
regulation of foreign exchange transactions and raising interest rates.
Key Trends in Bilateral Trade
The preceding sections of the report have focused on current and past issues in U.S.-Vietnam
trade relations. The final section of the report attempts to identify potential sources of future trade
friction by examining trends in bilateral trade figures. The focus will be on three aspects of recent
trade relations—merchandise trade, trade in services, and foreign direct investment (FDI).
Merchandise Trade
Only a few years haveAbout a decade has passed since trade relations between the United States and Vietnam have
opened. As previously mentioned, the rapid growth in Vietnam’s export of two types of
products—clothing and catfish—quickly made them sources of trade tension between the two
nations. However, other commodities that contribute more to U.S.-Vietnam trade flows could also
become touch points for trouble in bilateral trade relations.
According to U.S. trade statistics, the top U.S. imports from Vietnam in 2013, besides clothing
and fish, were (in order) footwear; furniture and bedding; electrical machinery; machinery and
mechanical appliances; spices, coffee, and tea; articles of leather; and articles of iron and steel
(see Table 2). The top U.S. exports to Vietnam included (in order) machinery and mechanical
appliances; electrical machinery; oil seeds; cotton; meat; residuals and waste from food
industries; iron and steel; edible fruit and nuts; wood and articles of wood; and plastic and plastic
57
For a copy of the 2013 report, see http://www.ustr.gov/about-us/press-office/reports-and-publications/2013/2013special-301-report.
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articles. The juxtaposition of these two lists reveals product categories that may warrant
watching, as well as a connection between some of the top trade commodities.
Table 2. Top 10 U.S. Exports to Vietnam and Imports from Vietnam
(According to U.S. trade statistics for 20112013; U.S. $ millions)
Top 10 Exports to Vietnam
Product
Top 10 Imports from Vietnam
Value
Product
Value
Nuclear reactors, boilers, machinery and
mechanical appliances; parts thereof
540.610
Articles of apparel and clothing
accessories, knitted or crocheted
3,782.039
Electrical machinery and equipment and
parts thereof; sound recorders and
reproducers, television recorders and
reproducers, parts and accessories
372.192Electrical machinery and equipment
and parts thereof; sound recorders and
reproducers, television image and
sound recorders and reproducers, and
parts and accessories of such articles
611.438
Articles of apparel and clothing
accessories, knitted or crocheted
4,723.098
Oil seeds and oleaginous fruits;
miscellaneous grains, seeds and fruits;
industrial or medicinal plants; straw
and fodder
555.643
Articles of apparel and clothing
accessories, not knitted or crocheted
2,773.679
Cotton, including yarns and woven fabrics
thereof
370.519
crocheted
3,338.890
Nuclear reactors, boilers, machinery
and mechanical appliances; parts
thereof
426.062
Footwear, gaiters and the like; parts of
of such articles
2,045.757
Meat and edible meat offal
298.327927.903
Cotton, including yarns and woven
fabrics thereof
402.516
Furniture; bedding, mattresses,
mattress supports, cushions and similar
similar stuffed furnishings; lamps and lighting
lighting fittings, not elsewhere
specified or
included; illuminated sign illuminated
nameplates and the like; prefabricated
buildings
1,844.465
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Top 10 Exports to Vietnam
Product
Top 10 Imports from Vietnam
Value
Product
Value
Vehicles other than railway or tramway
rolling stock, and parts and accessories
thereof
270.956
illuminated nameplates and the like;
prefabricated buildings
2,633.474
Edible fruit and nuts; peel of citrus fruit
or melons
309.407
Nuclear reactors, boilers, machinery
and mechanical appliances; parts
thereof
2,053.850
Residues and waste from the food
industries; prepared animal feed
265.170
Electrical machinery and equipment
and parts thereof; sound recorders and
and reproducers, television image and
and sound recorders and
reproducers, and
parts and accessories of such articles
996.955
Plastics and articles thereof
197.384
Fish and crustaceans, molluscs and
other aquatic invertebrates
793.674
Residues and waste from the food
industries; prepared animal feed
194.112
Coffee, tea, maté and spices
629.421
Iron and steel
189.722
Nuclear reactors, boilers, machinery
and mechanical appliances; parts
thereof
589.219
Dairy produce; birds’ eggs; natural honey;
edible products of animal origin, NESOI
170.835
Mineral fuels, mineral oils and products
of their distillation; bituminous
substances; mineral waxes
433.062
Raw hides and skins (other than furskins)
and leather
155.846
Edible fruit and nuts; peel of citrus fruit
or melons
406.061
Source: U.S. International Trade Commission.
Notes: Products categorized by HTS chapters; NESOI = Not elsewhere specified or included.
According to U.S. trade statistics, the top U.S. imports from Vietnam in 2011, besides clothing
and fish, were (in order) footwear; furniture and bedding; electrical machinery; spices, coffee, and
tea; machinery; mineral fuel and oil; and edible fruits and nuts (see Table 2). The top U.S. exports
to Vietnam included (in order) machinery; electrical machinery; cotton; meat; non-railway
vehicles; plastic and plastic articles; food waste and animal feed; iron and steel; dairy produce,
eggs, honey, and edible products of animal origin; and leather and raw hides and skins. The
juxtaposition of these two lists reveals product categories that may warrant watching, as well as a
connection between some of the top trade commodities.
