The Star Online (04/01/2021) - HANOI: In December 2020, the US Trade Representative (USTR) office organised a hearing to gather opinions from US businesses and organisations regarding suspicions that Vietnam’s increasing trade surplus with the US was caused by deliberate undervaluation of the Vietnamese dong.
The US Department of Treasury had labeled Vietnam and Switzerland as currency manipulators in Dec 16,2020 report, although this action on its own would not automatically activate tariffs or sanctions.
The USTR investigation would, however, allow US to unilaterally apply retaliatory tariffs on partners deemed to engage in unfair trade activities.
However, most US businesses and organisations participating in the hearing said the US’s large trade deficit with Vietnam was due to objective factors, not because the Vietnamese dong was pushed down, VnExpress reported.
Alexander Feldman, chairman, president and chief executive officer of the US-Asean Business Council, said a reason for the large trade deficit was due to the US’s export products losing their tariff advantage.
Vietnam signed free trade agreements (FTAs) with most countries in the Asia-Pacific alliance but the US had pulled out of the Trans-Pacific Partnership (TPP), Feldman said.
American Chamber of Commerce in Vietnam (Amcham) governor Virginia B Foote said exporters and importers do not see Vietnam’s exchange rate policies as an issue.
The US had stepped out of almost all FTAs, while tariffs are an extremely important factor in trade, she added.
Can Van Luc, a Vietnamese economist, said there were flaws in the US Treasury and USTR’s decision labeling Vietnam as a currency manipulator.
Countries must at least have a US$20bil bilateral trade surplus with the US, foreign currency intervention exceeding 2% of GDP and a global current account surplus exceeding 2% of GDP to be labeled a manipulator.
US treasury backed its claims with data from IMF documents, but even the IMF had admitted that these have shortcomings, said Luc.
In fact, Vietnam’s foreign currency reserves for the last three years have been low, only worth around 3.5 months of imports, which is much lower than some other countries in the region like Thailand (nine months), Singapore (five months), China (14 months), and the Philippines and South Korea (eight months).
Additionally, Vietnam’s exports depend a lot on its imports. If Vietnam wants to export more, it would have to import even more.
Its FDI sector accounted for around 70% of total export turnover in the last five years, and around 50% of its total import turnover — Vietnam Times
Read more at https://www.thestar.com.my/business/business-news/2021/01/04/concern-about-applying-tariffs-on-vietnamese-exports