USTR Says Vietnam Talks Held Week Before Section 301 Hearing

The U.S. and Vietnam held “consultations” Dec. 23 on allegations that Hanoi deliberately devalued the dong against the dollar to the detriment of American commercial interests, it was disclosed in the Section 301 investigative report from the Office of the U.S. Trade Representative ruling out tariffs on Vietnamese goods in the final days of the Trump administration (see 2101150053). The report shared nothing about the substance of the previously unknown talks, held roughly a week before USTR convened a virtual hearing Dec. 29 into Vietnam’s alleged currency misbehavior. Agency representatives made no mention of the consultations during the hearing.

USTR Robert Lighthizer, according to the report, wrote his counterpart at Vietnam’s Ministry of Industry and Trade Oct. 2 to inform him of his agency's initiation that day of the Section 301 investigation and to request consultations with Hanoi, as the 1974 Trade Act required Lighthizer to do. The report published Lighthizer’s letter, but the ministry’s unpublished Oct. 14 response accepting the request remains “on file with USTR,” the document said.

The agency didn’t respond to questions about the Dec. 23 consultations, including whether the two sides agreed to meet again or if the talks factored in any way into USTR's decision not to impose tariffs. We also asked for a copy of Vietnam's Oct. 14 reply letter, to no avail. Virtually all who testified against tariffs at the hearing urged closer U.S. ties with Hanoi, including through long-term negotiations toward a comprehensive free-trade agreement. Tariffs, they warned, would provoke Hanoi to impose retaliatory duties against U.S. exporters and damage ties with an increasingly important U.S. trading partner.

The finding of Section 301 actionability technically leaves tariffs or other remedies on the table for a future USTR to consider under statutory deadlines in Sections 304 and 305 of the Trade Act. Lighthizer said he hopes the U.S. and Vietnam “can find a path for addressing our concerns.” The report’s finding that Hanoi was culpable in the dong's devaluation “will be addressed in subsequent proceedings under Section 301,” the Federal Register notice said.

Vietnam’s “unreasonable” devaluation of the dong serves to “reduce market opportunities” for American firms in the U.S. import and Vietnamese export markets, the report found. “Available evidence” found that Vietnam’s currency “has been undervalued for several years,” exacerbated by Hanoi’s “recent, rapid, and significant” accumulation of foreign-exchange (FX) reserves “bilaterally” against the dollar in 2019, the report said. Vietnam’s state-owned bank in 2020 “continued to take FX market interventions that put downward pressure” on the value of the dong, and continued doing so through September, it said.