U.S.-Vietnam Economic and Trade Relations:
Issues for the 113th Congress

Michael F. Martin
Specialist in Asian Affairs
April 14, 2014
Congressional Research Service
7-5700
www.crs.gov
R41550


U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress

Summary
Since the resumption of trade relations in the 1990s, Vietnam rapidly 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 developing U.S. policy on some of these issues.
Bilateral trade has grown from about $220 million in 1994 to $29.6 billion in 2013, transforming
Vietnam into the 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 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 Partnership
(TPP), a trade agreement currently being negotiated by 12 countries, including the United States
and Vietnam. Vietnam’s incentive to join the TPP 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 the 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 accompanying issues and problems. Vietnam
has applied for acceptance into the U.S. Generalized System of Preferences (GSP) program and is
negotiating a Bilateral Investment Treaty (BIT) with the United States. Vietnam also would like
the United States officially to recognize it as a market economy.
There also have 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. 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 “non-
market 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 113th Congress

Contents
Introduction ...................................................................................................................................... 1
Trans-Pacific Partnership (TPP) ...................................................................................................... 3
Vietnam’s Generalized System of Preferences (GSP) Application .................................................. 5
Status of Application ................................................................................................................. 5
Role of Congress ....................................................................................................................... 6
Bilateral Investment Treaty (BIT) Negotiations .............................................................................. 6
Status of the Negotiations .......................................................................................................... 6
The Role of Congress ................................................................................................................ 7
Non-Market Economy Designation ................................................................................................. 8
State-Owned Enterprises ........................................................................................................... 8
Price and Wage Controls ......................................................................................................... 10
Vietnam’s View........................................................................................................................ 10
Catfish ............................................................................................................................................ 10
2008 Farm Bill ......................................................................................................................... 11
The Antidumping Sunset Review on Catfish .......................................................................... 13
Implications for the 113th Congress ......................................................................................... 13
Other Economic Issues .................................................................................................................. 14
U.S. Clothing Imports from Vietnam ...................................................................................... 14
Workers’ Rights ....................................................................................................................... 15
IPR Protection ......................................................................................................................... 17
Vietnam’s Exchange Rate Policy ............................................................................................. 17
Key Trends in Bilateral Trade ........................................................................................................ 17
Merchandise Trade .................................................................................................................. 17
Product Interplay ............................................................................................................... 19
Furniture and Bedding ....................................................................................................... 19
Footwear ............................................................................................................................ 19
Electrical Machinery ......................................................................................................... 19
Trade in Services ..................................................................................................................... 19
Foreign Direct Investment ....................................................................................................... 20

Figures
Figure 1. U.S. Clothing Imports from Vietnam ............................................................................. 15

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 ........................................... 18

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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress

Contacts
Author Contact Information........................................................................................................... 20

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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th 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 in part due to Vietnam’s 1986 decision to shift from a Soviet-
style 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, Congress
has appropriated approximately $10 million each year to support Vietnam’s economic reforms. 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 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
2013: 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.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 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 since 2010.
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 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.
Both nations are negotiating membership in the Trans-Pacific Partnership (TPP), a proposed
multilateral trade group. For its part, Vietnam has indicated a desire to foster closer trade relations
by applying for acceptance into the U.S. Generalized System of Preferences (GSP) program and
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress

negotiating a bilateral investment treaty (BIT). The United States also has expressed an interest in
closer economic relations, but has told Vietnam that it needs to make certain changes in the 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 also 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 also 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 113th Congress. 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, the Bush Administration notified Congress of its intention to enter into negotiations with
the four members of the Trans-Pacific Strategic Economic Partnership Agreement—Brunei,
Chile, New Zealand, and Singapore—to form a larger and more ambitious trade agreement. The
U.S. announcement of interest in joining the renamed Trans-Pacific Partnership was quickly
followed by similar expressions of 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 fifth-largest U.S. trading partner (after Canada, Mexico, Japan, and
Singapore) among the nations currently involved in the TPP negotiations.
According to a 2010 interview with key Vietnamese analysts, Vietnam is pressing for the
following provisions in the TPP agreement:7
• Designation as a market economy prior to 2018;8

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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• 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 29 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 (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.9 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), ASEAN + 6 (Australia, China, India, Japan, 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. In 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 join the East Asia Summit (EAS) in 2011,10 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, Congress would have to consider implementing legislation to
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.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.
10 According to 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, New Zealand, Russia,
and the United States.
11 The proposed TPP agreement would be presented to Congress as a Congressional-Executive Agreement, not as a
(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 continues to inquire about the status of its GSP
application, but 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.
Status 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

(...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.
13For 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. 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 113th Congress,
H.R. 1682 would deny Vietnam’s acceptance into the GSP program unless the President certified
to Congress that Vietnam has met certain human rights 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).16 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 currently 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,
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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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 bilateral trade agreement (BTA) 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 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.” In 2012, the Obama Administration released a new model BIT, which
presumably would be used in any future talks with Vietnam.18
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.19 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 113th
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.

