Report examines issues, benefits of adding Vietnam to GSP
November 5, 2008
World Trade\Interactive
A recent Congressional Research Service report examines the issues associated with extending Generalized System of Preferences benefits to Vietnam. These include Vietnam’s compliance with the GSP eligibility criteria as well as the economic impacts of providing duty preferences to imports from Vietnam. The Office of the U.S. Trade Representative is currently considering whether Vietnam should be added to GSP, and a final decision will be made by the White House.
The report states that if Vietnam is designated as a beneficiary developing country under GSP up to 3,400 different types of products could be imported duty-free from that country. Vietnam’s leading exports to the U.S. – apparel, furniture and footwear – are largely excluded from GSP, but some of its fastest growing exports, including electrical machinery, fruits and coffee preparations, would be eligible. Judging by the rapid rise in bilateral trade following the extension of normal trade relations status to Vietnam, the report notes, imports of these commodities would likely increase if Vietnam is granted BDC status. This could lead to an increase in the U.S. trade deficit with Vietnam and a shift in the mix of imports from Vietnam.
Some observers have also said that adding Vietnam to GSP could affect U.S. trade with China. With production costs rising in China, duty-free treatment for Vietnam could provide an additional incentive for U.S. companies to relocate their manufacturing facilities from China to Vietnam. This could not only improve their competitiveness in the global market but also reduce somewhat the U.S. trade deficit with China.
On the other hand, there have been some issues raised that could cause problems in accepting Vietnam into GSP. Among the most significant are Vietnam’s classification as a Communist country and its record on labor rights.
Communist State. The concept of Communism has two distinct common definitions, the report states, one political and one economic. The political definition typically hinges on the domination of the society’s political system by a single and self-perpetuating party. The report notes that while the Vietnamese government refers to the country as a socialist republic, Vietnam is a one-party state controlled by the Communist Party of Vietnam. The economic definition is usually based on the holding of all property in common, with ownership being ascribed to the community as a whole or the state. Vietnam has been steadily transforming its centrally planned economy into a market economy and has allowed the creation and growth of private enterprise, the report notes, but government influence and control over Vietnam’s economy still remains comparatively high.
The report notes, however, that even if Vietnam were determined to be a Communist country, it could still qualify for GSP status under U.S. law because it (a) is a member of the World Trade Organization and the International Monetary Fund, (b) has received permanent NTR status from the U.S., and (c) does not appear to be “dominated or controlled by international communism.”
Labor Rights. Among the five mandatory GSP criteria, the report states, Vietnam’s recognition of internationally-accepted workers’ rights may prove to be the most controversial. Vietnam argues that it has made progress in this area over the last two decades, having rejoined the International Labor Organization in 1992, worked with the ILO to draft new labor laws and ratified five of the eight fundamental ILO conventions (compulsory labor, income inequality, discrimination, minimum age and the worst forms of child labor) as well as 12 others. Nevertheless, critics maintain that working conditions in Vietnam remain below international standards, particularly with respect to allowing independent labor unions and respecting the right of association. At least one bill (S. 3678) has been introduced in the U.S. Congress that would prohibit GSP benefits for Vietnam until the president certifies that worker’s rights conditions have improved.
The report notes that while the human rights conditions of a country do not have to be considered when making a decision on GSP eligibility, the issue of human rights in Vietnam has been an important factor in every previous case when the U.S. has considered strengthening bilateral trade relations.
|
|
