U.S.-Vietnam Economic and Trade Relations:
Issues for the 111th Congress
Michael F. Martin
Analyst in Asian Trade and Finance
October 29, 2009
Congressional Research Service
7-5700
www.crs.gov
R40755
CRS Report for Congress
P
repared for Members and Committees of Congress
U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
Summary
After more than two decades of virtually no economic contact, the United States and Vietnam
reestablished trade relations during the 1990s. Since then, Vietnam has rapidly risen to become a
significant trading partner for the United States. Bilateral trade has risen from about $220 million
in 1994 to $15.7 billion in 2008. Much of this rapid growth in U.S.-Vietnam trade has been
attributed to U.S. extension of initially conditional and then later permanent normal trade
relations (NTR) status to Vietnam.
The growth in bilateral trade has not been without its accompanying issues and problems. As part
of what it sees as the normalization of relations, Vietnam has applied for acceptance into the U.S.
Generalized System of Preferences (GSP) program and is participating in negotiations of a
Bilateral Investment Treaty (BIT) with the United States. Both the Bush and the Obama
Administrations have shown some hesitance in accepting Vietnam as a GSP beneficiary country
and in concluding a BIT with Vietnam. Vietnam would also like to have the United States
officially recognize it as a market economy.
There have also been problems with trade for specific products. The rapid rise in clothing imports
from Vietnam contributed to the creation of a controversial import monitoring program.
Vietnam’s growing exports of certain types of frozen fish fillets led to passage of legislation that
redefined the meaning of catfish and transferred the regulation of catfish from the Food and Drug
Administration to the U.S. Department of Agriculture. The fish imports also gave rise to an
antidumping ruling against Vietnam. The Vietnamese government strongly protested these
actions.
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. Some have suggested that the United States curtail its
liberalization of trade with Vietnam until the Vietnamese government has taken sufficient action
to address these issues.
An examination of recent trends in bilateral trade reveals other product categories that could
generate future tension between the United States and Vietnam. Vietnam is quickly becoming a
significant source of imported furniture and bedding, footwear, and electrical machinery for the
United States. For its part, the United States would like to obtain greater access into Vietnam for
its exports of services, particularly financial services and telecommunications.
The 111th Congress may play an important role in one or more of these issues, as have past
Congresses. The GSP program is scheduled to expire on December 31, 2009, and if Congress
should take up GSP renewal, it may also consider Vietnam’s pending application. The 111th
Congress may also weigh in on clothing and fish imports from Vietnam, or its designation as a
market or non-market economy. Finally, if current growth trends continue, Congress may be
asked to act on the rising amount of footwear, furniture and/or electrical machinery being
imported from Vietnam.
This report will be updated as circumstances require.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
Contents
Introduction ................................................................................................................................ 1
Vietnam’s Generalized System of Preferences (GSP) Application................................................ 3
Compliance with Eligibility Criteria ...................................................................................... 3
Is Vietnam a “Communist” Country?............................................................................... 4
Workers’ Rights .............................................................................................................. 4
IPR Protection................................................................................................................. 4
Congressional Implications ................................................................................................... 5
Bilateral Investment Treaty (BIT) Negotiations ........................................................................... 5
Status of the Negotiations...................................................................................................... 6
The Role of Congress............................................................................................................ 6
Trans-Pacific Strategic Economic Partnership Agreement (TPP).................................................. 7
U.S. Clothing Imports from Vietnam and the U.S. Monitoring Program....................................... 8
The Vietnam-U.S. Textile Agreement of 2003 ....................................................................... 9
Vietnam’s WTO Accession, Permanent NTR and the Monitoring Program .......................... 10
Congressional Interest ......................................................................................................... 10
Catfish ...................................................................................................................................... 11
The 2002 Farm Act and the Anti-Dumping Case.................................................................. 11
Basa and Tra Imports from Vietnam .................................................................................... 12
2008 Farm Act and the Anti-Dumping Sunset Review ......................................................... 14
Implications for the 111th Congress...................................................................................... 14
Other Economic Issues.............................................................................................................. 15
Workers’ Rights .................................................................................................................. 15
Non-Market Economy......................................................................................................... 16
IPR Protection..................................................................................................................... 17
Vietnam’s Exchange Rate Policy ......................................................................................... 17
Key Trends in Bilateral Trade.................................................................................................... 18
Merchandise Trade.............................................................................................................. 18
Furniture and Bedding................................................................................................... 19
Footwear....................................................................................................................... 19
Electrical Machinery ..................................................................................................... 19
Product Interplay........................................................................................................... 19
Trade in Services................................................................................................................. 20
Foreign Direct Investment ................................................................................................... 20
Figures
Figure 1. U.S. Clothing Imports from Vietnam ............................................................................ 9
Figure 2. U.S. Imports of Selected Frozen Fillets from Vietnam ................................................ 13
Tables
Table 1. Growth in Bilateral Merchandise Trade between United States and Vietnam................... 2
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
Table 2. Top 10 U.S. Exports to Vietnam and Imports from Vietnam.......................................... 19
Contacts
Author Contact Information ...................................................................................................... 21
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th 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.
