California April 28th 2024

The Honorable Gina Marie Raimondo
Secretary of Commerce
U.S. Department of Commerce
1401 Constitution Avenue, NW
Washington, DC 20230

Dear Secretary Raimondo:

Vietnam Worker Defenders (“VWD”), a labor advocacy NGO based in California, is writing this letter to respectfully request you and the U.S. Department of Commerce (“DOC”) to consider the following factors in your review of Vietnam’s non-market economy (“NME”). As you’ll see explained in this letter, Vietnam is simply not a market economy by any measure. According to the Constitution of the Republic Socialist of Vietnam, Vietnam’s economy is a socialist-oriented economy.

Under U.S. trade laws, a market economy is determined by Commerce to operate on market principles. The Tariff Act of 1930 identifies several factors in considering a country’s market economy status. Vietnam does not meet the requirements for market economy status in the following manners:

1) Lack of Foreign Currency Convertibility: Vietnam’s currency, the Vietnamese Dong (VND), is not convertible because the Vietnamese government imposes strict controls that limit the movement of foreign currencies in and out of Vietnam. The State Bank of Vietnam (SBV) regulates the exchange rate of the VND and sets a daily reference rate based on a basket of currencies. The SBV also imposes restrictions on the payment and remittance of foreign currencies for various purposes, such as trade, investment, loans, and dividends.

2) Wage Rates Determined by Free Bargaining Between Labor and Management: Wage rates are influenced by the government through the National Wage Council (NWC) which annually reviews and adjusts the minimum wage levels across different regions of the country. Vietnam’s NWC included members from the Ministry of Labour representing the state, the Vietnamese Chamber of Commerce and Industry representing businesses and the Vietnamese General Confederation of Labour (VGCL) representing unions, but all these entities operate under the
directives of the government which do not consider worker’s wage a priority.

A fundamental right that gives workers the ability to bargain with management over wages and benefits is the right to organize their own independent union; when the Labor Law of 2019 came into force in 2021, it was touted as granting workers the right to organize their own representative organization for the first time even as the details in the Law actually put up unsurmountable barriers to aspiring workers.

Vietnam is expected to ratify Convention 87 in the near future. However, ensuring that domestic laws are amended to fully align with the convention’s provisions is even more crucial. There has not been a draft implementing decree related to independent worker representative organization being submitted to the Vietnam National Assembly for discussion.

The leaked secret directive 24 from the Political Bureau of the Central Executive Committee of the Communist Party of Vietnam only makes matters worse. Directive 24 orders the Party cadre to prevent the establishment of labor organizations, even going as far as to set up seemingly independent trade unions under the control of the government so Vietnam can pass as if it is compliant with ILO Convention 87.

3) Restrictions on Joint Ventures and Investment: Foreign Direct Investment (FDI) remains restricted and subject to numerous regulations, controls, and approvals by the government, a source of massive corruption. The Department of State’s 2023 Investment Climate Statements on Vietnam clearly illuminates these issues1.

4) Government Control Over Means of Production: The economic importance of State-Owned Enterprises (SOEs) in Vietnam remain significant by international standards. It accounts for more than 30% of GDP, according to Organisation for Economic Co-operation and Development (OECD) official data2.

5) Government Control Over Allocation of Resources: Vietnam maintains price control across its economy and unfairly promotes its extensive SOEs through full ownership of the banking sector. State-owned banks extend preferential treatment to SOEs with government guarantees resulting in most of the credit being channeled toward the SOEs and limiting the resources available to the private sector3.

6) Other Factors: Reports from the U.S. Department of Labor (DOL) and State indicated that child labor, forced labor, debt bondage, and violations of other internationally recognized labor standards (ILO) remained prevalent in Vietnam4.

We urge Commerce to consider Vietnam’s close economic relationship with China, especially as China and Vietnam actively seek to further deepen their trade ties. Vietnam’s manufacturing sector relies heavily on imports from China, exposing it to risks of being involved with products tainted by forced labor. Moreover, the Commerce Department itself has raised the alarm about China’s use of Vietnam to circumvent U.S. antidumping duties on Chinese-made products.

According to The Heritage Foundation’s Index of Economic Freedom in 2023, the overall rule of law is weak in Vietnam. The country’s property rights score, judicial effectiveness score, and its government integrity score are way below the world average5.

Vietnam’s compliance with the above standards will help develop trade between the United States and Vietnam, in a direction that benefits the American people and the Vietnamese people.

It is time for the U.S. to abandon the delusion that engaging in closer ties through increased trade, investment and military cooperation with Vietnam will lead to progress on human rights and labor rights. Directive 24 demonstrates unequivocally that Vietnam is willing to ratify Human Rights conventions, International Labor conventions and Free Trade agreements — while simultaneously developing plans to violate these rights and agreements — to secure aid, trade, and investment, and reap economic benefits. The recent political instability with the purge at the top leadership level shows fierce public fighting over private interests through power and corruption. A corrupt ruling apparatus cannot bring welfare to the people and respect international trade agreements.

Vietnam Worker Defenders appreciate your taking into consideration the above factors in your review and look forward to your leadership in ensuring American industries and jobs are protected, and our trade laws are not compromised.

Respectfully submitted
_____________________________
Huy Nguyen, Executive Director,
Vietnam Worker Defenders
_____________________________

1 https://www.state.gov/reports/2023-investment-climate-statements/vietnam/
2 https://www.oecd-ilibrary.org/sites/25daa14a-en/index.html?itemId=/content/component/25daa14a-en
3 https://vietnamnews.vn/economy/1165171/price-control-of-key-commodities-a-top-priority-for-central-government.html
4 https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods-print
5 https://www.heritage.org/index/pages/country-pages/vietnam