For every one of his 10 years as Minister of Trade, Mr Truong Dinh Tuyen attended the ASEAN Economic Ministers (AEM) meeting. But the 13th meeting on May 3 in Brunei was especially satisfying, with his counterparts agreeing to recognise Vietnam as a full market economy. According to the Minister, recognition came because of Vietnam’s commitments to the World Trade Organisation and its pledge to remove all subsidies that conflict with the regulations of the global trade body.

The ASEAN Secretariat said in a joint media statement issued at the meeting that: “Having noted the significant achievements of Vietnam in economic development and integration into the regional and global economies, ASEAN has agreed to recognise Vietnam as a full market economy.” In the statement ASEAN ministers also called on dialogue partners of ASEAN and other economies to issue similar statements in recognition of Vietnam’s economic status.

ASEAN’s recognition makes clear their view of Vietnam as a dynamic member of the region, following the country’s 12 years as an ASEAN member. “The recognition from ASEAN member economies is an important event, evidencing their positive evaluation of the country’s economic renewal achievements, which has been achieved by switching to a market economy,” Mr Tuyen told local media. 

Needless to say, being a full market economy is important to Vietnam, not only for domestic enterprises that face international trade disputes but also in helping to boost bilateral economic ties to a comprehensive level, according to foreign think-tanks. “ASEAN recognises Vietnam’s significant achievements in economic development and integration to the regional and global economy,” said Mr Ayumi Konishi, Country Director of the Vietnam Resident Mission at the Asian Development Bank. “With regard to the impact on Vietnam’s trade activities with ASEAN members, if any countries in the region deem that Vietnamese enterprises sell at dumping prices they will measure the dumping margins based on production costs in Vietnam, not from another country. This is an advantage as Vietnam is now recognised as a full market economy by ASEAN.”

Mr Sin Fong Wong, Country Manager, Vietnam, Laos and Cambodia, at the International Finance Corporation (IFC), agrees. “This recognition will help Vietnam to improve its position in anti-dumping cases initiated by ASEAN countries, as Vietnamese production costs are no longer being compared unfavourably to other selected market economies.” Before the recognition, he explained, goods exported from Vietnam, as a non-market economy, were targets of dumping allegations and have had difficulties in avoiding tax sanctions, because production costs were compared to another country’s; a practice that is usually imprecise and often results in the defendant losing the case. The title of full market economy means the end of such comparisons. “The fact that Vietnam is now recognised as a full market economy by ASEAN countries indicates that its efforts in the development of a market-orientated economy have met with initial success,” Mr Wong said.

It was also an important step in the country’s pursuit of free and open trade under WTO regulations, as Vietnam was admitted to the WTO as a non-market economy for a maximum of 12 years. If the country is not recognised by other WTO members as a market economy it could be subject to unfavourable conditions in terms of anti-dumping and anti-subsidy lawsuits. The country has already been recognised by China as a full market economy and a market-oriented economy by South Korea, and is now negotiating with the European Union for recognition as a full market economy.

“ASEAN recognition provides favourable conditions for Vietnam to continue negotiating and call on other countries to recognise its market economy,” said Mr Konishi. “As and when the US and the EU also recognise Vietnam as a full market economy, there will be even more impact.”

According to Mr Jonathan Pincus, Senior Economist with the United Nations Development Program (UNDP) in Vietnam, recognition from ASEAN has important symbolic value but will not have a significant impact on Vietnam’s economy. “Vietnam’s ‘non-market economy’ status is imposed on the country by the US and the EU,” he said. “These two trading partners reserve the right to decide on Vietnam’s market economy status and to use their own highly subjective methods to detect deviations from ‘market’ pricing.” The WTO does not provide a mechanism to compel the US and EU to follow more objective criteria in making their assessments.

“Therefore, although ASEAN’s affirmation of Vietnam’s status as a market economy is welcome, it will not influence decisions made by the EU and US in the interests of the EU and US,” he went on. “This is, in effect, a bilateral issue between the EU and Vietnam and between the US and Vietnam. So the determinations of third parties are not relevant. But this does not mean that Vietnam is entirely powerless. Both the EU and the US have provisions in their regulations to enable Vietnam to demonstrate that specific sectors are organised on a market basis.”

In other words, while the entire economy may still be judged a non-market economy by the EU and the US, Vietnam can collect evidence to present to courts in the two countries to demonstrate that, for example, shoes, furniture, garments, fish and so forth are not subsidised by the state and that producers set prices on the basis of the market.

Most economists recognise that the entire non-market economy issue is just another type of trade barrier that the US and EU use to protect their domestic producers against Chinese and Vietnamese exports. Vietnam was forced to agree to safeguards under EU and US non-market economy regulations in order to finalise its WTO agreements. China was forced to do the same.

“Now that Vietnam is a member of the WTO, the government must actively collect information to demonstrate that specific sectors are organised on the basis of the market and that subsidies are not significant or trade distorting,” Mr Pincus said.

According to Mr Il Houng Lee, Senior Resident Representative in Vietnam at the International Monetary Fund, this is a particularly important period for the Vietnamese Government because as the economy shifts to a fully market based system it requires an equivalent shift in the modality of government intervention policies.

Thu Trang reports.