USTR started two 301 investigations on actions by Vietnam, one of which dealt with Vietnam’s currency valuation and whether Vietnam’s actions violate Section 301. On January 15, 2021, USTR released a press release announcing the results of the investigation.
“The U.S. Trade Representative has issued findings in the Section 301 investigation of Vietnam’s acts, policies, and practices related to currency valuation, concluding that Vietnam ’s acts, policies, and practices including excessive foreign exchange market interventions and other related actions, taken in their totality, are unreasonable and burden or restrict U.S. commerce. In making these findings, USTR has consulted with the Department of the Treasury as to matters of currency valuation and Vietnam’s exchange rate policy. The findings in this investigation are supported by a comprehensive report, which is being published today on USTR’s website.
“‘Unfair acts, policies and practices that contribute to currency undervaluation harm U.S. workers and businesses, and need to be addressed,’ stated U.S. Trade Representative Robert E. Lighthizer. ‘I hope that the United States and Vietnam can find a path for addressing our concerns.’”
USTR press release, USTR Releases Findings in Section 301 Investigation of Vietnam’s Acts, Policies, and Practices Related to Currency Valuation, January 15, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/january/ustr-releases-findings-section-301-investigation-vietnams-acts-policies-and-practices-related.
The report and notice sent to the Federal Register are embedded below. USTR has not recommended action at this point, leaving resolution to the next Administration.Vietnamcurrency301report
As reviewed in a prior post, Vietnam’s currency practices have been found countervailable by the U.S. Department of Commerce, and Vietnam has been found to be a currency manipulator by the Department of the Treasury in the most recent semi-annual report. See December 21, 2020, Vietnam and Switzerland found to be “currency manipulators” in latest U.S. Treasury semiannual report, https://currentthoughtsontrade.com/2020/12/21/vietnam-and-switzerland-found-to-be-currency-manipulators-in-latest-u-s-treasury-semiannual-report/.
Vietnam has had rapid export growth to the United States and through 11 months of 2020 had the third largest trade surplus with the U.S. at $63.68 billion, trailing only China and Mexico. The U.S. trade deficit with Vietnam has surged from a 2017 deficit of $38.34 billion (full year). Thus, problems of currency valuation to the extent it supports an artificially undervalued currency encourages exports to the U.S. and limits U.S. exports to Vietnam. U.S. imports for consumption for the first eleven months of 2020 from Vietnam were $71.21 billion, with sixteen 4-digit HS categories showing imports from Vietnam of more than $1 billion in 2020 (the largest being over $11 billion). Failure to resolve the matter bilaterally to the satisfaction of the U.S. could result in additional duties being applied to all imported goods from Vietnam.
While U.S. importers who have shifted supply from China to Vietnam for products are assuming additional duties will be imposed, the current USTR is taking no action, meaning whatever action occurs will be left to the incoming Biden team. Unlike many press releases, USTR Lighthizer has indicated that he hopes “that the United States and Vietnam can find a path for addressing our concerns.’” Considering the stakes, look for a resolution without additional duties during the first quarter of 2021.