Vietnam benefits from being viewed as a "market economy" by significant importers like the US and EU in anti-dumping and subsidy investigations.

According to the Ministry of Industry and Trade, 72 nations, including powerful economies like Canada, Australia, Japan, and South Korea, have recognized Vietnam as a market economy. The UK recently issued an official letter recognizing Vietnam's market status.

A representative of the Trade Remedies Department (Ministry of Industry and Trade) said that since the first anti-dumping investigation case with Vietnam in 2002, the US has considered Vietnam a non-market economy.

Prime Minister Pham Minh Chinh mentioned the proposal for the US to recognize Vietnam's market economy status soon when meeting US Secretary of Commerce Gina Raimondo on September 19 in Washington. The joint statement between General Secretary Nguyen Phu Trong and President Joe Biden on upgrading Vietnam-US relations to a Comprehensive Strategic Partnership mentioned this issue.
In addition to the US, the EU maintains that Vietnam is a non-market economy. When the FTA was being negotiated in 2015, the representative of the European Union delegation told the press that the signing did not imply that Vietnam was recognized as having a market economy.

Prime Minister Pham Minh Chinh received US Secretary of Commerce Gina Raimondo on September 19 in Washington. Photo: Nhat Bac

Non-market economy refers to economies where the government has a monopoly or near monopoly on trade and the state sets domestic prices. Normal price calculation principles will not be used if an exporting country is considered a non-market. The importing nation is free to employ any other techniques it deems appropriate. This significantly negatively affects producers and exporters from nations regarded as non-market economies.

Each country and economy will have its regulations on criteria for determining a non-market economy.

According to US regulations, there are 6 criteria to consider whether an economy has a market or not, including Currency conversion level, Negotiate salaries and wages between employees and employers, Level of foreign investment in economic activities, Issues of state ownership and private ownership, Extent of Government control over certain resources and prices; Other factors.

There are 5 criteria for the EU, such as government influence in allocating resources and business decisions (Vietnam has done it, according to the EU's assessment in 2015). No state intervention distorts the daily operations of businesses; corporate governance, accounting and auditing; the existence and enforcement of certain legal regimes, respecting intellectual property rights, bankruptcy and competition, and judicial systems; financial sector.

According to Ms Nguyen Thi Thu Trang, Director of the Center for WTO and Integration, Vietnam was forced to acknowledge in the 2007 WTO accession documents that other import countries would classify it as a non-market economy due to the negotiation backdrop.

"Being considered a non-market economy has a big impact on Vietnamese businesses, especially in anti-dumping investigations," said a representative of the Trade Defense Agency.

For example, because it considers Vietnam a non-market when calculating the dumping margin, the US will use the value of a third country with a market economy to calculate the production costs of businesses. in Vietnam instead of using data provided by these units. Due to this, the dumping margin is greatly inflated and does not accurately reflect the production environment of Vietnamese businesses.

Additionally, since manufacturers in the replacement nation are frequently Vietnamese exporters' rivals, they may submit unfavorable information in these inquiries, according to Ms Trang. 

In addition, considering Vietnam as a non-market economy allows the US to apply nationwide tax rates for businesses that do not cooperate or cannot prove that they are not under Government control. The US often calculates the national tax rate based on available data, so it is often pushed up very high and maintained during all reviews, hindering the consideration of lifting the tax imposition.

The US is an important export market of Vietnam, with a total turnover 2022 of nearly 109.4 USD (accounting for 29.5% - according to data from the General Department of Customs). The US also initiated the most trade defence investigations with Vietnam, mainly anti-dumping investigations, with 25 out of 56 cases as of August 2023.

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From 2020, the EU will rank as the third-largest overseas market for Vietnamese exports. According to data from the Ministry of Industry and Trade, Vietnam has exported items worth 128 billion USD to this market since the EVFTA went into effect. According to customs data, Vietnamese exports to the EU in 2022 will be 46.8 billion USD or 12.6% of all export revenue.

For Vietnam's manufacturing and export sectors, being recognized as a market economy by two significant import markets is extremely important.

"If recognized, Vietnamese enterprises will not be subject to unfavourable calculations while facing anti-subsidy and anti-dumping cases. Thus, to drastically lower it compared to the present, the US will adopt the amplitude and associated tax rate toward higher standards and fairness, Ms. Trang stated.

In fact, since 2008, after officially joining the WTO, Vietnam and the US have established a bilateral Working Group on the market economy. According to information from the Vietnamese side's focal point, the Ministry of Industry and Trade, the two sides have met 10 times to update the US on Vietnam's market economic status. Vietnam's senior leaders also mentioned this issue during working trips to the US.

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On September 8, Vietnam's Ministry of Industry and Trade officially requested the US Department of Commerce to consider Vietnam's market economy issue. "The time to apply is special in the context of the relationship between the two countries being raised to a new level," the Trade Remedies Department assessed.

According to regulations, the US Department of Commerce will decide whether to initiate a review within 45 days and reach a conclusion within 270 days from when Vietnam submitted the dossier. In the two countries' Joint Statement, the US said it would urgently consider the request to recognize market regulations. In a recent meeting with Prime Minister Pham Minh, Trade Minister Gina Raimondo said she would find ways to promote the US's early approval of Vietnam's request.