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Wednesday, January 5, 2011

U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress

Michael F. Martin
Specialist in Asian Affairs

Since the resumption of trade relations in the 1990s, Vietnam has rapidly risen to become a significant trading partner for the United States. Along with the growth of bilateral trade, a number of issues of common concerns, and sometimes disagreement, have emerged between the two nations. Congress may play a direct role in the U.S. policy on some of these issues.

Bilateral trade has grown from about $220 million in 1994 to $15.4 billion in 2009. Vietnam is the second-largest source of U.S. clothing imports, and a major source for footwear, furniture, and electrical machinery. Much of this rapid growth in bilateral trade can be attributed to U.S. extension of normal trade relations (NTR) status to Vietnam. Another major contributing factor is over 20 years of rapid economic growth in Vietnam, ushered in by a 1986 shift to a more marketoriented economic system.

Bilateral trade may increase if both nations become members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP). The United States and Vietnam are among the nine countries negotiating the terms of expansion of the trade association. The Obama Administration envisions an expanded TPP as a “21
st Century free trade agreement” that will become the cornerstone for a trans-Pacific regional trade association. Vietnam is also a party to negotiations to form a larger pan-Asian regional trade association based on the Association of Southeast Asian Nations (ASEAN) that could exclude the United States and prove to be an alternative to the TPP and the U.S. vision for regional economic integration in Asia.

The growth in bilateral trade has not been without its accompanying issues and problems. Vietnam has applied for acceptance into the U.S. Generalized System of Preferences (GSP) program and is participating in negotiations of a Bilateral Investment Treaty (BIT) with the United States. Vietnam also would like to have the United States officially recognize it as a market economy.

There have also been problems with U.S. imports of specific products from Vietnam. In 2003, the United States began collecting antidumping duties on certain fish imports from Vietnam. In 2008, the 110
th Congress passed legislation that transferred the regulation of catfish from the Food and Drug Administration to the U.S. Department of Agriculture. The Vietnamese government strongly protested these actions as largely protectionist measures. However, the proposed new catfish regulations have been under review by the White House for over a year.

An examination of recent trends in bilateral trade reveals that other product categories—such as footwear, furniture, and electrical machinery—could generate future tension between the United States and Vietnam. Observers of Vietnam’s economic development have also been critical of Vietnam’s protection of workers’ rights, its enforcement of intellectual property rights laws and regulations, and the country’s exchange rate policies.

The 112
th Congress may play an important role in one or more of these issues, as have past Congresses. The 112th Congress would have to consider implementing legislation if a TPP agreement is concluded. If the 112th Congress should take up GSP renewal, it may also consider Vietnam’s pending application. The 112th Congress may also weigh in on its designation as a market or non-market economy. Finally, if current growth trends continue, Congress may be asked to act on the rising amount of footwear, furniture, and/or electrical machinery being imported from Vietnam. This report will be updated as circumstances require.

Date of Report: December 27, 2010
Number of Pages: 24
Order Number: R41550
Price: $29.95

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