Section 301 Witness List Heavily Stacked With Vietnam Tariff Opponents

Witnesses will have five minutes each to testify, plus take questions from the interagency USTR organizing committee. Post-hearing rebuttals are due Jan. 7, stoking fears among many tariff opponents that USTR may try to rush through a Section 301 notice imposing tariffs on Vietnamese imports, even if the duties were to take effect after President Donald Trump leaves office. USTR didn't respond to questions.

Several witnesses plan to suggest at the hearing that USTR’s true motivation in the probe is to punish Vietnam for its growing trade surplus with the U.S., the record shows. Their argument: The Trump administration itself is responsible for that burgeoning trade imbalance because its Section 301 tariffs on Chinese imports chased U.S. import sourcing from China to Vietnam the past three years. The stakes are high if Vietnamese import tariffs are on the table, because Vietnam plays a significant and growing role in the U.S. consumer tech supply chain. It generates a fifth of all smartphone imports to the U.S., compared with a single-digit percentage share in 2017.

The first two witnesses USTR will hear from Tuesday represent the only companies urging Vietnam tariffs be kept on the table. Magnum Magnetics President Mark Bradley will testify that Vietnam's currency practices “have harmed the U.S. flexible magnet industry,” says Magnum’s prehearing comments. Bradley will discuss “the remedies Magnum feels would be appropriate should USTR's investigation find that Vietnam's currency valuation practices are an actionable offense." Flexible magnets are used in a wide variety of consumer and industrial applications.

Caperton Furnitureworks CEO Gat Caperton will follow Bradley with a more explicit call for Vietnam tariffs. His 25-year-old wooden-furniture manufacturing company is struggling to compete against a rising "surge" of cheaper Vietnamese imports, Caperton told USTR this month. “To the extent that such import surges are attributable to unreasonable market interventions by Vietnam that contribute to the undervaluation of Vietnam's currency, the government should adopt appropriate measures, including the application of section 301 duties, to address those issues."

Roy Houseman, United Steelworkers' legislative director, likely is the only tariff ally Bradley and Caperton will hear from in the daylong proceeding. The union, Houseman will testify, “wishes to address issues related to the measure of relief, the elasticity of relief and methods to best ensure a dynamic response to shifting currency policy by a foreign state," says his prehearing submission.

CTA, the Information Technology Industry Council and the Semiconductor Industry Association are tech groups strongly opposing Vietnam tariffs, and all will testify to that effect at Tuesday’s hearing. General Electric also fears tariffs on Vietnam likely “will lead to Vietnamese retaliation against U.S. exporters,” James Renigar, managing director-global government affairs and policy, will testify: “Section 301 tariffs in this case would also undermine U.S. relations with Vietnam, an increasingly critical strategic partner in Southeast Asia."

All business groups scheduled to speak at the hearing are on record as solidly anti-tariff on the Vietnam issue. “Punitive tariffs” on Vietnam “will damage the overall U.S.-Vietnam relationship, which is vital to the U.S. national economic interest,” US-ASEAN Business Council CEO Alexander Feldman will testify. Imposing tariffs as the result of the Section 301 investigation “could create a more challenging environment for US businesses that operate in, and trade with, Vietnam," according to Virginia Foote, chair of the American Chamber of Commerce in Hanoi, who will also testify.

That Vietnam is the first case ever brought under Section 301 “over a foreign country's currency practices has potentially vast application worldwide,” the National Foreign Trade Council told USTR in November. It should be done only "as a legitimate response to an acknowledged pattern of unreasonable and discriminatory behavior." Vanessa Sciarra, vice president-legal affairs and trade and investment policy, will represent the council at the hearing.

Sciarra's group worries this Section 301 case may "be motivated by a desire to penalize Vietnam for its growing bilateral trade surplus with the United States,” it told USTR in November. “Ironically, much of this trade surplus has been driven by forces put into motion by the current administration’s policies toward China which have caused a significant amount of production to relocate from China to other parts of Southeast Asia and most significantly to Vietnam in particular.”

Harvard University economist David Dapice will use his testimony to suggest USTR is targeting the wrong Southeast Asia country for Section 301 currency manipulation review, he previously told USTR. Dapice studied currency depreciation trends in India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam between 2010 and 2019, finding only Vietnam depreciated its currency "by substantially less than the inflation differential” of the other countries in the region, he said. “This is the opposite of currency manipulation to boost exports" to the U.S., he concluded from his study.

Vietnam's foreign exchange reserves at the end of 2019 were equal to about 3.5 months of imports, Luc Can of the Training and Research Institute at the Bank for Investment and Development of Vietnam told USTR in November. The higher the reserves, he said, the more opportunity a foreign government would have to undervalue its own currency to gain an unfair advantage against its trading partners.

Hanoi had considerably less flexibility than its Southeast Asia neighbors to undervalue the Vietnamese dong, Can's study found. Vietnam's 3.5-month foreign cash reserves at the end of 2019 compared with 14 months of reserves for China, nine months for Thailand, eight months for South Korea and five months for Singapore. He will testify at the hearing that the weakening of the dong against the dollar does not improve its trade surplus with the U.S. “due to its economic structure,” he said in November. “The more Vietnam exports, the more it also imports," he said, shattering the argument that an undervalued dong hurts U.S. exporters.