Vietnamese garment firms discuss TPP prospects

03 Aug '13

2 min read

Representatives of several Vietnamese garment businesses discussed the prospects for the industry at a seminar on ‘Trans-Pacific Partnership (TPP) agreement and its impact on Vietnamese garment sector’, organized by the Vietnam Textile and Apparel Association (VITAS) and the People’s Committee of the southern province of Dong Nai.

Participants said currently Vietnamese garments are taxed at 17.5 percent for exports to the US and joining the TPP agreement would decrease this tax rate to zero.

However, to enjoy the zero tax rate, Vietnamese garments would have to satisfy the ‘yarn forward’ criteria, which means that every stage of the garment production from yarn onwards, including weaving, dyeing, finishing and sewing, has to be done in Vietnam.

Participants said this principle may create problems for the Vietnamese garment industry, which heavily relies on fabric imports. Vietnam imports about 88 percent of its total fabric requirement, mainly from countries that are not among the ones negotiating for the TPP.

According to VITAS, the TPP negotiating parties are considering to include a term “supply shortage”, to allow countries with textile raw material shortage, particularly Vietnam, Malaysia and Mexico, to continue purchase of fabric from countries outside the TPP for enjoying the zero-tax facility.

However, the “supply shortage” would allow the zero-tax benefit only for a certain period of time, which is expected to be around three years.

Hence, on the expiry of the “supply shortage” period, Vietnamese garment businesses would again face difficulties, participants said.

They suggested that the Vietnamese garment industry needs to adopt a long-term strategy to develop fabric production in a sustainable manner.

In 2012, Vietnamese garment enterprises used about 6.8 billion metres of fabric, while the domestic fabric production was only 0.8 billion metres, and the companies were forced to import about 88 percent of their total fabric requirement.

The TPP is a proposed free trade agreement under negotiation by Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Japan is also considering joining the TPP bloc. The TPP agreement is expected to be signed this October in Bali, Indonesia.

Last year, Vietnam exported US$ 17.1 billion worth of garments and textiles, with the US alone importing more than 50 percent of the same.

Fibre2fashion News Desk - India

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