Leading financial services group DBS headquartered in Singapore, said in a report that the withdrawal of the US from TPP will not have any major short term impact on the Vietnamese textile companies. The cost of manufacturing in the country is low in terms of labour as well as power, and it has a taxation environment that is more favourable than some other countries like China.

The report states that losing duty free access to the US will not affect Vietnam as it has multiple free trade agreements with European Union (EU), China, Japan and some ASEAN Nations. As for the companies, Shenzhou International exports merely 10 per cent of its products to the US, which can be diverted to the other duty-free locations. Pacific Textiles and Nameson export 50 per cent of their products to Japan, while Texhong ships a major portion of its products manufactured in Vietnam to China.

Luen Thai has minimal facilities in Vietnam along with units in other locations such as Cambodia and Philippines. Thus, this company is likely to benefit owing to lesser competition from Vietnam in the US market. Texwinca has decided to stop its expansion plans in Vietnam for now. However, the US TPP withdrawal will impact manufacturers such as Best Pacific and Regina Miracle who have Victoria's Secret as their major client.

As for the long term impact on Vietnam, expansion plans in the country could go down but the existing plans will be executed due to factors like risk diversification, cost benefits and zero-duty access to various regions, according to DBS.

The DBS report also mentions that it is unlikely that the US will set up polluting industries and bring labour intensive jobs back to the country. However, if the new President as well as the Congress go ahead with the plan and slap a 45 per cent tariff on Chinese goods, it will majorly impact Chinese manufacturers, US companies dealing with Chinese supply chain and consumers in the US. (KD)

Fibre2Fashion News Desk – India