Early US recognition of market economy to increase opportunities for Vietnamese exports

The US's recognition of the market economy in Vietnam will help expand business opportunities for Vietnamese enterprises and pave the way for Vietnamese exports to this market, according to experts.

In early May 2024, the US Department of Commerce held a hearing on the recognition of Vietnam's market economy.

Vietnam has made efforts for a long time to meet six criteria for the US to recognize its market economy status, including conducting economic reforms to meet the criteria prescribed by the US, including currency convertibility, salary and wage negotiations between employees and employers, level of foreign investment in economic activities, and issues related to state and private ownership.

According to assessments of many international analysts, Vietnam has demonstrated its performance in accordance with the above criteria as good or often better than other countries that have been granted the market economy status. Vietnam also intervenes less in state-owned enterprises than India, and is more open to foreign investment than Indonesia, Canada and the Philippines.

Nguyen Thi Thu Trang, Director of the Centre for WTO and Integration under the Vietnam Chamber of Commerce and Industry (VCCI), held that winning the US recognition has great significance for manufacturing and export industries, as exports to this market will receive tax reductions. This move can also encourage US companies to diversify their supply chains.

James Borton, a non-resident senior fellow at the Foreign Policy Institute (FPI) of the Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies (SAIS), wrote in an article published on geopoliticalmonitor.com that the market status recognition will bring many economic benefits to both countries.

Burgeoning trade flows between the two countries and the White House’s push for the establishment of the partnership agreement on the Indo-Pacific Economic Framework for Prosperity (IPEF), means market status recognition would help Vietnam expand its trade and investment with the US.

The bilateral benefits for US companies derived from recognition of Vietnam as a market economy include market access and export opportunities, namely in agriculture, machinery, aircraft, and pharmaceutical products, all of which contribute to the development of a supply chain that suits the US’s interests.

Market-status recognition would also contribute to a reduction in trade barriers, making it easier and cheaper for US businesses to export goods and services to Vietnam, according to Borton.

Furthermore, the US’s recognition of Vietnam as a market economy could further incentivise US companies to diversify their supply chains. Additionally, lower import prices and improved market access could enable US companies to increase their output and production in Vietnam. This offers the potential to generate increased sales revenues and profitability for American companies operating in Vietnam, he wrote.

According to Nguyen Dinh Luong, former head of the Vietnamese negotiation delegation of the Vietnam – US Bilateral Trade Agreement (BTA), to be truly recognised as a market economy by the US, Vietnam must learn from the world's laws and apply universal laws in new areas, and have a roadmap to gradually gain a firm foothold in the common playing field.

Trang advised businesses to study and regularly update regulations of the US market, pay attention to those related to trade remedies, epidemic prevention, hygiene, technical standards, rules of origin, and regulations related to labour employment standards./.