Wednesday, September 27, 2006

VIETNAM: `Not a market economy country'

VIETNAM: `Not a market economy country'


HANOI — The United States Department of Commerce (DoC) ruled on January 24 that Vietnam is “dumping” catfish on the US market. The ruling was based on a decision made by the commerce department last November that Vietnam is “not a market economy country” for the purposes of trade with the US.

The DoC's decision could lead to punitive tariffs of 64% against Vietnam's frozen fish exports to the US. The livelihoods of 400,000 Vietnamese farmers and thousands of workers involved in fish processing factories could be jeopardised by such punitive tariffs.

The ruling is surprising given that over the last decade Vietnam has allowed the growth of domestically-owned capitalist businesses, opened up to foreign capitalist investors, decollectivised farming and allowed most domestic prices to be market-determined.

Two years ago the US and Vietnamese governments signed a bilateral trade agreement in which Vietnam agreed to accept many of the “market economy” conditions for foreign trade set out by the World Trade Organisation (WTO).

What then could the DoC be up to?

The January 24 DoC ruling was in response to an “anti-dumping" suit launched by Catfish Farmers of America (CFA), which alleged that imports of Vietnamese catfish were being subsidised and sold in the US below the cost of production.

Anyone familiar with how rich countries manipulate “free trade” will recognise this as a typical case of how these countries can pay lawyers to launch spurious lawsuits which cause huge losses to farmers in poor countries.

Vietnam simply cannot afford to subsidise exports, and Vietnamese farmers (earning an average of US$35-50 per month) are simply too poor to sell below cost price to break into an overseas market. But with such low labour costs, the sale price of Vietnamese farmers' produce is correspondingly low.

Trade liberalisation theorists assert that countries should export whatever they can sell more cheaply, anywhere in the world. Their theory of “comparative advantage” crashes when a poor country manages to break through the monopolisation of rich-country markets by held by Western industrial, agribusiness and trading cartels. When that happens, “free market” theory goes out the window and the Western monopolies bring in their highly paid lawyers.

CFA first launched an unsuccessful “sanitary" case against Vietnamese catfish imports. Even the US embassy in Hanoi has substantiated the fact that growing conditions for catfish in Vietnam are hygienic; catfish farmers use traditional methods.

CFA then banned Vietnamese farmers using the term “catfish” for their catfish exports to the US, forcing them to re-label the product as Tra and Basa. Finally, CFA launched the anti-dumping suit.


Despite its ruling, the DoC knows there are no Vietnamese government subsidies on catfish exports. But, as aim of the DoC is to protect the profits of US agribusiness, it dug up the WTO guidebook on swindling and found that if you call a country a “non-market economy country”, then the sale price of an export from that country can be assumed to be lower due to alleged “distortions” in its overall economic structure. No proof of government subsidies is required.

While catfish farming is a traditional occupation in Vietnam, since the country began exporting catfish to the US the quantity of catfish farmed has risen from 2000 tons in 1998 to 60,000 tons in 2001, with large amounts of land previously used for rice farming being converted to catfish production.

Catfish farming relies on huge inputs of animal feed. Not surprisingly, US animal feed and agricultural trade corporation Cargill has been a major pusher of the expansion of Vietnamese catfish farming, organising credit for fish cages in the Mekong River delta.

If the DoC imposes punitive tariffs on Vietnamese catfish exports to the US such that these exports decline, Cargill will simply sell more animal feed to US catfish producers instead of to Vietnamese farmers, large numbers of whom will be burdened for years with their debts to Cargill.

The same scenario is now occurring with shrimp. In October, the Shrimp Importation Financing Fairness Act was introduced into the US Congress, accusing Vietnam, Thailand, China, Indonesia, India, Mexico and Ecuador of dumping prawns, and demanding these countries reduce their prawn exports to the US to 4.8 million kilograms per month.

In addition, fierce competition and increased supply from European countries reduced world shrimp prices by 20-30% in 2002. While Vietnam's shrimp exports rose by 10.7% in the first half of 2002, the earnings from these exports rose only 4.4%.