Bilateral 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. The shift in U.S.
policy also was spurred by Vietnam’s withdrawal from Cambodia, which it invaded in 1978
following Cambodian incursions into Vietnamese territory. President Bill Clinton ordered an end
to the U.S. trade embargo on Vietnam on February 3, 1994.2 In 1997, President Clinton appointed
the first U.S. Ambassador to Vietnam since the end of the Vietnam War in 1975. Three years later,
the United States and Vietnam signed a bilateral trade agreement (BTA) on July 13, 2000, which
went into force on December 10, 2001.3 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).4 Since the signing of the BTA, the
United States government has appropriated approximately $4-5 million each year to support
Vietnam’s economic reforms.5
In contrast to some other nations (for example, China), official U.S. and Vietnamese trade figures
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.
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.
2 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.
3 For more information about the BTA, see CRS Report RL30416, The Vietnam-U.S. Bilateral Trade Agreement, by
Mark E. Manyin.
4 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.
5 USAID correspondence with CRS in January 2009.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
The growth in bilateral trade has not been without its accompanying issues and problems. For its
part, Vietnam has indicated a desire to foster closer trade relations by applying for acceptance into
the U.S. General System of Preferences (GSP) program, participating in negotiations of a bilateral
investment treaty (BIT) with the United States, and expressing an interest in the Trans-Pacific
Strategic Economic Partnership Agreement (TPP), a multilateral trade group the United States is
also considering joining. The growth in trade has also created sources of trade friction. A rapid
increase in Vietnam’s clothing exports to the United States led to a controversial monitoring
program. The growth in Vietnam’s export of catfish has also 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.
Table 1. Growth in Bilateral Merchandise Trade between United States and Vietnam
(in millions of U.S. dollars)
U.S. Trade Data
Vietnamese Data
Exports to
Imports from
Exports to
Imports from
Year
Vietnam
Vietnam
United States
United States
1994 173
50 N.A. N.A.
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 460 1,053 1,065 411
2002 580 2,395 2,453 458
2003
1,324 4,555 3,939 1,143
2004
1,164 5,275 5,025 1,134
2005 1,193 6,631 5,924
863
2006 1,100 8,567 7,845
987
2007 1,903 10,633 10,089 1,700
2008 2,790 12,901 N.A. N.A.
Source: U.S. trade data from World Trade Atlas; Vietnamese data from General Statistics Office of Vietnam.
This report will examine each of these trade issues, discussing their main elements and exploring
their implications for the 111th Congress. This will be followed by an analysis of key trends in
bilateral trade to discern any potential sources of trade friction in the future.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
Vietnam’s Generalized System of Preferences (GSP)
Application6
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.7 Initially created by Title V of the Trade Act of 1974 (P.L.
93-618) for a 10-year period, the GSP program has been repeatedly renewed by Congress, most
recently in a one-year extension on October 16, 2008, as part of P.L. 110-436. 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 high 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. During Vietnam’s Prime Minister Nguyen Tan Dung’s 2004 official visit
to the White House, he raised the issue of Vietnam’s GSP application with President George W.
Bush. The status of Vietnam’s GSP application was reportedly raised during the meeting of the
U.S.-Vietnam Trade and Investment Framework Agreement (TIFA) Council in Washington, DC,
from April 15-22, 2009.8 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 Criteria
For the United States, Vietnam’s GSP application poses several problems with respect to its
compliance with the program’s eligibility criteria. In particular, there is a question whether
Vietnam is a “Communist” country according to the definition specified in U.S. law. Under the
provisions of the Trade Act of 1974, a “Communist” country is ineligible for the GSP program
unless it meets certain additional conditions. 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 may not be adequate to satisfy GPS 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.
6 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 Michael F. Martin and Vivian C. Jones.
7For background information on the U.S. GSP program, see CRS Report RL33663, Generalized System of Preferences:
Background and Renewal Debate, by Vivian C. Jones.
8 “Vietnam, U.S. Boosting Agricultural, Trade, Labor Cooperation,” Vietnam Business Forum, April 28, 2009.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
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 is a member of both the International Monetary Fund
(IMF) and the World Trade Organization (WTO). Third, the country is “not dominated or
controlled by international communism.”