17 Previous U.S. trade agreements have included language similar to that of the U.S. model BIT.
18 A copy of the new model BIT is available online at http://www.ustr.gov/sites/default/files/
BIT%20text%20for%20ACIEP%20Meeting.pdf.
19 For the complete text of the 2001 BTA, go to http://www.usvtc.org/trade/bta/text/.
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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 country that the administering
Vietnam’s Economy at a Glance
authority determines does not operate on
In 1986, Vietnam started the transformation of its Soviet-
market principles of cost or pricing structures,
style centrally planned economy into a market-oriented
so that sales of merchandise in such country
economy. Its agricultural sector, which was
do not reflect the fair value of the
decollectivized in the 1990s, remains the main source of
merchandise.” In making such a
employment in the country, but provides about 20% of
determination, the administrating authority of
GDP. The industrial sector, which contributes about 40%
of GDP, has also undergone a gradual shift from state-
the executive branch is to consider such
owned to privately owned production. Vietnam’s
criteria as the extent of state ownership of the
industrial output currently is produced by foreign-owned
means of production, and government control
enterprises (about 45% of industrial output), privately
of prices and wages. However, the General
owned domestic companies (about 35% of industrial
Agreement on Tariffs and Trade (GATT)
output), and state-owned enterprises (about 20% of
industrial output). Vietnam’s services sector (about 40%
implicitly defines a “non-market economy”
of GDP) has also transitioned from primarily
for purposes of trade as “a country which has
government-run to primarily private providers. Most
a complete or substantially complete
goods and services are now distributed using market
monopoly of its trade and where all domestic
mechanisms, but there remains significant government
intervention via subsidies for key industries and selected
prices are fixed by the State.”20
consumer goods. Vietnam’s financial system is still
dominated by state-owned banks, but some private banks
For over 20 years, Vietnam has been
have emerged.
transitioning from a centrally planned
Vietnam’s real GDP grew by 5.4% in 2013, fueled by
economy to a market economy. Under its doi
industrial and service sector growth. Vietnam’s consumer
moi policy, Vietnam has allowed the
price index (CPI) rose by 6.6%. The unemployment rate
development and growth of private enterprise
remained low, but Vietnam continues to suffer from
and competitive market allocation of most
significant underemployment. Vietnam’s total exports
were $132 billion; imports were $131 billion.
goods and services. Although most prices have
been deregulated, the Vietnamese government
Although the shift in economic policy has led to rapid
still retains some formal and informal
growth, it has also brought many of the traditional
problems of market-oriented economies. Vietnam has
mechanisms to direct or manage the economy.
periodically struggled with inflation, fiscal deficits, trade
imbalances, and other cyclical economic phenomena
common to market economies. Vietnam has also seen a
State-Owned Enterprises
rising income and wealth disparity, that at times has
fueled discontent among Vietnam’s poor and lower-
For the United States, one of the main
income population. Vietnam’s economic priorities for
concerns about Vietnam’s economy is the
2013 are to increase economic growth and lower
inflation.
continued importance of state-owned
enterprises (SOEs) in the nation’s industrial
Source: General Statistics Office of Vietnam.
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 Ad Note to Art. VI:1 of the GATT.
21 Based on data from Vietnam’s General Statistics Office.
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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 2015.25 The Asian
Development Bank (ADB) is providing Vietnam with a $630 million loan to help it reform its
SOEs and improve corporate governance.26
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.27 The company had run up $4.4 billion in
debts by June 2010, and was having trouble servicing its debt to both Vietnamese and non-
Vietnamese 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.28 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.29 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.”30

22 “150 SOEs Must Be Equitized Every Year,” Viet Nam Net, May 14, 2012.
23 “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.
25 “150 SOEs Must Be Equitized Every Year,” Viet Nam Net, May 14, 2012.
26 For details, see ADB’s webpage—http://www.adb.org/projects/project.asp?id=39538&p=vieproj.
27 Leigh Murray, “Vinashin May Hurt Vietnam Banks,” Wall Street Journal, December 13, 2010.
28 “Vietnam Minister Says Vinashin Should Make Its Own Debt Payment,” Bloomberg, December 8, 2010.
29 “Vietnam Offers Loans to Ailing Shipbuilder Vinashin,” BBC, December 28, 2010.
30 “Vietnam Jails Former Vinashin Executives After Downfall,” Reuters, March 30, 2012.
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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 also to curb wage increases.
The Vietnamese government asserts that most of the prices and wages in Vietnam are market-
determined, 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 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 (i.e., 2018) or
until it meets U.S. criteria for a “market economy” designation.32
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 113th 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

