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Updated April 10, 2019
U.S.-Vietnam Economic and Trade Relations: Issues in 2019
Over the past decade, U.S.-Vietnam economic relations
Bilateral trade growth—and the U.S. trade deficit with
have expanded rapidly. According to Vietnam’s trade
Vietnam—accelerated following Vietnam’s accession to the
statistics, the United States was the nation’s 3rd largest
World Trade Organization (WTO) in December 2006,
trading partner in 2018; according to U.S. trade statistics,
under which the United States was obligated to grant
Vietnam was the 17th largest trading partner. Bilateral
Vietnam permanent NTR status.
economic issues likely to arise in 2019 include the impact
of Vietnam’s membership in the Comprehensive and
Table 1. Vietnam’s Top Five Exports to the United
Progressive Agreement for Trans-Pacific Partnership
States (by HTS Chapter) in 2018
(CPTPP); market economy status for Vietnam; trade in
in bil ions of U.S. dol ars
catfish; U.S. arms sales to Vietnam; and a possible bilateral
investment treaty. Following his withdrawal of the United
Type of Product
Value
States from the Trans-Pacific Partnership (TPP), President
Electrical Machinery (85)
11.019
Trump initially indicated some interest in negotiating a
bilateral trade agreement with Vietnam, but appears to have
Knitted or Crocheted Clothing (61)
7.152
dropped the idea.
Footwear (65)
6.208
The main vehicle at which these and other trade issues may
Furniture (94)
5.089
be discussed is the Trade and Investment Council (TIC),
established by the 2007 bilateral Trade and Investment
Non-knitted and Non-crocheted Clothing (62)
5.043
Framework Agreement (TIFA). The two nations held the
Total Exports
46.483
first TIC meeting since 2011 on March 27-28, 2017, in
Hanoi. During the meeting, the United States reportedly
Source: U.S. International Trade Commission.
urged Vietnam to address certain trade issues, such as
Note: HTS = U.S. Harmonized Tariff Schedule.
agriculture and food safety, intellectual property, digital
trade, and financial services. Vietnam has asked that the
Following the granting of conditional NTR, clothing was
United States recognize Vietnam as a market economy and
Vietnam’s largest export to the United States, accounting
lift new catfish inspection regulations.
for over half of its exports in 2003. Subsequently, footwear
and furniture became major exports to the United States,
Bilateral Trade Balance
each topping $1 billion in 2007. More recently, Vietnam
According to U.S. trade statistics, total merchandise trade
has become a major exporter of electrical machinery,
between the United States and Vietnam has grown from
machinery, and leather goods to the United States. In 2018,
$1.5 billion in 2001 to $58.86 billion in 2018, transforming
the top five goods constituted more than 70% of Vietnam’s
Vietnam into the 12th-largest source of U.S. imports and
exports to the United States (see Table 1). In 2018, the
30th-largest destination for U.S. exports. In addition, the
leading U.S. exports to Vietnam were electrical machinery,
U.S. merchandise trade deficit with Vietnam rose from
cotton, fruit and nuts, machinery, and oil seeds.
$592 million in 2001 to more than $39 billion in 2018, the
6th largest U.S. bilateral trade deficit (after China, Mexico,
Regional Trade Agreements
Germany, Japan, and Ireland). According to Vietnam’s
In January 2019, the CPTPP went into effect for Vietnam,
trade statistics, bilateral trade in 2018 totaled $60.3 billion.
one month after it did for six other members of the regional
trade agreement (RTA). The CPTPP is the world’s 3rd
The U.S. trade deficit with Vietnam was a topic of
largest RTA (in terms of GDP) and is expected to result in a
conversation when President Trump hosted Prime Minister
modest increase in trade and investment among CPTPP
Nguyen Xuan Phuc in May 2017, and again when President
members, and a slight decline in trade with non-members,
Tran Dai Quang met with President Trump in Hanoi in
including the United States. This could lead to an increase
November 2017. In the joint statements issued following
in the U.S. trade deficit with Vietnam in 2019 and beyond.
those meetings both nations pledged to make efforts to
expand trade relations, as well as take measures to address
Vietnam is also a potential party to another proposed
some of their bilateral trade issues.
RTA—the Regional Comprehensive Economic Partnership
(RCEP) involving up to 16 Asian nations, but not the
Trends in Bilateral Trade
United States—that would have similar indirect effects on
Although the Vietnam War-era U.S. trade embargo on
U.S.-Vietnam trade as the CPTPP. Projections of RCEP’s
Vietnam ended in 1994, bilateral trade only started to grow
trade effects show a slight increase in Vietnamese exports
significantly after the United States granted Vietnam
to the United States, and a small decrease in U.S. exports to
conditional “normal trade relations” (NTR) in 2001.