U.S. law does not provide any 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,9 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.
Workers’ Rights
Among the GSP eligibility criteria, Vietnam’s recognition of internationally accepted workers’
rights may prove to be the most controversial. 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.10 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. 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 2009, with the official report noting a
rise in online piracy.11 However, the 2009 National Trade Estimate Report on Foreign Trade
Barriers (NTE)12 states that “Vietnam has made considerable progress over the past few years in
9 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.”
10 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.
11 For the complete text of the 2009 Special 301 Report, see http://www.ustr.gov/about-us/press-office/reports-and-
publications/2009/2009-special-301-report.
12 Office of the U.S. Trade Representative, The 2009 National Trade Estimate Report on Foreign Trade Barriers ,
Washington, DC, March 31, 2009.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
modernizing its legal framework for IPR protection.” The NTE report also commends Vietnam
for its efforts to strengthen its IPR enforcement. At the same time, the NTE notes that “trademark
infringement is widespread” and “enforcement remains uneven, particularly for certain categories
of physical products, such as software, music and video CDs, VCDs, and DVDs.”
Recent statements by current and past U.S. officials indicate that Vietnam’s IPR protection could
play an important 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 GSP although Vietnam satisfies basic criteria.”13 Virginia E.
Palmer, Deputy Chief of Mission for the U.S. Embassy in Hanoi, was quoted in a Vietnamese
newspaper as saying, “The U.S. hopes Vietnam will soon gain GSP. However, Vietnam needs to
solve two problems of intellectual property rights and trade union freedom. Vietnam excels in
intellectual property protection right [sic] and needs to pay attention to copyright imitation.”14
Congressional Implications
Under current U.S. law, Congress has no direct role in the determination if Vietnam will 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, 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 the GSP program or in
separate legislation. Alternatively, Congress could pass legislation—separately or as part of the
renewal of the GSP program—stipulating additional eligibility criteria for the President to
consider when deciding to confer BDC status to Vietnam. 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.
Bilateral Investment Treaty (BIT) Negotiations
During their June 2008 meeting, President Bush and Prime Minister Dung announced the launch
of talks to establish a bilateral investment treaty (BIT).15 BITs are designed to improve the
climate for foreign investors by establishing dispute settlement procedures and by protecting
foreign investors from performance requirements, restrictions on transferring funds, and arbitrary
expropriation. The United States has signed 47 BITs, with 40 currently in force. Vietnam has
signed over 50 BITs.
13 “Exporters Must be Good at Product Valuation, Seminar,” Vietnam Business Forum, March 9, 2009.
14 T. Dong and M. Duy, “US Hope Vietnam Will Gain GSP Soon,” Binh Duong Daily, March 12, 2009.
15 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.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
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,
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. A second round of negotiations was held June 1 and 2, 2009, in Hanoi.
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 free trade agreement (FTA) with the United States. 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 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.”
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.16 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.”
The Role of Congress
If the United States and Vietnam successfully complete the negotiations of a BIT during the 111th
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.
16 For the complete text of the 2001 BTA, go to http://www.usvtc.org/trade/bta/text/.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
Trans-Pacific Strategic Economic Partnership
Agreement (TPP)
The Bush Administration notified Congress of its intention to enter into negotiations with the
members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP) on September 22,
2008.17 The TPP—also known as the P4—is a multilateral free trade agreement between Brunei,
Chile, New Zealand, and Singapore. The U.S. announcement of interest in joining the TPP was
quickly followed by similar expressions of interest by Australia, Peru, and Vietnam.
Discussion about the TPP among Chile, New Zealand, and Singapore began during an Asia-
Pacific Economic Cooperation (APEC) leader meeting in 2002. Brunei Darussalam joined
negotiations in 2005, and the TPP came into force in 2006.18
In the President’s 2009 Annual Report on the U.S. trade agreements program, the Obama
Administration stated that U.S. participation in the TPP would strengthen U.S. trade and
investment ties in the Asia-Pacific, help U.S. businesses compete in the region, and “could serve
as a vehicle for achieving the long-term APEC objective of a Free Trade Area of the Asia-
Pacific.”19 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 priorities in 2009.20
The first meeting of the interested parties was expected to occur in Singapore in late March 2009.
