U.S. Senator Sherrod Brown Warns Administration that Granting Vietnam Market Economy Status Ohio Workers & Manufacturers, Boost China

“There is abundant evidence suggesting that Vietnam does not meet the legal requirements established by Congress to receive market economy status. We are especially concerned by reports that Commerce pledged to the government of Vietnam that your agency’s review will result in a favorable determination, to the detriment of U.S. industries and workers. We urge Commerce to examine the full range of evidence as it conducts its review and to consider the impact on American jobs and producers in its final determination,” wrote the senators in their letter.

“Granting Vietnam market economy status before it addresses its clear nonmarket behavior and the severe deficiencies in its labor law will worsen ongoing trade distortions, erode the U.S. manufacturing base, threaten American workers and industries, and reinforce Vietnam’s role as a conduit for goods produced in China with forced labor. We urge you and your agency to thoroughly consider the economic and labor conditions in Vietnam as you conduct your review of Vietnam’s market economy status, and believe the evidence points to one conclusion: Vietnam does not meet the requirements to receive market economy status under U.S. trade law. To find otherwise would weaken our trade enforcement laws and jeopardize the livelihoods of American workers,” they continued.

In October 2023, the Commerce Department announced the initiation of a changed circumstances review (CCR) of Vietnam’s nonmarket economy status. The Tariff Act of 1930 established a six-factor test to determine whether or not a country qualifies as a nonmarket economy, and the lawmakers note that the reality of Vietnam’s economy—including evidence collected by the U.S. government itself—shows Vietnam does not meet any of the first five factors.

The sixth factor the Commerce Department is required to consider is a catch-all, giving it the flexibility to consider additional factors it deems appropriate. The lawmakers urged the Commerce Department, as part of its evaluation of Vietnam’s ability to meet the sixth factor, to take into account Vietnam’s close economic relationship with China, especially as China and Vietnam actively seek to further deepen their trade ties. Vietnam’s manufacturing sector relies heavily on inputs from China, making it “vulnerable to forced labor risks in supply chains.”

Brown has long been a leader in strengthening trade enforcement, specifically to target how China uses Southeast Asian countries like Vietnam to subvert trade rules meant to level the playing field for Ohio workers. His Leveling the Playing Field 2.0 Act would establish new tools to improve the effectiveness of the U.S. trade remedy system in responding to  “country hopping” by China. In August 2023, the Commerce Department issued a final determination uncovering that Chinese solar panel producers – operating in Southeast Asia, including in Vietnam – are circumventing U.S. trade law meant to protect American businesses and workers by routing their products through these countries. In recent years, Brown has pushed to protect Ohio workers from unfair trade practices in Vietnam in industries from tires to mattresses.

Senator Brown was joined in sending the letter by Sens. Elizabeth Warren (D-MA), Tammy Baldwin (D-WI.), Bob Casey (D-PA), Debbie Stabenow (D-MI), Bernie Sanders (I-VT), John Fetterman (D-PA), and Tina Smith (D-MN).

Read the full letter here or below:

Dear Secretary Raimondo,

We write to express our significant concerns with the Department of Commerce’s (Commerce) review of Vietnam’s status as a nonmarket economy (NME) under U.S. trade law. There is abundant evidence suggesting that Vietnam does not meet the legal requirements established by Congress to receive market economy status. We are especially concerned by reports that Commerce pledged to the government of Vietnam that your agency’s review will result in a favorable determination, to the detriment of U.S. industries and workers.[1] We urge Commerce to examine the full range of evidence as it conducts its review and to consider the impact on American jobs and producers in its final determination.

In October, pursuant to a request from the government of Vietnam, Commerce announced the initiation of a changed circumstances review (CCR) of Vietnam’s NME status.[2] The Tariff Act of  1930 establishes a six-factor test to determine whether or not a country qualifies as a nonmarket economy.[3] Analysis by U.S. government agencies and other official sources clearly shows that Vietnam does not meet any of the first five factors:

1. “The extent to which the currency of the foreign country is convertible into the currency of other countries”[4]: Unlike the U.S. Federal Reserve, Vietnam’s central bank “is not an independent body” and “continues to operate under government oversight.”[5] The U.S. Treasury Department recently added Vietnam back to its “currency monitoring” watchlist on the grounds that Vietnam meets two of the three criteria for currency manipulation.[6] We understand that Treasury continues to work with Vietnam to address currency manipulation, but Commerce’s review must not presuppose progress in that arena.
2. “The extent to which wage rates in the foreign country are determined by free bargaining between labor and management”[7]: The U.S. State Department found severe deficiencies in Vietnam’s labor law in its 2022 human rights review of the country. State notes that “The government did not effectively enforce applicable laws providing for freedom of association and collective bargaining.”[8]
3. “The extent to which joint ventures or other investments by firms of other foreign countries are permitted in the foreign country”[9]: Foreign direct investment (FDI) in Vietnam is strictly controlled by the government.[10] Moreover, foreign investors must contend with “widespread corruption, the entrenched position of state-owned enterprises (SOEs) in certain sectors, regulatory uncertainty in key sectors, a weak and opaque legal regime, poor enforcement of intellectual property rights, a shortage of skilled labor, restrictive labor practices, and slow government decision-making processes.”[11]
4. “The extent of government ownership or control of the means of production”[12]: SOEs continue to dominate the Vietnamese economy, particularly “through their preferential position regarding access to credit and land.”[13] The Vietnamese government “still has widespread ownership … in the manufacturing industries particularly with regard to [the] textile and garment sector. The country also retains strong state ownership in sectors such as agriculture …; finance; real estate and construction; and wholesale and retail trade.”[14]
5. “The extent of government control over the allocation of resources and over the price and output decisions of enterprises”[15]: The Vietnamese government’s outsize control of the banking sector allows it to unfairly promote SOEs and maintain extensive price controls.[16]While Vietnamese law does not explicitly preference SOEs, “in practice, a state enterprise that has higher operational costs than its private competitors can benefit from lower borrowing costs resulting from government guarantees extended by state-owned banks.”[17]

The sixth factor Commerce is required to consider as part of its review is a catch-all, giving Commerce the flexibility to consider “such other factors” as it deems appropriate.[18] In identifying additional issues to consider as part of this factor, we urge Commerce to take into account Vietnam’s close economic relationship with China,[19] especially as China and Vietnam actively seek to further deepen their trade ties.[20] Vietnam’s manufacturing sector relies heavily on inputs from China, making it “vulnerable to forced labor risks in supply chains.”[21] Moreover, Commerce itself has raised the alarm about China’s use of Vietnam to circumvent U.S. antidumping duties on Chinese-made products.[22] Vietnam currently has 25 antidumping orders against it, with four more investigations pending; these active and pending orders range across industries, from tires, mattresses, and paper shopping bags to wind towers.[23] Granting Vietnam market economy status would impact the outcome of all pending antidumping investigations and could prevent Commerce from protecting domestic workers and producers from market-distorting practices.

Additionally, Commerce must consider the severe labor issues in Vietnam as part of the sixth factor. Reports indicate child labor, forced labor, debt bondage, and violations of other internationally recognized labor standards remain prevalent in Vietnam.[24] Nearly 80 percent of Vietnam’s labor force works in the informal economy, with little or no legal protections and no ability to bargain for better wages and working conditions.[25]

Commerce must conduct an object and holistic review of Vietnam’s nonmarket economy status based on data and evidence, not politics. We understand that the administration is seeking to increase engagement in Southeast Asia, including through the Indo-Pacific Economic Framework (IPEF). However, such engagement cannot come at the cost of jobs and industries at home. Indeed, [several of us] raised similar concerns when the administration initially announced Vietnam’s involvement in IPEF.[26]

Granting Vietnam market economy status before it addresses its clear nonmarket behavior and the severe deficiencies in its labor law will worsen ongoing trade distortions, erode the U.S. manufacturing base, threaten American workers and industries, and reinforce Vietnam’s role as a conduit for goods produced in China with forced labor. We urge you and your agency to thoroughly consider the economic and labor conditions in Vietnam as you conduct your review of Vietnam’s market economy status, and believe the evidence points to one conclusion: Vietnam does not meet the requirements to receive market economy status under U.S. trade law. To find otherwise would weaken our trade enforcement laws and jeopardize the livelihoods of American workers.

Sincerely,