Vietnam, leading to an overall increase in the bilateral trade
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U.S.-Vietnam Economic and Trade Relations: Issues in 2019
deficit. Vietnam also has negotiated a trade agreement with
After the final catfish inspection regulations were
the European Union that is awaiting ratification.
published, Vietnam’s Ministry of Foreign Affairs stated the
new regulations could constitute a non-tariff trade barrier,
Market Economy Recognition
harming the livelihood of Vietnamese catfish farmers. On
Vietnamese leaders would like the United States to change
January 12, 2018, Vietnam filed a request for consultations
Vietnam’s official designation under U.S. law from
with the WTO’s Dispute Settlement Body (DSP) regarding
“nonmarket economy” (NME) to “market economy,” and
the imposition of anti-dumping duties and cash deposit
may increase its efforts to obtain market economy status.
requirements by the U.S. Department of Commerce on
NME status is particularly significant for antidumping (AD)
“Certain Frozen Fish Fillets” from Vietnam. On February
and countervailing duty (CVD) cases because it often
22, 2018, Vietnam filed a WTO complaint that the U.S.
results in higher tariffs being imposed. For the Vietnamese
inspection program for catfish imports violates the WTO
government, being granted “market economy” status also
SPS Agreement. On March 22, 2018, China asked to be
would symbolize that relations have become “normalized.”
part of the inspection complaint consultations. The WTO
did not report any subsequent actions with regard to either
Under the terms of its WTO accession agreement with the
submission in 2018; the case is still pending.
United States, Vietnam is to remain a NME under U.S. law
for up to 12 years after its January 2007 accession or until it
U.S. Arms Sales
meets U.S. criteria for a “market economy” designation.
In 1975, U.S. military sales to all of Vietnam were banned
Under 19 U.S.C. 1677, NME means “any foreign country
as part of the U.S. trade embargo. In April 2007, the
that the administering authority determines does not operate
Department of State began to grant, on a case by case basis,
on market principles of cost or pricing structures, so that
licenses for bilateral trade in defense articles and services.
sales of merchandise in such country do not reflect the fair
In May 2016, President Obama announced the removal of
value of the merchandise.” A number of trading partners—
remaining U.S. restrictions on sales of lethal weapons and
including the Association of Southeast Asian Nations
related services to Vietnam. Thus far, the United States has
(ASEAN), Australia, India, Japan, and New Zealand—have
transferred few, if any, lethal defense articles to Vietnam. In
designated Vietnam a market economy for purposes of
May 2017, the United States delivered a refurbished
international trade.
Hamilton-class cutter to Vietnam through the Excess
Defense Article (EDA) program. The United States also has
For more than 20 years, Vietnam has been shifting from a
provided several new coast guard patrol boats, financed via
centrally planned economy to a market economy. Under its
the Foreign Military Financing (FMF) program.
doi moi policy, Vietnam has allowed the development and
growth of private enterprise and competitive market
Congress may exercise oversight of some exports of
allocation of most goods and services. However, the
military items to Vietnam pursuant to Section 36(b) of the
Vietnamese government still retains some formal and
Arms Export Control Act (AECA, P.L. 90-629). The AECA
informal mechanisms to direct or manage the economy.
requires the President to notify the Speaker of the House,
and the Senate Foreign Relations and the House Foreign
Catfish
Affairs Committees, before the Administration can take the
Vietnam is a major exporter of certain varieties of fish—
final steps to conclude either a government-to-government
known as basa, swai, and tra in Vietnamese—that are
or commercially licensed arms sale over a certain monetary
commonly referred to as catfish. Since 1999, Vietnamese
threshold.
exports of frozen catfish fillets have secured a growing
share of the U.S. market, generating trade friction between
Bilateral Investment Treaty (BIT)
the United States and Vietnam. In 2018, the United States
Negotiations
imported over $518 million in catfish from Vietnam.
In June 2008, President George W. Bush and Prime
Minister Nguyen Tan Dung announced the launch of talks
In 2002, Congress passed legislation that prohibited the
to establish a bilateral investment treaty (BIT). A proposed
labeling of basa, swai, and tra as “catfish” in the United
fourth round of talks that was to be held in early 2010 did
States. In August 2003, the U.S. government imposed
not happen, presumably because the two nations were
antidumping duties on “certain frozen fish fillets from
focused on negotiating the proposed Trans-Pacific
Vietnam,” including basa, swai, and tra. In June 2009, the
Partnership. BIT negotiations may resume. However, BIT
U.S. International Trade Commission determined to keep
negotiations were not mentioned in either joint statement
the duties in place “for the foreseeable future.”
issued following President Trump’s 2017 meetings with
Vietnamese leaders.
The ongoing tensions around catfish trade were heightened
by the passage of the 2008 Farm Bill (P.L. 110-246), which
For more about U.S. trade relations with Vietnam, see CRS
transferred catfish inspection (including basa, swai, and
Report R45172, U.S.-Vietnam Economic and Trade
tra) from the Food and Drug Administration (FDA) to the
Relations: Key Issues in 2018.
U.S. Department of Agriculture (USDA). USDA inspection
procedures are generally considered more stringent than
Michael F. Martin, Specialist in Asian Affairs
those of the FDA. The transfer was confirmed in the
Agriculture Act of 2014 (P.L. 113-79). The USDA
IF11107
published final regulations for imported catfish inspection
in the Federal Register on December 2, 2015.
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U.S.-Vietnam Economic and Trade Relations: Issues in 2019
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