Additional risk of being sued against Vietnam's export subsidies

Enterprises in the seafood industry can cope with the disease by increasing orders to other markets such as the EU or US to offset the decline of the Chinese market. Photo: LE HOANG VU

New classification of USTR

A recent report by Bao Viet Securities Company (BVSC) said that on February 10, 2020, the US has made an official announcement on updating the list of developing and least developed countries in the law on Anti-subsidy tax.

Specifically, the US decided to abolish the old regulations on national classification under the World Trade Organization (WTO) in order to apply anti-subsidy tax law. Under the new rules, USTR will classify the country according to its own criteria.

While under the WTO, a country with a per capita income (GNI per capita) below US $ 12,375 will be considered a developing country, USTR states: if you want to be on this list, then The criterion of income per capita is less than 12,375 USD, that country must meet other conditions of trade and other membership.

In addition, the WTO classification takes into account social development indicators such as infant mortality, illiteracy rate, life expectancy, etc., while the USTR does not take these into account. It is this change in the new classification that makes some countries like Vietnam, China, India, Indonesia no longer on the list of developing countries, according to USTR.

One of the other conditions that USTR adds is the proportion of trade. Specifically, a country with a share of world trade above 0.5% (WTO rules of 2%) will be considered a developed country.

Accordingly, Vietnam's import and export proportion of total world trade was about 2.5% in 2018 (data from the WTO), meeting USTR's above 0.5% criteria.

However, according to BVSC, the most notable point is that updating the new list of USTR will only take effect in the law on countervailing duties. This list will not affect the country classification in other US laws.

Therefore, the impact of this new update will be limited to imposing US countervailing duties without affecting other incentives enjoyed by Vietnam or other developing countries.

The general assessment is that Vietnam will lose its benefits when it is still on the list of developing and least developed countries, for example the threshold to be exempted from anti-subsidy investigation will be lowered. than.

Specifically, Vietnam will not be “exempted” from investigation under the anti-subsidy tax law if the benefit margin is above 1% (if it is on the list of developing countries, this threshold will be 2%) or The import turnover of a commodity from Vietnam accounts for over 3% (if it is on the list of developing countries, this threshold will be 4%) of the total import turnover of that item into the US.

Due to less favorable conditions for “exemption”, Vietnam will face many risks related to anti-subsidy and anti-dumping lawsuits in the near future. This move by the US continues to strengthen the “America first” policy of the administration of President Donald Trump.

Previously, the US-China trade war was put on the list of money manipulation and manipulation, and the manipulation of monetary manipulation was also imposed, with a ban on technology applied to enterprises. foreign countries, threatening taxes on Mexico and Canada, accusing the EU of illegally subsidizing the manufacture of Airbus aircraft …

Countries with large trade surpluses with the US may continue to be on target in the near future.

Impacts on some export industries

Some industries that may be directly affected by US anti-dumping and anti-dumping regulations are seafood and textiles. For seafood products, the US is currently the largest market of Vietnam (accounting for more than 17%) with two main products are shrimp and tra fish.

Not needing the new regulation of USTR, both of the above items in recent years have always faced anti-dumping investigations by the US. The fishery industry is expected to face many difficulties in 2020 when the widespread Covid-19 epidemic in China will affect the seafood consumption demand.

While businesses in the industry can respond by increasing orders to other markets such as the EU or US to offset the decline of the Chinese market, it will not be easy because the general sentiment in these markets is still trending. cautious direction, ordering in moderation to wait for prices to fall.

For the textile and apparel industry, strengthening the legal basis for conducting anti-subsidy and dumping investigations may make the price of synthetic fibers on the world market less pressure to reduce prices.

Recently, Chinese yarn companies are said to have received subsidies from the Chinese government, leading to continuous dumping in foreign markets.

The recovery of synthetic fiber prices (if any, because China does not dare to aggressively reduce prices anymore) may support the business results of yarn manufacturing enterprises such as Century Fiber Joint Stock Company (STK code ) in the medium term.

However, it should be noted that anti-dumping and anti-dumping lawsuits often take a lot of time to investigate and compromise between the parties. Moreover, Vietnam does not have many yarn-producing enterprises like STK.

According to the Saigon Economic Times