USTR Sheds No Light on Vietnam Talks Held Week Before Dec. 29 Hearing
The U.S. and Vietnam held “consultations” Dec. 23 on allegations that Hanoi deliberately devalued the dong against the dollar to the detriment of American commercial interests, it was disclosed in Friday’s Section 301 investigative report from the Office of the U.S. Trade Representative ruling out tariffs on Vietnamese goods in the final days of the Trump administration (see 2101150052). The report shared nothing about the substance of the previously unknown talks, held roughly a week before USTR convened a virtual hearing Dec. 29 into Vietnam’s alleged currency misbehavior (see 2012290034). Agency representatives made no mention of the consultations during the hearing.
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The report said USTR Robert Lighthizer wrote his counterpart at Vietnam’s Ministry of Industry and Trade Oct. 2 to inform him of his agency's initiation that day of the Section 301 investigation and to request consultations with Hanoi, as the 1974 Trade Act required Lighthizer to do. The report published Lighthizer’s letter, but the ministry’s unpublished Oct. 14 response accepting the request remains “on file with USTR,” said the document.
The agency didn’t respond Tuesday to questions about the Dec. 23 consultations, including whether the two sides agreed to meet again or if the talks factored into USTR's decision not to impose tariffs. We also asked for a copy of Vietnam's Oct. 14 reply letter, to no avail.
No record or transcript of the Dec. 23 consultation exists, as far as we know. Virtually all who testified against tariffs at the hearing urged closer U.S. ties with Hanoi, including through long-term negotiations toward a comprehensive free-trade agreement. Tariffs, they warned, would provoke Hanoi to impose retaliatory duties against U.S. exporters and damage ties with an increasingly important U.S. trading partner.
The report’s main finding that Vietnam’s alleged currency manipulation was “actionable” under Section 301 appeared to shun the testimony of many hearing witnesses, including CTA Vice President-International Trade Sage Chandler, who said Treasury or the World Trade Organization are more proper venues for resolving the administration’s concerns. Chandler didn’t comment, but CTA President Gary Shapiro tweeted Friday that “a tariff-free supply chain w/ Vietnam is critical” to his members.
A Congressional Research Service report Jan. 7 said presidential administrations have initiated 130 Section 301 investigations in the nearly five decades since the statute was enacted. Lighthizer launched six of them on President Donald Trump’s watch, said CRS, but his probe into Hanoi’s alleged devaluation of the dong was the first in the statute's history involving a currency dispute. The U.S. Chamber of Commerce welcomed the news that tariffs won’t be imposed on Vietnam, but said Section 301 was “an inappropriate means by which to address currency valuation questions,” and the “precedent set” in USTR’s report “was worrisome to our members.”
The finding of Section 301 actionability technically leaves tariffs or other remedies on the table for a future USTR to consider under statutory deadlines in Sections 304 and 305 of the Trade Act. Lighthizer said he hopes the U.S. and Vietnam “can find a path for addressing our concerns.” The report’s finding that Hanoi was culpable in the dong's devaluation “will be addressed in subsequent proceedings under Section 301,” said a Federal Register notice signed by USTR Chief of Staff Kevin Garvey. President-elect Joe Biden nominated Katherine Tai, House Ways and Means chief trade counsel, to succeed Lighthizer as the next USTR.
Vietnam’s “unreasonable” devaluation of the dong serves to “reduce market opportunities” for American firms in the U.S. import and Vietnamese export markets, the report said. “Available evidence” showed Vietnam’s currency “has been undervalued for several years,” exacerbated by Hanoi’s “recent, rapid, and significant” accumulation of foreign-exchange (FX) reserves “bilaterally” against the dollar in 2019, said the report. Vietnam’s state-owned bank in 2020 “continued to take FX market interventions that put downward pressure” on the value of the dong, and continued doing so through September, it said.
The Vietnamese government has “tightly managed” the dong “at an undervalued level” against the dollar since 2016, said the report. The International Monetary Fund estimates the dong was undervalued by 10.3% in 2016, 7% in 2017 and 8.4% in 2018, it said. A “more recent” IMF assessment of the dong’s valuation doesn’t exist, it said. The Vietnamese Embassy in Washington didn’t comment.