However, this meeting was postponed at the request of the United States in order to allow senior
trade officials in the Obama Administration time to take office and conduct a review of U.S. trade
policy. Following talks with U.S. Trade Representative Ron Kirk and other U.S. officials, New
Zealand’s Trade Minister Tim Groser told reporters on May 15, 2009, that it “will take patience
and diplomacy” to get the United States back into the TPP negotiations because of an ongoing
major review of U.S. trade policy.21
Vietnam’s interest in the TPP could complicate U.S. intentions for two major reasons. First,
whereas the other parties involved in the negotiations are generally viewed as having
comparatively open trade policies, Vietnam has made less progress in trade and investment
liberalization. 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. Second, if Vietnam were to successfully negotiate TPP
membership before the United States does, under the current rules of the TPP, Vietnam would
have the ability to block U.S. membership.
17 For more information on U.S. interest in the TPP Agreement, see CRS Report R40502, The Trans-Pacific Strategic
Economic Partnership Agreement, by Ian F. Fergusson and Bruce Vaughn.
18 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.
19 Office of the U.S. Trade Representative, 2009 Trade Policy Agenda and 2008 Annual Report of the President of the
United States on the Trade Agreements Program, Washington, DC, February 27, 2009.
20 “Vietnam to Pursue Foreign Policy of Peace in 2009,” Vietnam News Agency, January 23, 2009.
21 “US Trade Talks Need Patience, Says Groser,” NZPA, May 15, 2009.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
Another complicating factor is Vietnam’s membership in the Association of Southeast Asian
Nations (ASEAN) and ASEAN’s discussions with other nations to form a Pan-Asian trade
association that could exclude the United States.22 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 Zealand,
and South Korea)—to discuss the formation of a free trade area that would include only Asian
nations.
U.S. Clothing Imports from Vietnam and the U.S.
Monitoring Program
Vietnam’s clothing exports 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).23 Up until
2002, U.S. imports of clothing from Vietnam were small both in value (below $50 million) and as
a share of total imports from Vietnam (below 10%). Following the U.S. extension of conditional
NTR to Vietnam, U.S. clothing imports from Vietnam shot up in value and share. As a share of
total imports, clothing peaked in 2003 at 51.4%. The value of U.S. clothing imports from Vietnam
has continued to rise every year since 1996, with the largest year-on-year increases occurring in
2003 and 2007—the first full years after the U.S. granted Vietnam conditional and permanent
NTR status, respectively.
22 For more about the complicated dynamics of regionalism in Asia, see CRS Report RL33653, East Asian Regional
Architecture: New Economic and Security Arrangements and U.S. Policy, by Dick K. Nanto.
23 For purposes of this section of the report, clothing imports and exports will be defined as commodities traded under
chapters 61 and 62 of the U.S. Harmonized Tariff System (HTS), unless otherwise noted.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
Figure 1. U.S. Clothing Imports from Vietnam
Value ($ billions) and Share of Total U.S. Imports from Vietnam
6.0
60%
5.0
50%
4.0
40%
3.0
30%
2.0
20%
1.0
10%
0.0
0%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Value
Share
Source: U.S. International Trade Commission.
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 2009.24 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. clothing and 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.
The Vietnam-U.S. Textile Agreement of 2003
During the congressional debate over the bilateral trade agreement (BTA) with Vietnam, many
Members of Congress urged President Bush to negotiate a separate bilateral textile agreement
with Vietnam. Because Vietnam was not a WTO member at the time, its clothing exports were not
covered by the Agreement on Textiles and Clothing (ATC),25 and therefore there were no quotas
24 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.
25 The ATC expired on December 31, 2006.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
on Vietnam’s clothing exports to the United States. In the Members’ opinion, it was important
that the United States conclude a bilateral textile agreement with Vietnam that ensured fair
competition and/or restricted the growth of Vietnamese clothing exports to the United States.
Negotiations of a separate bilateral textile agreement began soon after the bilateral trade
agreement went into effect. On April 25, 2003, the two nations agreed to the terms of a bilateral
textile agreement that placed quantity quotas on 38 categories of clothing imports from Vietnam
from May 1, 2003, until December 31, 2006. The quotas automatically rolled over in subsequent
years—with the inclusion of annual quantity increases of 2% for wool products and 7% for all
other products. The agreement also lowered Vietnam’s tariffs on U.S. clothing and textiles exports
to 7% for yarn, 12% for fabric, and 20% for clothing.