31 “Vietnam to Set Price Controls on Commodities,” Vietnam Business News, December 2, 2010.
32 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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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 2013, the United States imported over $339 million of basa
and tra from Vietnam.34
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
prohibited 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”).37 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.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,

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.
36 International Trade Administration, “Notice of Antidumping Duty Order: Certain Frozen Fish Fillets from the
Socialist Republic of Vietnam,” 68 FR 47909, August 12, 2003.
37 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.
38 “Toxic Residues Could Shrivel Shrimp Exports: Experts,” Vietnam Economy News, November 12, 2010.
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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.”39 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.40 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, 2011.41 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.
40 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.
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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.42 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.43
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.”45 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.”46
Implications for the 113th Congress
Two of the previous 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. In the 112th Congress, legislation was introduced—
H.R. 4296 and S. 496—to return the inspection of catfish back to the FDA. The 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.

42 “Catfish Quality Tests Tightened for Export Hygiene Standards,” Vietnam News, April 15, 2010.
43 “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 Vietnam, 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.
46 “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 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).47
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.
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 2009.48 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” rule49 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,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
0.0
0%
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
19
19
19
19
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Value
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 2013 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

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.53 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.”54
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 worked with the International Labor Organization (ILO) to
finalize a new Labour Code and Trade Union Law.55 In June 2012, Vietnam’s National Assembly
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.56

52 Human Rights Watch, Not Yet a Workers’ Paradise, New York, NY, May 2009.
53 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.
54 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.
55 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.
56 “UN Aid Helps Improve Trade Union Capacity,” Voice of Vietnam News, April 1, 2010.
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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
About 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/2013/2013-
special-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 2013; U.S. $ millions)
Top 10 Exports to Vietnam
Top 10 Imports from Vietnam
Product
Value
Product
Value
Electrical machinery and equipment
611.438
Articles of apparel and clothing
4,723.098
and parts thereof; sound recorders and
accessories, knitted or crocheted
reproducers, television image and
sound recorders and reproducers, and
parts and accessories of such articles
Oil seeds and oleaginous fruits;
555.643
Articles of apparel and clothing
3,338.890
miscellaneous grains, seeds and fruits;
accessories, not knitted or
industrial or medicinal plants; straw
crocheted
and fodder
Nuclear reactors, boilers, machinery
426.062
Footwear, gaiters and the like; parts
2,927.903
and mechanical appliances; parts
of such articles
thereof
Cotton, including yarns and woven
402.516
Furniture; bedding, mattresses,
2,633.474
fabrics thereof
mattress supports, cushions and
similar stuffed furnishings; lamps and

lighting fittings, not elsewhere
specified or included; illuminated sign
illuminated nameplates and the like;
prefabricated buildings
Edible fruit and nuts; peel of citrus fruit
309.407
Nuclear reactors, boilers, machinery
2,053.850
or melons
and mechanical appliances; parts
thereof

Residues and waste from the food
265.170 Electrical machinery and equipment
1,957.048
industries; prepared animal feed
and parts thereof; sound recorders
and reproducers, television image

and sound recorders and
reproducers, and parts and
accessories of such articles
Dairy produce; birds’ eggs; natural
217.645 Fish and crustaceans, mol uscs and
938.657
honey; edible products of animal origin
other aquatic invertebrates
NESOI
Wood and articles of wood; wood
211.104 Articles of leather; saddlery and
752.268
charcoal
harness; travel goods, handbags and
similar containers; articles of animal
gut (other than silkworm gut)
Plastics and articles thereof
201.933 Coffee, tea, maté and spices
662.140
Iron or steel
185.528 Mineral fuels, mineral oils and
526.105
products of their distillation;
bituminous substances; mineral
waxes
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 2013.
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 2013. Vietnam was the second-largest source of
footwear imports for the United States in 2013, 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, exceeding $1.9 billion in 2019 and nearly 8% 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.
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
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.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 113th Congress

Foreign Direct Investment
In 2012, Vietnam licensed 1,287 foreign direct investment (FDI) projects worth $16.3 billion.58
The leading source of FDI in 2012 was Japan, with 317 projects worth $5.6 billion. The United
States was the 13th-largest source of FDI in 2012 with 45 projects worth $160 million. The
accumulated value of FDI in Vietnam for the period 1988-2012 is $210.5 billion. Japan was the
leading investor during this period, followed by Taiwan and Singapore. The United States was the
7th-largest investor, with 648 projects worth $10.5 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 113th Congress if the negotiations are
completed in 2014 or 2015. 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.

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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