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handle is hein.crs/govebmt0001 and id is 1 raw text is: ConrEessina R serc Servic 0 February 1, 2021 Vietnam's Economy and U.S. Trade: Key Issues in 2021 Over the last decade, Vietnam has emerged as a major manufacturing center in Asia, and has risen to become one of the top 10 trading partners for the United States. The expansion of Vietnam's export-oriented manufacturing sector contributed to Vietnam experiencing rapid economic growth during most of the decade. Vietnam's rise to be a major U.S. trading partner was stimulated in part by shifts in regional supply chains, driven by rising production costs in the People's Republic of China (China, or PRC), as well as trade tensions between the PRC and the United States. The expansion of bilateral trade has resulted in a major increase in the U.S. merchandise trade deficit with Vietnam (see Figure 1). The growth in trade also contributed to other forms of trade friction. The Trump Administration accused Vietnam of unfair trade practices, including an allegation of currency manipulation. Vietnam has claimed that the U.S. government has utilized unwarranted trade restrictions and regulations to block Vietnamese exports to the United States, particularly exports of catfish. Figure I. Growth in U.S.-Vietnam Merchandise Trade Billions of U.S. dollars 40 20 40 -20 so t -4--t@+- - 4 -60 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (thru -llwExports --Imports lrade 8aLance Source: CRS, based on U.S. International Trade Commission data. Vietnam's Economy According to the International Monetary Fund (IMF), Vietnam was one of 26 economies that experienced positive growth in 2020. Vietnam's General Statistics Office (GSO) reported 2.9% real gross domestic product (GDP) growth in 2020, down from 7.0% in the two previous years. According to GSO, the growth was relatively balanced across all sectors, and led by strong domestic investment and expanding international trade. Over the last 10 years, Vietnam has benefited from shifting regional manufacturing supply chains, which has seen the nation diversifying beyond its role as a regional clothing manufacturing hub into new products, such as consumer electronics. Vietnam's importance in regional industrial production may also have benefited from newly-established regional trade agreements (RTAs), such as the 11-nation Comprehensive and Progressive Agreement for Trans- Pacific Partnership (CPTPP) that went into effect in early 2019, and may similarly benefit from the 15-nation Regional Comprehensive Economic Partnership (RCEP) that was concluded in late 2020. In addition, the continuing trade tensions between the PRC and the United States likely contributed to Vietnam's positive GDP growth in 2020. Growth in Bilateral Trade According to the U.S. International Trade Commission (USITC), bilateral merchandise trade has nearly quadrupled in size between 2011 and 2020. Most of that growth is due to the rapid rise in U.S. imports from Vietnam. As a result, the trade deficit with Vietnam was the 3rd largest for the United States for the first 10 months of 2020, after the PRC and Mexico, respectively. According to GSO, in 2020, the United States was Vietnam's largest export market, its 5th biggest source of imports, and 2d largest trading partner (after the PRC). GSO says Vietnam's trade surplus with the United States in 2020 was $63.4 billion. Bilateral Trade Issues The rapid growth in bilateral trade has given rise to several trade issues. Some U.S. companies have made allegations of unfair competition by Vietnamese companies. Vietnamese companies have similarly accused the United States of unwarranted and discriminatory trade regulations and restrictions designed to reduce Vietnam's exports to the United States. Special 301 Investigation On October 2, 2020, USTR announced that it was initiating an investigation of Vietnam's acts, policies, and practices related to the import and use of timber that is illegally harvested or traded. According to the USTR announcement, Evidence indicates that much of the timber imported by Vietnam was harvested against the laws of the source country. USTR's interest in Vietnam's timber trade may have been influenced by the rapid increase in Vietnam's furniture exports to the United States over the last 10 years. USTR held a public hearing on Vietnam's alleged illegal import and use of timber on December 28, 2020. For more about this issue, see CRS In Focus IF11683, Section 301 Investigations: Vietnam 's Timber Trade and Currency Practices. Allegations of Currency Manipulation USTR also announced on October 2, 2020, an investigation into whether Vietnam's acts, policies, and practices related to the valuation of its currency are unreasonable or discriminatory and burden or restrict U.S. commerce. ttps%'/crsrepo rts.coig ressg ov

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