What does ‘the key’ do to unleash the manipulation of the currency

Reply VnExpressMany experts believe that the problem of the US labeling Vietnam as a currency manipulator must be properly recognized to avoid overreaction.

Mr. Vu Tu Thanh, Deputy Executive Director of the US-ASEAN Business Council, assessed that the US conclusion weighs “political factors over technical and technical factors.” Through discussions and consultations with trusted third parties in the United States, he found that they also believe that Vietnam does not manipulate the currency. “US experts understand this too. Vietnam’s trade surplus stems from other reasons,” he said.

A bilateral merchandise trade surplus with the US of at least $ 20 billion is one of three factors the US has in determining whether a country is manipulating its currency, in addition to an equivalent current account surplus. to at least 2%. GDP and intervention in foreign currency exceed 2% of GDP.

The large trade surplus with the United States comes mainly from the trade balance characterized by cheap labor costs, labor deficits, receipt of foreign investment and exploitation of resources from Vietnam. On the other hand, the steadily increasing surplus in recent years may be an undesirable consequence of the Donald Trump administration’s harsh policy with China that many companies have to relocate and obtain new supplies in China. countries, including Vietnam.

Data from the US Treasury Department shows that Vietnam’s trade surplus with the US has increased dramatically in the four years of Trump’s presidency – from $ 38.3 billion in 2017 to $ 39.4 billion in 2018, $ 55.7 billion in 2019 and aiming for a record $ 65 billion this year.

Adam Sitkoff, executive director of the American Chamber of Commerce (Amcham) in Hanoi, commented: “The Trump administration should view this trend as evidence of its success in implementing supply chain diversification policies in Asia-Pacific.”

The US currency manipulation labeling for Vietnam, according to Vu Thanh Tu Anh, a professor at the Fulbright School of Public Policy and Management, is just the beginning of the negotiation process between the two sides.

He said that even when Vietnam was identified as a currency manipulator, the United States could not immediately impose sanctions. “According to the process, the two parties have 1 year to discuss and negotiate to resolve the problem,” Tu Anh said. Therefore, the next step will be the period in which Vietnam and the United States negotiate and resolve the issues.

“It is important to understand what the United States really cares about solving. Sometimes what they care about is not necessarily related to currencies,” Tu Anh analyzed. Therefore, he recommended that Vietnam be active, proactive, and practical in dealing and negotiating with the US government. If we find points of consensus, perhaps Vietnam will quickly shed the “currency manipulation” brand like China earlier this year. The country was officially blamed for currency manipulation in August 2019 and was removed from office in January 2020. Before that, China was also considered as currency manipulation in the period 1992-1994.

Okay, Mr. Vu Tu Thanh noted: Vietnam does not devalue the currency, so it is impossible to manipulate it with the exchange rate history or through monetary policy, but it is necessary to reduce the trade deficit with the US.

This is reflected in a decrease in exports to the US and an increase in imports of goods from this country. “Ideally, do both at the same time. But under current conditions in Vietnam, it is more feasible to increase imports from the United States with items that benefit both parties,” said Vu Tu Thanh.

For example, in the energy sector, LNG gas power is a Vietnamese commodity in high demand, while supply from the US is abundant and competitively priced. “If Vietnam can accelerate these projects, it will significantly improve the trade balance with the United States,” Thanh said.

However, when viewed as a currency manipulator, Vietnam can face certain risks as well. On the other hand, all the experts said that Vietnam should also actively exchange and mobilize new members of the presidential administration to elect Biden.

First, This may have a related impact on the results of a business fraud investigation. The Office of the United States Trade Representative (USTR) began in early October with the lumber industry. The investigation under section 301 of the Trade Act of 1974 was to determine whether Vietnam would devalue the currency and use illegal timber to export to the United States.

Mr. Nguyen Quoc Khanh, President of HCM City Wood Industry and Craft Association, said that Vietnam’s wood processing companies have sufficient evidence to prove the origin and origin of raw wood. The USTR’s illegal timber allegations are based on outdated evidence from 2015-2016. With the rest of the research related to currency devaluation, the USTR is conducted independently of the United States Department of the Treasury, but can also be affected by influence.

Textile and footwear companies, although not directly affected by this investigation, are also awaiting the hearing on December 28. Textiles and apparel, leather and footwear, in addition to having a small amount of inputs such as wood, are the main items on the list of export surpluses to the US, so they are in the group that is vulnerable to sanctions, according to Vu Tu Thanh.

MondayWith the declaration that Vietnam is a currency manipulator, the US government has a stepping stone to impose trade sanctions on Vietnam, the easiest way is to tax export goods.

For example, with the group of 3 products that Vietnam has strengths: textiles, footwear, wood, the data from the General Statistics Office shows that in the first 9 months of the year, the total export turnover to the US is of 20 billion dollars. 5-25% tax rate, in the brightest scenario is to maintain the amount of exports, assuming a constant price, the minimum business loss is 1-5 billion dollars.

However, the business world said that reality will not only stop at the above numbers because they can reduce production, lose markets and create chaos in the supply chain. The impact of the supply chain affects not only Vietnamese companies, but also American companies that produce goods in this market. To build a supply chain, a business takes an average of 2 to 3 years.

However, according to Mr. Vu Thanh Tu Anh, if punishment occurs, there will be different levels, depending on each type and group of products. “There are many variables for the US side to make the final decision, so it will not have a destructive effect, but will only affect certain areas. That is the worst case,” he said.

Tuesday it is a concern about FDI flows out of Vietnam. According to Mr. Vu Tu Thanh, the fact that foreign companies are affected by this information must be based on two assumptions, among them that the United States tax rate must be large enough and the application period is relatively long, at least in 1-2 years. .

And Mr. Tu Anh recognized that this could occur in some areas of Vietnam with a large trade surplus and a high growth rate of the export surplus to the United States. “In fact, this has happened in several areas, like furniture, I know. It is not surprising at all,” he said. But this change is not happening in a massive way, supply chains will not be massively shifted to Cambodia, Bangladesh or other countries.

“The move is only carried out for a handful of high-risk items, the move is inexpensive and it is not easy to have a factory installed in this Covid-19 condition,” he said.

The United States is the largest export market in Vietnam and vice versa, Vietnam has also become one of the potential import markets of the United States with the fastest growth rate, especially for agricultural products. airplanes, energy, equipment, technology … According to Adam Sitkoff, Amcham CEO, Vietnam also receives billions of dollars from American companies each year, most of which work together to build supply chains. The integrated application benefits American consumers.

Phuong Anh