In this interview, Dr. Nguyễn Quốc Việt, Deputy Director of the Vietnam Institute for Economic and Policy Research (VEPR), elaborates on the broader economic impact of this situation and what it means for both Vietnamese and U.S. companies.
Journalist: - Dr. Việt, how does the U.S.'s refusal to recognize Vietnam as a market economy affect the economy and trade relations between Vietnamese and U.S. businesses?
Dr. Nguyễn Quốc Việt: - The U.S.'s decision not to recognize Vietnam as a market economy has far-reaching consequences, not just for the economies of both nations but also for the development of their business communities. Vietnam has made relentless efforts over nearly 40 years of renovation, and today, 73 countries and territories around the world recognize Vietnam as a market economy. These include countries with economic and political structures similar to those of the U.S.
It's not just Vietnamese companies that suffer from this lack of recognition; U.S. businesses also face significant losses. Many U.S. companies are heavily invested in Vietnam, whether through direct business partnerships, placing orders, or manufacturing. This includes everything from traditional Vietnamese exports like agricultural products and textiles to high-end products like electronics and smartphones. Major U.S. corporations such as Apple, Microsoft, and Google have connected directly with Vietnamese manufacturers.
Without market economy recognition, businesses on both sides face higher compliance costs. This creates a more expensive and complicated business environment, making it less attractive for U.S. companies to continue doing business in Vietnam. As a result, there is a risk that businesses may shift to other markets with lower operational costs and fewer legal hurdles.
- Can you elaborate on the specific challenges that businesses are facing due to this situation? Is it possible to quantify the economic impact?
- Vietnamese businesses face a number of hurdles when trying to export their goods to the U.S. market. The process of clearing and exporting goods becomes more prolonged and complicated, which adds to the overall cost. These compliance costs are significantly higher compared to those faced by businesses from countries that have more competitive products and are recognized as market economies.
While it is difficult to quantify the exact financial impact, the indirect damage is enormous. First, Vietnamese businesses experience difficulty in market access. There is also discrimination against Vietnamese goods, particularly when products from Vietnam compete with those of similar origin entering the U.S. or other high-demand markets.
Second, companies face higher costs related to compliance and the prevention of anti-dumping measures. Vietnamese businesses are more susceptible to anti-dumping lawsuits and other forms of discrimination, which results in costly legal battles. This impacts not only local Vietnamese companies but also foreign-invested enterprises operating in the country. If a business is hit with an anti-dumping lawsuit, the costs of pursuing the case are incredibly high and time-consuming, further burdening companies.
- From your perspective as an economic expert, do you believe that after nearly 40 years of reform, Vietnam deserves to be recognized as a market economy?
- Absolutely. It is essential to recognize that there are multiple standards and criteria when determining whether a country qualifies as a market economy. However, if we look at the global picture, it’s clear that many countries and territories have already recognized Vietnam's market economy status.
Vietnam's participation in global economic institutions, particularly those oriented towards economic liberalization, highlights the country’s progress. Vietnam is not only engaged but fully integrated into the global economy, meeting and even exceeding the rigorous standards set by organizations like the World Trade Organization (WTO). Vietnam has also actively participated in numerous bilateral and multilateral trade agreements, further underscoring its commitment to market-based economic principles.
Looking at international research and publications, there are numerous reports from respected institutions such as the World Bank and the World Economic Forum, all of which recognize the tremendous progress Vietnam has made. These reports acknowledge the nearly 40 years of reform and recognize that Vietnam’s economic and market-based reforms have yielded significant results.
In terms of rankings, Vietnam consistently achieves high scores across various indicators, particularly in terms of economic development and market economy reforms. When we compare Vietnam's progress with other countries that have already been recognized as market economies, it’s clear that Vietnam meets most, if not all, of the necessary criteria.
FDI enterprises also play a crucial role in this. They should work closely with the Vietnamese government to continue lobbying and making the case to the U.S. Department of Commerce. We have a nine-month window to push for a more comprehensive, fairer, and objective review, not only from the U.S. government but also from other global stakeholders regarding Vietnam’s market economy status.
- It sounds like FDI enterprises have a vested interest in Vietnam’s recognition as a market economy. Can you explain how this would benefit them?
- Absolutely. If Vietnam were recognized as a market economy, FDI enterprises would benefit greatly. They would face lower compliance costs, fewer legal hurdles, and more straightforward business processes. Recognition would also open the door to increased foreign investment, as it would signal to global markets that Vietnam is a stable, transparent, and competitive place to do business.
Additionally, with reduced risk of anti-dumping measures and other trade-related barriers, FDI enterprises would enjoy smoother operations and fewer costly legal disputes. The current situation places an unnecessary burden on these companies, and by achieving recognition, the business environment in Vietnam would become much more attractive.
- Thank you for your insights, Dr. Việt.
