Vietnam, US strike deal to end shrimp fight

Deputy Minister of Industry and Trade Tran Quoc Khanh announced recently that a settlement has been reached with the US ending two longstanding World Trade Organization (WTO) disputes involving shrimp imports.

The litigation stemming from anti-dumping duties are: United States – Anti-dumping Measures on Certain Shrimp from Vietnam (DS404) and United States – Anti-dumping Measures on Certain Shrimp from Vietnam (DS429).

Under the terms of the settlement, the US will remove a Vietnamese shrimp exporter — Minh Phu Group — from a 2005 duty order on shrimp imports and repay the company for duty deposits.

Although the resolution amounts to a full reversal of the decision and punishment for Minh Phu, the anti-dumping duty order on Vietnamese shrimp will remain in place for all other producers.

The Vietnam government had launched a two-pronged assault on the US shrimp order, bringing one WTO case in 2010 and another in 2012 and the settlement represents a gigantic victory in both cases.

Most importantly, the government successfully argued two key issues in connection with the cases, for which the WTO disputes settlement panel sided with it— and the US acquiesced to them in the settlement.

First of all, the Vietnam government and subsequently the WTO took issue with the US reliance on a controversial duty calculation method known as zeroing. Zeroing is a complex practice that artificially inflates dumping margins.

The US in the negotiated settlement agreed to put an end to the practice.

Secondly, the government was triumphant on the central issue of what exactly is fair in determining the proper prices of exports from non-market economies like Vietnam into market economies like the US.

It is important to understand that Vietnam, like China, is considered by the WTO to be a non-market economy and as such the law in the US as applies to them is, in many respects, different than that applicable to market countries.

Market Economy vs Non-Market Economy

The WTO agreed with the Vietnam government and faulted the US practice in anti-dumping cases of starting with a ‘rebuttable presumption’ that all exporters from non-market economies are government controlled, state-sponsored entities.

In essence for non-market economies such as Vietnam, under GATT 1994, importing countries such as the US have the right to exercise significant discretion in the calculation of the normal value of products exported within the confines of anti-dumping disputes.

In short, this non-market status has up until this agreement allowed the US to skate by placing the burden on Vietnamese companies to prove they are not government controlled.

The WTO sided with the Vietnam government essentially shifting the burden from Vietnam to the US to prove that the Vietnamese company is government controlled, again a major victory favouring Vietnam, which was borne out in the final settlement.

Assistant US Trade Representative Barbara Weisel, who headed the US delegation in the settlement talks, applauded the deal as an important stepping stone for the future of Vietnam-US trade.

“We welcome the resolution of this long-standing issue,” she said in a statement “This agreement demonstrates the commitment of the United States and Vietnam to address outstanding issues as we work to take our relationship to the next level.”

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