EU to Promote Vietnam's Market Economy Recognition, Says EC

EU to Promote Vietnam's Market Economy Recognition, Says EC

Vietnam proposed that the EU grant Vietnam the status of a market economy three years ago. However, Vietnam has recently received requests from the EU to clarify some issues. The EU’s recognition of Vietnam as a market economy holds an important meaning. If the country is recognised as a market economy, local enterprises will enjoy more benefits during anti-dumping court cases. VIB Forum interviewed Markus Cornaro, head of the European Commission delegation to Vietnam, on this issue.

What do you think about Vietnam’s economic development in recent years?

A: I am very proud to say that in recent years Vietnam ranked second or third in terms of GDP growth, not only in the region but also in the world with a rate of around seven per cent. Per capita GDP in Vietnam doubled over the past seven years. Observers say that they are optimistic that Vietnam will maintain this growth rate for between five and seven years.  

With such a rate of development, what meaning does the EU’s recognition of Vietnam's market economy have?

The EU’s evaluation of Vietnam’s market mechanism is not a joint declaration applied for the whole economy. The purpose is to help settle trade disputes more precisely. In particular, it will help to solve the issue of anti-dumping court cases.  

If Vietnam is recognised as a market economy, it will benefit from the good reputation of its economy. However, the impact on Vietnamese economy or politics should not be over-evaluated. So, I think, the value of the EU’s declaration that Vietnam is a market economy from anti-dumping investigations or issues relating to trade protection will be important as it is a declaration of prices. This means that if we recognise Vietnam as a market economy, prices of all goods in Vietnam will be decided by the market, and the market mechanism but not the government, which cannot interfere in a direct or indirect manner into production decisions. 

This means that the recognition of a market economy is just a price comparison to make conclusions in anti-dumping court cases? Can you give more details about criteria for implementation?

We must have a mechanism so that all enterprises can compete directly with each other in a healthy business environment. With such a target, we have developed criteria to assess the State’s interference in the distribution of production resources, including land, tax or tax priorities. At the same time, we consider these laws based on the ‘indiscrimination’ principle. We consider the laws on intellectual property, protection of land ownership, bankruptcy and enterprise, as well as production costs. For example, one State-owned paper producing enterprise can lower production prices to below the average level as it will have banks to guarantee their outstanding debts if it lacks capital. Meanwhile, private enterprises do not have any subsidies and even they are assumed to sell their products at prices as low as that of the above-mentioned State-owned enterprise, they will go bankrupt. With such importance, we will have to evaluate the activities of the financial sector. We think that activities of Vietnam’s financial sector remain weak. It is difficult for small and medium-sized enterprises and household businesses to get capital for expanding production. It is even more difficult for business households because they find it difficult to present projects and future plans before local banks.

So, I want to say once again that these criteria will be applied technically but not as a progress declaration or at a higher level. Mainly, we will decide which prices can be used.

How has the EU’s consideration of granting Vietnam a market economy status gone so far?

We have just started to work with Vietnam to evaluate which technical criteria Vietnam has met. Since Vietnam submitted its proposal to the EU to recognise its market economy, we have organised our first discussion. We have sent Vietnam criteria and Vietnam has sent its answers back. We have read, analysed, and sent Vietnam more detailed questions. We hope that we will complete the gathering of documents and answers from Vietnam very soon. After some rounds, we will hold discussions with the Vietnamese Government. At present, we consider Vietnam a transitional economy. We have accepted to investigate Vietnam in each specific case. For example, when investigating prices of products sold to Europe, we will consider each case, if producers are private enterprises, to make sure whether they operate under the  market mechanism or not. If sued producers are State-owned enterprises with tax and capital priorities, we will not consider each case. We will take comparable prices of countries without market economies like Mexico to compare production costs before drawing any conclusion on whether they dump in the European market or not.

Will Vietnam enjoy priority from the EU during the consideration process?

I think that the evaluation is technical so there will be no priorities. However, the consideration of Vietnam as a transitional economy will depict good relations between the EU and Vietnam. The EU will make efforts to accelerate its recognition of Vietnam’s market economy and create favourable conditions for anti-dumping investigations.

• Giang Tu