Source- This post on Vietnam pushing US for Changing the Non-Economy Market Status is based on the article “Why Vietnam wants US to change its ‘non-market economy’ status” published in ” The Indian Express” on “9th May 2024”.
Why in News
Vietnam has been pushing the US government to change Vietnam’s ‘non-market economy‘ classification to ‘market economy‘. This push is aimed to avoid high taxes imposed by the US on the goods imported from Vietnam.
Even though, Vietnam has emerged as one of the top trading partners of the US and has helped thwart China’s expanding influence in the South-east Asian region, it has continued to be on US’s list of non-market economies for more than two decades.
How are economies designated as ‘non-market economies’ by the US
Designation criteria- Economies are designated by the US as a non-market economy based on several factors. These are mentioned below-
a. Country’s currency convertibility.
b. Wage rates determination by free bargaining between labour and management
c. Ease of FDI inflow
d. State control over the ownership of plants and machineries, price and output decisions
e. Human rights
Present ‘Non-Market Economies’- At present, the US has designated 12 countries as non-market economies. This includes Russia, China, Vietnam and some countries which used to be a part of the erstwhile Soviet Union.
Implications of Designation as a ‘Non-market economy’
The non-market economy label allows the US to impose “anti-dumping” duties on goods imported from designated countries. The level of anti-dumping duties is determined by relying on the prices of import from a third country.
For ex- In case of Vietnam’s exports to US, the anti-dumping duty is imposed taking into consideration the final export landing price of goods from Bangladesh.
Challenges in removal of name from ‘Non-market economies’ List
1. Opposition from US steel makers and the American Shrimp Processors Association- The push of Vietnam has been opposed by US business associations, which cite reasons of state control of economy in Vietnam. For ex- Vietnam’s restrictions on land ownership, weak labour laws, and lower shrimp duties.
2. Risks of Chinese circumvention of anti-dumping duties- Chinese state firms have invested heavily in Vietnam. There are concerns that removal of Vietnam from the ‘non-market economies’ list, will let China more easily circumvent US tariffs on their goods.
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