Commerce Keeps Non-Market Economy Designation for Vietnam in AD Proceedings
The Commerce Department on Aug. 2 said Vietnam will continue to be treated as a non-market economy in antidumping duty proceedings. Releasing the results of its review of the nation's market status, the agency said that despite "substantive reforms made over the past 20 years, the extensive government involvement in Vietnam’s economy distorts Vietnamese prices and costs," rendering them "unusable" for calculating the duties.
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The result is that Commerce will use its NME methodology when conducting AD investigations and reviews on Vietnamese products. This methodology sets a country-wide rate, based on adverse facts available, which an individual company can rebut by establishing its independence from state control.
According to a pre-publication version of the final results of its review, Commerce reviewed the six statutory factors used to assess whether a nation is a non-market economy.
The first factor is the extent to which the foreign nation's currency is convertible into other countries' currencies. The agency said that while economic reforms in Vietnam "have led to enhanced currency convertibility," the nation "maintains restrictions" on the currency's convertibility. The Vietnamese government still conducts foreign exchange interventions to influence its currency's value, and Vietnam's central bank isn't an independent "policy making apparatus," Commerce said.
The second factor concerns the extent to which the nation's wage rates are set by free bargaining between labor and management. Commerce said "Vietnam’s labor market does not reflect free bargaining between labor and management," noting that independent labor unions are illegal and that "strikes are generally illegal."
The third factor is the extent to which joint ventures or other outside investment are allowed in the nation. Commerce said the rise in foreign direct investment "represents a noteworthy achievement," but is in line with the "simultaneous growth in Vietnam's GDP, suggesting that there has been no dramatic change in the country’s overall dependence on foreign investment during that period," the agency said. Foreign investment is still restricted in various sectors and faces a myriad of challenges, including "general market access barriers, red tape, lack of transparency in regulatory processes, and failure to protect firms’ intellectual property rights."
The fourth factor is the extent of government ownership of the means of production. Commerce found that, by law, state-owned enterprises play a "leading role" in Vietnam's economy, and that "benefits are still largely disproportionally bestowed upon state sector firms relative to their private sector counterparts." As a result, greater structural reforms are needed "before the economy becomes deeply reliant upon free-forming supply and demand conditions," the agency said.
The fifth factor concerns the extent of state control on the "allocation of resources and over the price and output decisions of enterprises." This factor also weighed against granting Vietnam market economy status, with Commerce declaring that the state "still heavily relies on state planning as a means through which it directs business decisions to achieve output and other economic outcomes." However, the agency noted many of Vietnam's reforms, including the fact that state ownership in the banking sector dipped from nearly 80% to at least 50% since 2002.
The final factor includes other factors Commerce considers "appropriate," and in this review included legal protections for corporations. Again, despite reform efforts, Commerce found the "persistent influence of the Communist Party of Vietnam (CPV) in Vietnam’s legal system continues to undermine judicial independence and effective law enforcement."