Vietnam’s WTO Accession, Permanent NTR and the Monitoring
Program
Congressional interest in U.S. clothing imports from Vietnam reemerged during the negotiations
over the terms of Vietnam’s WTO accession.26 U.S. textiles and clothing manufacturers sought to
extend the import quotas on Vietnamese clothing products as part of Vietnam’s accession
agreement, or to include in the agreement safeguard measures similar to those included in China’s
WTO accession agreement.27 However, neither provision was included in Vietnam’s WTO
accession agreement. In response to a “hold” placed on the PNTR bill, the Bush Administration
put in place a monitoring program from January 2007 to January 2009.28
Congressional Interest
According to the Department of Commerce (DOC), the monitoring program officially ended on
January 19, 2009. However, some Members of Congress were concerned that the termination of
the monitoring program—as well as the end of the special safeguards on Chinese clothing imports
on December 31, 2008—would result in a surge of clothing imports from China and Vietnam. At
their request, language was included in the House Committee on Appropriations’ Committee Print
on H.R. 1105, the Omnibus Appropriations Act of 2009 (P.L. 111-8), stating, “ITA is expected to
undertake apparel import monitoring, focusing on prices of imports from China and Vietnam and
whether their state-run industries are illegally pricing products and dumping in the U.S.
market.”29 The appropriation bill for the Department of Commerce for fiscal year 2010 does not
include the monitoring language.
At the time this report was written, no special monitoring of Vietnamese clothing imports was
being conducted by the DOC, despite the expectation of such in the 2009 Committee Print. If
26 For a general discussion of Vietnam’s WTO accession, see 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.
27 For a description of the Chinese safeguard measures, see CRS Report RL34106, U.S. Clothing and Textile Trade
with China and the World: Trends Since the End of Quotas, by Michael F. Martin.
28 For a summary of the monitoring program, see CRS Report RL34262, U.S. Clothing Imports from Vietnam: Trade
Policies and Performance, by Michael F. Martin.
29 U.S. Congress, House Committee on Appropriations, Division B—Commerce, Justice, Science, and Related Agencies
Appropriations Act, 2009, committee print, 111th Cong., 1st sess., p. 222.
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Congress would like monitoring to occur, this may require specific congressional action. Such
action could range from legislation requiring the monitoring of Vietnamese clothing imports to a
congressional committee requesting information from the executive branch on Vietnamese
clothing imports to effectively reconstitute the monitoring program. On October 9, 2008,
Chairman of the House Ways and Means Committee Charles Rangel formally requested the
International Trade Commission (ITC) to initiate an investigation to monitor certain U.S. clothing
and textile imports from China beginning in 2009. Some have suggested that a similar letter
covering Vietnamese imports be sent to the ITC.
Catfish
Catfish have been a constant 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.30 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. 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, including the
passage of legislation that prohibits referring to basa and tra as catfish and the imposition of
antidumping duties on “certain frozen fish fillets from Vietnam,” including basa and tra. Despite
these measures, Vietnam’s exports of basa and tra have continued to rise.
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. 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.
The ongoing tensions around catfish trade were recently heightened by two events. The first was
the passage of the 2008 Farm Bill (P.L. 110-246) by the 110th Congress on May 22, 2008,
transferring regulatory oversight of the import of catfish and “any additional species of farm-
raised fish” to the Department of Agriculture (USDA) under the provisions of the Federal Meat
Inspection Act (21 U.S.C. 601 (w)) and requiring the Secretary of Agriculture to develop
adequate regulatory procedures for examining and inspecting imported catfish. There have been
reports that draft USDA regulations redefine basa and tra as catfish, making them subject to the
stricter USDA regulations. The second event was the ITC’s determination on June 15, 2009, to
keep in place the antidumping duties on certain frozen fish fillet imports from Vietnam.
The 2002 Farm Act and the Antidumping Case
Between 1997 and 2001, there was a significant increase in the U.S. import of frozen fish fillets
from Vietnam made from basa and tra (see Figure 2 below). In response, the U.S. catfish
industry—represented by the Catfish Farmers of America (CFA)—requested that Congress and
30 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.
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the Bush Administration in 2002 take action to protect the U.S. catfish industry from what the
CFA perceived as unfair competition from Vietnam.
Language was introduced into the Farm Security and Rural Investment Act of 2002 (H.R. 2646)
that restricted the legal definition of catfish to the family Ictaluridae, effectively banning the use
of the term “catfish” for basa and tra. H.R. 2646 became P.L. 107-171 on May 13, 2002,
including section 10806, which limited the use of the word “catfish” to fish within the family
Ictaluridae. As a result, Vietnamese fish imports could no longer be labeled catfish, but were
generally labeled basa or tra.
Just over a month after the enactment of P.L. 107-171, the CFA and several individual catfish
processors filed a petition with the U.S. International Trade Commission (ITC) requesting an
antidumping investigation of certain frozen fish fillets imported from Vietnam. In their petition,
the CFA alleged that Vietnamese basa and tra were being imported under four different
Harmonized Tariff System (HTS) codes, and requested that the ITC use a broader definition when
conducting their investigation.31 After the usual investigation and series of determinations, the
Department of Commerce ordered on August 7, 2003, the collection of antidumping duties
(retroactive to January 31, 2003) ranging from 36.84% to 63.88% on frozen fish fillets from
Vietnam.
