22 Groups to Testify at Section 301 Hearing on Vietnam Currency Manipulation

The groups said they want the Section 301 investigation to include consideration of Treasury's Dec. 16 "critically important" report blasting the Vietnam government for tampering with the foreign exchange market "in a sustained, asymmetric manner," to the detriment of U.S. interests. Treasury released the report nearly a week after the deadline passed for requesting to appear at Tuesday's hearing. Not giving witnesses a chance to come forward and testify on Treasury's report risks flouting Administrative Procedure Act protections on transparent federal rulemakings, the groups suggested.

Vietnam’s central bank bought $22 billion in foreign currencies last year, sending the value of the Vietnamese dong tumbling against the U.S. dollar, alleged USTR in October (see 2010070047). The Section 301 investigation will determine whether Vietnam’s “interventions” were “unreasonable or discriminatory and burden or restrict U.S. commerce,” and what action to take in response, said USTR then.

The National Retail Federation (NRF), the Retail Industry Leaders Association (RILA) and the U.S. Chamber of Commerce also are scheduled to testify, as is the Semiconductor Industry Association. All indicated in their prehearing comments that they oppose the imposition of Section 301 tariffs to remedy Vietnam's alleged currency abuse, as did most of the other groups on the witness list. Three of the first six testifying on the schedule were strongly critical of Vietnam in their prehearing submissions, including one that called explicitly for tariffs on Vietnamese imports.

The timing of USTR's Jan. 7 deadline for the filing of post-hearing rebuttals is stoking fears in the CTA rank and file that President Donald Trump may try to rush through tariffs on imports from Vietnam before Jan. 20 to remedy Hanoi’s alleged devaluation of the dong and the harm that his administration says it caused U.S. commerce, even if the duties don’t take effect until after Trump leaves office (see 2012160022). USTR didn't comment. Its decision to proceed with the hearing is sure to do little to alleviate the fears of tariffs among those who harbor them.

Tuesday’s virtual hearing will be a change of pace for USTR, which in the past three years held several rounds of “off-camera” Section 301 hearings into China’s alleged trade abuses, with no video recording or photography allowed. USTR’s Oct. 8 notice initially said it would forgo a hearing in the Vietnam investigation due to COVID-19 complications. That changed in a Nov. 25 notice, when it scheduled the virtual hearing and set a Dec. 10 deadline for filing requests to appear (see 2011240020).

The 1974 Trade Act requires USTR to convene a public hearing in a Section 301 investigation with 30 days' notice “if requested by any interested person,” says Section 304 of the statute. ITI was among several so requesting in mid-November comments.

USTR’s Oct. 8 notice initiating the Section 301 investigation against Hanoi sought comments on what actions it should take to remedy Vietnam’s alleged currency misbehavior but didn’t specifically raise the specter of tariffs. CTA nevertheless will testify proactively against tariffs on Vietnamese imports, said its Dec. 10 request to appear. “Maintaining a tariff-free supply chain with Vietnam is critical to CTA members, especially given that many companies have recently made resource intensive and costly supply chain adjustments” due to the Trump administration’s "efforts to shift business away from China,” said the association.

Vietnam plays a significant and growing role in the consumer tech supply chain, according to Census Bureau import data accessible through the International Trade Commission’s DataWeb tool. Roughly a fifth of all smartphone imports to the U.S. in the first 10 months of 2020 originated from Vietnam (see 2012190001), DataWeb showed. Vietnam produced fewer than 9% of the 237 million smartphones imported to the U.S. in 2017, said DataWeb, the first year the administration launched its Section 301 enforcement actions against China.

CTA President Gary Shapiro told us much of the Vietnamese supply chain for consumer tech products didn't exist four years ago and came into play only after U.S. importers sought refuge from the tariffs on Chinese goods. The administration withdrew the threat in February to impose tariffs on Chinese smartphones, but they still appear on USTR's inactive List 4B duties.

USTR should use “policy tools” other than Section 301 remedies to curb Vietnam’s alleged currency misbehavior, ITI will testify, according to its prehearing comments. “If USTR nevertheless decides to continue with its Section 301 investigation, we strongly urge deliberate, thorough, and transparent consideration of these and other stakeholder concerns at each phase of the process.”

Many NRF members “actively source goods from Vietnam” but believe the value of the dong “has little to no impact on their sourcing decisions and, consequently, U.S. commerce,” said the association’s request to appear. “Any action by the United States to restrict imports from Vietnam as a method of addressing any undervaluation of the dong that may prevail would be wholly unwarranted and harmful.”

RILA members worry tariffs imposed on products from Vietnam “would have a devastating impact on American businesses and families,” said the group representing Best Buy, Target, Walmart and other big-box retailers. U.S. importers “heeded” the administration’s call to “diversify supply chains out of China” and “deepened their ties” with Vietnam, said RILA. Imposing tariffs on Vietnamese products now would “slow the migration” of supply chains away from China, it said.

At least three groups or companies on the witness list plan testimony critical of Vietnam's alleged currency harms, said their prehearing submissions, including one that explicitly recommended tariffs as the obvious solution. Hanoi’s currency manipulation had a “significant impact” on workers and "their facilities" and hinders the ability of U.S. firms to “compete domestically and globally,” said the United Steelworkers.

U.S. competition in flexible magnet manufacturing “has shifted from China to Vietnam over the past decade,” said Magnum Magnetics. Vietnam's currency practices “harmed the U.S. flexible magnet industry,” it said. Magnum has "remedies" in mind it feels "would be appropriate should USTR's investigation find that Vietnam's currency valuation practices are an actionable offense," it said. Like the union, it didn't spell out whether those suggested remedies should include tariffs.

A third, more hawkish Vietnam opponent, Caperton Furnitureworks, said tariffs on Vietnamese imports are a well-called-for fix for Vietnam's currency misbehavior, and that the duties can't come a day too soon. Vietnamese imports of wooden furniture to the U.S. are “surging,” said Caperton, which does business as Gat Creek. "To the extent that such import surges are attributable to unreasonable market interventions by Vietnam that contribute to the undervaluation of Vietnam’s currency," USTR should adopt "appropriate measures," including the imposition of Section 301 duties, "to address those issues," it said.