Vietnam is currently undertaking a massive expansion of shrimp production for export. The wisedom of this strategy is open to question, given the catastrophic environmental and disease problems familiar to other countries which have gone heavily into shrimp production. Uncultivable saline wastelands and thousands of heavily indebted, landless farmers have often been the result of unsustainable production in vain attempts to help farmers “escape poverty" by investing in “higher value crops".

High-value export crops

Yet poor countries often have little choice about entering high risk areas and pushing them to unsustainable levels — they need the export income to pay for increasingly expensive imports of industrial products from rich countries. Such imports are turning into a flood as tariffs, quotas and other trade barriers, erected by underdeveloped countries to protect nascent industries, are being torn down under the pressure of the International Monetary Fund, the World Bank and WTO entry conditions.

Ironically, poor countries are also being flooded by certain agricultural imports, where rich country agribusinesses have grain surpluses. Large US catfish farmers claim to be protecting their own livelihood from cheap imports, even though Vietnamese catfish accounts for only 2% of the US market. Yet such protection measures are banned for poor countries.

According to Professor Vo Tong Xuan from An Giang University, when US maize and soybean arrive in Vietnam under its bilateral trade agreement with the US, local farmers will be wiped out, as subsidised US prices are up to half the current price in Vietnam. The US government provides hundreds of billions of dollars in export subsidies to rich farmers, but Vietnam cannot afford to sue Washington for “dumping”.

To pay for these imports, even more export crops are needed, of whatever the West currently does not produce — coffee yesterday, shrimp today — until competition among poor countries to pump out as much as possible sends the corporate-controlled “world price” tumbling.

Vietnam's Ministry of Agriculture and Rural Development has admitted in a recent major report that coffee-centred trade liberalisation in the Central Highlands has caused a “great shock" to the region, particularly to the poor and the ethnic minorities, following the massive crash in coffee prices in the late 1990s.

Vietnam has been cautious about trade liberalisation, but has not been able to avoid it. The trade agreement with the US, the Asia Free Trade Area (AFTA) requirements and World Bank conditions attached to a current Comprehensive Poverty Reduction and Growth Strategy all mean further trade liberalisation.

The government has wisely delayed for six months massive tariff cuts, due this month, on 96% of imports from Asian countries under AFTA, but it cannot escape for long, and is now talking of early entry into the WTO.

Limited privatisation

Is the “non-market" label then purely an excuse for US protectionism or does Washington have more fundamental problems with Vietnam's trade liberalisation process?

According to the DoC: “The department recognises that the government of Vietnam has taken substantial steps to open its market to the international community and to allow limited forces of supply and demand affect the development of its economy. The government has promulgated many positive legal reforms that have led to the marked and sustained growth of the private sector.

“However, the level of government intervention in the economy is still such that prices and costs are not a meaningful measure of value. The Vietnamese currency, the dong, is not fully convertible, with significant restrictions on its use, transfer, and exchange rate. Foreign direct investment is encouraged, but the government still seeks to direct and control it through regulation. Although prices have been liberalised for the most part, the government pricing committee continues to maintain discretionary control over prices in (certain) sectors.

“Privatisation of state-owned enterprises and the state-dominated banking sector has been slow, thereby insulating the state sector from competition. Finally, private land ownership is not allowed and the government is not initiating a land privatisation program.”

What the DoC really objects to is not so much the low prices of Vietnamese catfish exports, but that Vietnam has used a number of mechanisms to maintain public control over its economy. Government-owned enterprises remain dominant in the “commanding heights" of the economy — heavy industry, banking and foreign trade in strategic goods.

Foreign investment is directed by the government into promoting industrial development and into joint ventures with the state sector; price subsidies are maintained on some basic goods to keep them affordable to poor people; government control is maintained over the currency, which helped save Vietnam from the 1997 Asian financial crisis and economic collapse.

Agricultural land is state-owned, with farmers leasing renewable and inheritable titles for 20 years, helping prevent the large-scale land concentration and landlessness afflicting most of the underdeveloped world (where “full” private ownership of land means the “full” right of farmers to lose the land they work on). Moreover, the government is making a renewed push to encourage farmers to set up voluntary cooperatives.

Just in case Vietnam thought it had a sovereign right to freely choose such an economic direction, the US government has just given it a reminder of who makes the rules that govern “free trade” in today's world.

From Green Left Weekly, February 12, 2003.

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