The combination of the 2002 Farm Act and the antidumping duties was viewed by the
Vietnamese government and others as a protectionist campaign to block the import of Vietnamese
basa and tra. The Vietnamese government lobbied unsuccessfully against section 10806 of the
2002 Farm Act and testified against the imposition of antidumping duties (citing the spirit and
provisions of the recently completed bilateral trade agreement).
Basa and Tra Imports from Vietnam
The actions of Congress and the antidumping duties appear to have had some impact on U.S.
imports of basa and tra frozen fillets from Vietnam, regardless of which definition of catfish
imports is used (see Figure 2). Imports generally declined following the passage of the 2002
Farm Act and the imposition of the antidumping duties, particularly for goods categorized as
catfish or the equivalent (the narrow definition).32 However, that downturn was short-lived, as
imports rose to new highs in 2006 and have continued to grow since then.
31 The four codes were 0304.20.60.30 (catfish frozen fish fillets), 0304.20.60.43 (other fresh-water frozen fish fillets),
0304.20.60.57 (sole frozen fish fillets), and 0304.60.99 (other frozen fish fillets NESOI).
32 Following the passage of the 2002 farm Act, the HTS code was modified to create a separate category for the import
of Ictalurus and Pangasius.
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Figure 2. U.S. Imports of Selected Frozen Fillets from Vietnam
(in U.S. $ millions)
90
80
70
60
50
40
30
20
10
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2008
2009
YTD
YTD
Narrow Definition
Broad Definition
Source: CRS calculations based on official U.S. trade figures reported by the U.S. ITC.
Notes: Narrow definition includes only import of only catfish or pangasius frozen fish fillets; Broad definition
includes import of frozen fish fillets classified as sole, other fresh-water or other NESOI. The HTS codes for
these four types of frozen fish fillets changed during the time period in question; figure presents data for all four
types, regardless of HTS code.
According to a May 2007 USDA market update, a possible beneficiary of antidumping duties on
Vietnamese imports were Chinese producers of farm-raised catfish.33 An examination of USDA
Foreign Agricultural Service (FAS) data reveals that Vietnam provided over 94% of the fresh
catfish imported into the United States (in quantity) in 2002, but virtually none since 2005. By
contrast, China provided virtually none of the catfish imported into the United States before 2003,
but 97% of the catfish imports since 2005. In 2008, U.S. imports of catfish from China totaled
10,337.4 metric tons (98.6% of total imports), worth $40.0 million (98.1% of total import value).
By comparison, according to the USDA, there were over 1,600 catfish growing operations in the
United States in 2008, with total sales of $410 million.34
33 United States Department of Agriculture, Foreign Agricultural Service, Catfish and Basa Imports Continue to
Increase Despite Confirmed Antidumping, Washington, DC, May 2007.
34 National Agricultural Statistics Service, USDA, Catfish Production, Washington, DC, January 30, 2009.
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2008 Farm Act and the Antidumping Sunset Review
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 Act (P.L. 110-246), enacted on June 18,
2008. The section, entitled “Inspection and Grading,” establishes a voluntary fee-based grading
program for “catfish (as defined by the Secretary).” The law also stipulates 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 Act 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, has 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 Processors, 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.”35 Supporters of the provisions of the 2008 Farm Act state that it provides greater
protection to U.S. consumers.
While the USDA prepares the new catfish regulations, 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.”36 In a unanimous decision, the six ITC commissioners voted to
continue the antidumping duties. 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.”37
Implications for the 111th Congress
Two of the last four Congresses have 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. Given that the 110th Congress chose to take action with
respect to the definition and regulation of catfish, the 111th Congress may be disinclined to alter or
reverse a process already underway. However, there are aspects of the issue that the 111th
Congress might take up, such as reclaiming the authority to define catfish or stipulating specific
examination and inspection requirements for imported catfish, or fish and fish products in
general.
35 “A Fish by Any Other Name,” Wall Street Journal, May 20, 2009.
36 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.
37 “Vietnam Criticizes US Duties on Catfish as Protectionist,” Earth Times, June 17, 2009.
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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 111th
Congress include workers’ rights, the designation of Vietnam as a non-market economy, IPR
protection, and Vietnam’s exchange rate policy.
