US to Rule on ‘Market Economy’ Status
Over recent decades, Vietnam has grown more integrated into global markets and international value chains. Legal reform – starting with Doi Moi in 1986 – started Vietnam on this path through a gradual liberalisation of domestic markets and industries, reduction in state-owned enterprises, and opening up to foreign investment.
US Department of Commerce hearing begins
The latest milestone on this path came earlier this month as the United States Department of Commerce began a two-month hearing into whether the US government should upgrade Vietnam to official “market economy” status.
If granted, this would align the United States with 72 other countries around the world who recognise Vietnam as being a market economy, including major trading partners such as the UK, Japan, and Australia.
The decision hinges on several issues. These include whether countries meet market principles on costs and pricing, levels of state intervention in economic activities, and opportunities for foreign companies to invest or engage in joint ventures. For instance, the US will benchmark the price of a Vietnamese exported product against comparable goods from other similar countries who are defined as market economies.
If the US changes its current designation of Vietnam as a “non-market economy”, it would help to reduce anti-dumping duties against Vietnamese imports, making them more competitive in the market. The final decision is set to be announced in July.
The US is Vietnam’s largest export market, with trade volumes reaching more than USD 111 billion in 2023. The export of goods including textiles, electronics, solar panels, footwear, and agricultural produce helped Vietnam generate an annual surplus of USD 104 billion in its bilateral trade with the US last year.
International integration continues apace
Meanwhile, Vietnam continues to seek greater access to other major export markets. Building on the UK-Vietnam Free Trade Agreement signed in 2020, earlier this month, the Standing Committee of the National Assembly proposed that the parliament approve the UK’s accession to the Comprehensive and Progressive Trans-Pacific Partnership (“CPTPP”) in its upcoming 7th session, opening up new opportunities for Vietnamese goods to access the UK market.
Also, this month, the EU Delegation to Vietnam met with ministers in Hanoi where the government urged EU Member States to accelerate ratification of the EU-Vietnam Investment Protection Agreement (“EVIPA”). Once it enters into force, following ratification in each EU Member State, this agreement would give EU investors and their capital greater protection using measures including an innovative dispute-resolution mechanism.
For more information about Vietnam’s free trade agreements and how companies can benefit from preferential tariff schedules, the elimination of non-tariff barriers, and liberalised markets, just contact our team on: contact@apflpartners.com
Disclaimer: This article and its content are for information only and are not given as legal or professional advice. they do not necessarily reflect all relevant legal provisions with respect to the subject matter. Readers should seek legal or professional advice before taking or refraining to take any action.
