Value of US trade ties too important

Adam Sitkoff, executive director of AmCham in Hanoi

Last month the Trump administration launched an investigation into the trade practices of Vietnam, faulting the country for currency practices. The investigation comes as Vietnam’s trade surplus with the United States surged to an all-time high in August, up 39 per cent from a year earlier.

The Office of the US Trade Representative cited its authority under Section 301 of the Trade Act of 1974 – the same legal justification that allowed the Trump administration to impose tariffs on import from China, the primary tool used in a US-China trade war that has lasted more than two years.

However, in response to the investigation, AmCham Hanoi has expressed its concerns to the US government about the investigation and the implied proposal to impose tariffs on imported goods from Vietnam in connection with the alleged undervaluation of VND.

In terms of the bilateral commercial relationship, the US and Vietnam have developed a healthy trade and investment relationship that has not only created jobs and tax revenues for both countries but has also enhanced regional security. The US is Vietnam’s largest export market, and has been even during the global pandemic. Vietnam receives billions of US dollars of foreign investment from their companies each year, much of it to build integrated supply chains that benefit American consumers.

In addition, Vietnam has emerged as a key partner in the Indo-Pacific region in achieving the Trump administration’s stated goals of enhancing trade ties and mitigating supply chain risks as companies diversify their supply chains away from China.

Importantly for the US, Vietnam has become one of America’s fastest-growing export markets and AmCham expects this positive trend to continue. It is also noted that the great opportunities for US agriculture, machinery, and many other sectors are helping to create wealth and jobs in America’s heartland.

Although the stated intent of the investigation is to assess whether Vietnamese currency undervaluation harms the US, it seems the motivation to initiate the investigation appears to be primarily due to a rising US bilateral trade deficit with Vietnam.

However, the value of the commercial relationship between the US and Vietnam cannot be measured by the trade deficit alone, and that currency valuation needs to be assessed in terms of overall trade, foreign exchange needs, investment flows, inflation, and economic stability.

The US business community has been pleased at Vietnam’s ability to maintain a stable macroeconomic situation for over a decade. This stability helps both foreign and domestic enterprises plan and operate their businesses here.

We think that currency manipulation has not been an issue for AmCham members. However, there are many areas that AmCham members view as challenges. Examples include digital trade and broadcast, pharmaceutical imports, intellectual property rights, customs and tax procedures, and more. To effectively address the trade imbalance, AmCham would prefer that both governments focus on the principal challenges and opportunities that matter most.

Though Vietnam’s trade surplus with the US has grown rapidly in recent years, the cause of the growth appears to be driven primarily by the relocation and reassessment of supply chain security and manufacturing capacity from China to Vietnam. This shift was also driven by the imposition of tariffs by President Trump on goods imported from China and an attractive business environment in Vietnam, not by actions taken by the State Bank of Vietnam on currency.

AmCham is urging the US government to view this trend as evidence of their success in implementing its oft-stated policy of diversifying supply chains in the Asia-Pacific region. Similarly, AmCham is urging the Trump administration to avoid retaliatory measures against the logical outcome of its own policy goals.

We would like to highlight the warm friendship between our two countries and we expect the bilateral commercial relationship to continue growing as the world economy starts to recover from the disruption caused by COVID-19.