Workers’ Rights
The U.S. government and a number of non-governmental organizations (NGOs) such as Human
Rights Watch have been somewhat critical of Vietnam’s protection of 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 an ongoing problem. The State
Department’s 2008 human rights report on Vietnam singled out problems with: suppression of
independent labor unions, failure to enforce laws governing the right to organize, a hardening
stance against wildcat strikes, child labor in rural areas, and inadequate safety conditions
(especially in small- and medium-sized enterprises).
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. According to the State Department’s 2008
Country Report on Human Rights Practices, “In actuality only 85% of state-owned enterprises,
60% of foreign-invested enterprises, and 30% of private enterprises were unionized.”38 Human
Rights Watch has also raised concern about the ability of Vietnamese workers to call an official
strike, especially at state-owned enterprises (SOEs).39
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,
Vietnamese workers have gone on strike reportedly because they felt that they were not well-
represented by the official union.
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 worker’s rights, the flaws of the VGCL, and efforts to improve working conditions
in Vietnam.40 The humanitarian aid agency of the Australian Council of Trade Unions, which has
38 Bureau of Democracy, Human Rights, and Labor, 2008 Country Reports on Human Rights Practices, 2008 Human
Rights Reports: Vietnam, U.S. Department of State, Washington, DC, February 25, 2009.
39 Human Rights Watch, Not Yet a Workers’ Paradise, New York, NY, May 2009.
40 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
(continued...)
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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.”41
In addition to its bearing on Vietnam’s GSP application (see section on “Vietnam’s Generalized
System of Preferences (GSP) Application” above), the status of workers’ rights in Vietnam relates
to provisions in several bills introduced in the 111th Congress. Both version of the Vietnam
Human Rights Act of 2009 (H.R. 1969 and S. 1159) would place restrictions on increases in non-
humanitarian assistance to Vietnam unless the President certifies that Vietnam has made
substantial progress on workers’ rights, as well as other human rights. Similarly, the Overseas
Private Investment Corporation (OPIC) Reauthorization Act of 2009 (S. 705) contains a provision
that effectively prohibits OPIC involvement in projects in countries that have not taken steps to
provide their workers with internationally recognized workers’ rights. Workers’ rights in Vietnam
could also play a role in legislation renewing the GSP program.
Non-Market Economy
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. Many of Vietnam’s
state-owned enterprises 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, but most of the shares remain owned by the Vietnamese government. Although most
prices have been deregulated, the Vietnamese government still retains some formal and informal
mechanisms to direct or manage the economy.
The Vietnamese government maintains that its economy is as much a market economy as many
other nations around the world, and has actively sought formal recognition as a market economy
from its major trading partners. A number of trading partners—including ASEAN, Australia, the
European Union, 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 until it meets U.S. criteria for a “market economy” designation.42
Under U.S. trade law (19 U.S.C. 1677), the term “nonmarket economy country” means “any
foreign country that the administering authority determines does not operate on market principles
of cost or pricing structures, 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 convertibility of the nation’s currency, the
(...continued)
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.
41 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.
42 Other countries considered non-market economies by the United States include Armenia, Azerbaijan, Belarus, China,
Georgia, Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan.
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extent of state ownership of the means of production, and government control of prices and
wages.
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 111th 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.
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 2009
Special 301 Report, an annual review of the global state of IPR protection and enforcement.43
Vietnam remained on the Watch List because of its continuing problems with IPR piracy and
trademark infringement. While the report recognized Vietnam’s revision of its criminal code for
IPR violations and its strengthening of its IPR enforcement agencies, IPR piracy remains
widespread and appears to be rising for online piracy.
The perceived continuing problems with Vietnam’s IPR protection may play a role in any
consideration of its GSP application, as well as the bilateral BIT negotiations. The Trade Reform,
Accountability, Development, and Employment (TRADE) Act of 2009 (H.R. 3012) would require
that any future trade agreement that contains IPR provisions “promote adequate and effective
protection of intellectual property rights.” These provisions are to be consistent with the WTO’s
Declaration on the TRIPS Agreement and Public Health, and the Convention on Biological
Diversity. Enactment of H.R. 3012 could have implications for the ongoing BIT negotiations.
The Foreign Relations Authorization Act, Fiscal Years 2010 and 2011 (H.R. 2410) and the
Foreign Relations Authorization and Reform Act, Fiscal Years 2010 and 2011 (H.R. 2475) would
establish 10 additional “intellectual property attaches to serve in United States embassies or other
diplomatic missions.” Assignment priority would be given to countries identified in the USTR’s
Special 301 Report, which could imply the assignment of one of the attaches to Vietnam. H.R.
2410 was passed by the House on June 10, 2009, and referred to the Senate on June 22, 2009.