Furniture and Bedding
Over the last 10 years, Vietnam has risen from being the 62nd
accessories of such articles
1,957.048
Dairy produce; birds’ eggs; natural
honey; edible products of animal origin
NESOI
217.645
Fish and crustaceans, molluscs and
other aquatic invertebrates
938.657
Wood and articles of wood; wood
charcoal
211.104
Articles of leather; saddlery and
harness; travel goods, handbags and
similar containers; articles of animal
gut (other than silkworm gut)
752.268
Plastics and articles thereof
201.933
Coffee, tea, maté and spices
662.140
Iron or steel
185.528
Mineral fuels, mineral oils and
products of their distillation;
bituminous substances; mineral
waxes
526.105
Source: U.S. International Trade Commission.
Notes: Products categorized by HTS chapters; NESOI = Not elsewhere specified or included.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress
Product Interplay
There is also a discernable interplay between Vietnam’s top exports to the United States and the
top U.S. exports to Vietnam. Vietnam imports substantial amounts of cotton from the United
States, which is then used to manufacture clothing to be exported to the United States. Similarly,
Vietnam imports wood from the United States that may end up in the furniture that is imported by
the United States from Vietnam. There is also a significant amount of cross-trade in electrical
machinery—a top-10 export item for both countries—as parts and components are shipped back
and forth across the Pacific Ocean. The implication is that efforts to curtail the growth of certain
top exports of Vietnam to the United States could result in a decline in U.S. exports to Vietnam
and possible job losses in the United States.
Furniture and Bedding
Over the last 10 years, Vietnam has risen from being the 62nd-largest source for furniture and
bedding imports for the United States to being the fourth-largest source—surpassing past leaders
such as Italy, Malaysia, and Taiwan. Furniture and bedding provided over 10% of total U.S.
imports from Vietnam in 20112013.
Footwear
While most of the focus has been on clothing imports from Vietnam, footwear constituted nearly
12% of total U.S. imports from Vietnam in 20112013. Vietnam was the second-largest source of
footwear imports for the United States in 2011, nearly twice the size of Italy and three times the
size of Indonesia.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress2013, more twice the size of imports from Italy.
Electrical Machinery
Vietnam’s electrical machinery exports to the United States grew more than 1,500-fold since
2001, reaching nearly $1exceeding $1.9 billion in 20112019 and nearly 68% of total U.S. imports from Vietnam.
According to interviews with foreign investors in Vietnam, there is great potential for growth in
this sector because of Vietnam’s inexpensive, skilled workers.
Product Interplay
There is also a discernable interplay between Vietnam’s top exports to the United States and the
top U.S. exports to Vietnam. Vietnam imports substantial amounts of cotton from the United
States, which is then used to manufacture clothing to be exported to the United States. Similarly,
Vietnam imports wood from the United States that may end up in the furniture that is imported by
the United States from Vietnam. There is also a significant amount of cross-trade in electrical
machinery—a top-10 export item for both countries—as parts and components are shipped back
and forth across the Pacific Ocean. The implication is that efforts to curtail the growth of certain
top exports of Vietnam to the United States could result in a decline in U.S. exports to Vietnam
and possible job losses in the United States.
Trade in Services
The United States perceives a trade advantage in several of the services sectors, especially
financial services. In the latest U.S. National Trade Estimate (NTE), the Office of the U.S. Trade
Representative indicated that as part of the implementation of the BTA, Vietnam has committed
to greater liberalization of a broad array of its services sectors, including financial services,
telecommunications, express delivery, distribution services, and certain professions. Vietnam has
already
committed to allowing 100% foreign ownership of securities firms and express delivery
service service
providers by 2012. It is likely that the United States will press Vietnam for more access
during the
BTA talks, as well as during the BIT negotiations.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress
Foreign Direct Investment
In 20102012, Vietnam licensed 1,237287 foreign direct investment (FDI) projects worth $19.88616.3 billion.6358
The leading source of FDI in 2010 was Singapore, with 112012 was Japan, with 317 projects worth $4.58655.6 billion. The
United United
States was the fifth 13th-largest source of FDI in 20102012 with 6445 projects worth $1.936 billion.
The 160 million. The
accumulated value of FDI in Vietnam for the period 1998-2010 is $194.5721988-2012 is $210.5 billion. Taiwan
Japan was the
leading investor during this period, followed by South KoreaTaiwan and Singapore. The United
States was the 7th
7th-largest investor, with 568648 projects worth $13.10410.5 billion.
Growing U.S. interest in investment opportunities in Vietnam could have an impact on the BIT
negotiations and, by implication, have an effect on the 112th113th Congress if the negotiations are
completed in 20122014 or 2015. In addition, as more U.S. companies invest in Vietnam, there is the possibility
possibility of more business-to-business disagreements between U.S. and Vietnamese companies,
and more
constituent pressure on Congress to address perceived shortcomings in Vietnam’s
treatment of
foreign-owned enterprises.
63
Data from the General Statistics Office of Vietnam; latest available figures.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress foreign-owned enterprises.
Author Contact Information
Michael F. Martin
Specialist in Asian Affairs
mfmartin@crs.loc.gov, 7-2199
58
Data from the General Statistics Office of Vietnam; latest available figures.
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