Technically Speaking: Trade relations with Vietnam

By Hoa Huynh, SSGA Technical Adviser, Southeast Asia

It’s very likely the Section 301 investigation into Vietnam as a currency manipulator will result negatively in our efforts to expand the Vietnam market for U.S. agricultural products due to potential retaliations from Vietnam.

Our contacts in Vietnam say they are surprised and perplexed that the United States initiated the action, given the current good relations between two countries. It’s notable that the United States is the only major trading partner which doesn’t have a free-trade agreement with Vietnam after the collapse of the Trans-Pacific Partnership (TPP), while China and the European Union already signed free-trade agreements with Vietnam. In hopes of avoiding a trade war, Vietnam’s leadership has been actively engaging at the highest level with U.S. leadership.

Vietnam is an emerging and promising market for U.S. agricultural products, which U.S. exporters have been working hard to successfully to promote and grow in the market. Vietnamese importers of ingredients for food manufacture – such as the high-quality, premium soybeans and specialty grains that can be supplied by SSGA members – might someday grow their country’s market to the size of Japan’s for our exporters.

In FY 2020 (October-September), Vietnam was the eighth-largest destination for U.S. agricultural exports, totaling $4 billion, including about $400 million worth of soybeans.

In October, the U.S. Administration initiated an investigation of Vietnam under Section 301 of the 1974 Trade Act. This was intended to determine whether Vietnam has undervalued its currency in order to make its products unfairly cheap abroad and to probe the country’s importation and use of timber that may have been illegally harvested and traded. On Dec. 16, the U.S. Department of the Treasury formally labeled Vietnam a currency manipulator, accusing it of improperly intervening in foreign exchange markets to advantage its own exports.

Technically Speaking is an SSGA feature that includes news and information from SSGA’s technical advisers for North Asia (Alyson Segawa), Southeast Asia (Hoa Huynh) and Europe (Eugene Philhower). Please reach out to them via email. They want to hear from SSGA members!