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. On March 25, 2009, the SBVN widened the band to
43 For a copy of the 2009 report, see http://www.ustr.gov/about-us/press-office/reports-and-publications/2009/2009-
special-301-report.
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±5% from the official exchange rate of 16,980 dong = $1.44 Between July 2008 and 2009, the
value of the dong depreciated in value by 8.7% against the U.S. dollar.45
Several bills have been introduced in the 111th Congress that would identify countries with
intentionally “misaligned” exchange rates and provide recourse for the United States to rectify the
alleged economic harm caused to the U.S. economy.46 Vietnam’s current exchange rate policy
might subject it to the proposed economic sanctions contained in these bills. In addition,
Vietnam’s managed exchange rate may be one factor in its continued designation as a non-market
economy by U.S. government agencies.
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 have passed since trade relations between the United States and Vietnam have
opened. As previously mentioned, the rapid growth in two types of products—clothing and
catfish—quickly made them sources of trade tension between the two nations. However, there are
other commodities that contribute more to U.S.-Vietnam trade flows that 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 2008, besides clothing
and fish, were (in order): furniture and bedding; footwear; mineral fuel and oil; electrical
machinery; machinery; spices, coffee, and tea; and edible fruits and nuts (see Table 2). The top
U.S. exports to Vietnam included machinery and electrical machinery, non-railway vehicles and
aircraft, meat, wood, iron and steel, plastic, and food waste and animal feed. 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.
44 “Dong Slips 1.4 Percent, Most in 3 Months, on New Band,” Thanhnien News, March 25, 2009.
45 Calculated from June 1, 2008 to June 1, 2009 relative to the U.S. dollar.
46 These bills include H.R. 2378, S. 1027, and S. 1254.
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Table 2. Top 10 U.S. Exports to Vietnam and Imports from Vietnam
According to U.S. trade statistics for 2008
Top 10 Exports to Vietnam
Top 10 Imports from Vietnam
Product
Value (US$)
Product
Value (US$)
Machinery 331,475,487
Knit
Apparel 2,810,257,134
Vehicles, not Railway
328,306,928 Woven
Apparel 2,341,355,933
Meat
230,315,697
Furniture and Bedding
1,449,288,775
Cotton, including Yarn and Fabric
194,433,382
Footwear
1,213,027,733
Plastic
165,128,999
Mineral Fuel, Oil Etc
1,091,502,740
Iron and Steel
156,870,478
Fish and Seafood
558,805,125
Electrical Machinery
149,940,613
Electrical Machinery
493,633,192
Aircraft, Spacecraft
120,405,420
Machinery
353,052,891
Wood
112,134,962
Spices, Coffee and Tea
347,759,077
Food Waste; Animal Feed
91,115,430
Edible Fruit and Nuts
258,178,616
Source: Global Trade Atlas.
Notes: Products categorized by HTS chapters.
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 11% of total U.S.
imports from Vietnam in 2008, and it was the second-fastest growth category of imports from
Vietnam (after electrical machinery) since 1998.
Footwear
While most of the focus has been on clothing imports from Vietnam, footwear imports from
Vietnam were over 9% of total imports in 2008. Vietnam was the fourth-largest source of
footwear imports for the United States in 2008, exceeding Italy, Malaysia, and Taiwan.
Electrical Machinery
Vietnam’s electrical machinery exports to the United States grew more than 1,000-fold over the
last 10 years, reaching nearly half a billion dollars in 2008 and almost 4% 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
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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 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.
Foreign Direct Investment
In 2008, Vietnam received $60 billion in foreign direct investments (FDI) despite the global
economic crisis. The leading source of FDI in 2008 was Malaysia, largely due to a nearly $10
billion steel complex project financed by the Lion Group. The second- and third-largest sources
of FDI in 2008 were Taiwan and Japan, respectively. The United States is the seventh-largest
source of FDI in Vietnam over the last 10 years.
However, Matthew Daley, former president of the U.S.-ASEAN Business Council, recently told
an audience in Hanoi that he expects the United States to become the largest foreign direct
investor in Vietnam in the next two to three years.47 According to Daley, during the first quarter of
2009, nearly two-thirds of the FDI registered in Vietnam was from the United States.
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 111th Congress if the negotiations are
completed in 2009 or 2010. In addition, as more U.S. companies invest in Vietnam, there is the
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.
47 “US on Track to be Top Investor in Vietnam,” Agence France Press, May 13, 2009.
Congressional Research Service
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress
Author Contact Information
Michael F. Martin
Analyst in Asian Trade and Finance
mfmartin@crs.loc.gov, 7-2199
Congressional Research Service
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