Besides its numerous benefits, the Trans-Pacific Partnership will bring a slew of challenges to the Vietnamese textile, apparel and footwear sectors.
Signed on February 4 in New Zealand, the historic Trans-Pacific Partnership (TPP) aims to boost trade between its 12 member countries by lowering tariffs. As the world’s major exporter of textiles, garments and footwear, Vietnam is expected to benefit greatly from the trade deal.
For example, the average taxes on textile products exported from Vietnam to the US, a TPP member and the largest importer of made-in-Vietnam garments, will gradually decrease to zero from the current level of 17 per cent.
Overall export turnover is forecast to reach $55 billion in 2020, and the Vietnamese textile and garment industry will expectedly grow by 25 per cent a year after the TPP takes effect.
It is thus understandable that the Vietnamese textile, apparel and footwear industries have greeted the trade deal with feverish enthusiasm. However, it should be noted that aside from these opportunities, the TPP also presents Vietnamese firms with numerous challenges.
Specifically, the “yarn forward” rule from the TPP states that Vietnamese exporters must use fabrics and textiles either from local sources or other TPP members if they wish to benefit from lowered taxes.
This has proved to be challenging for Vietnamese textile and footwear firms, that now import the majority of their materials from China, a non-TPP member.
Researchers from Bao Viet Securities said in a recent report on TPP that 70-80 per cent of textile and footwear materials in Vietnam were currently imported from non-TPP countries, with imports from China accounting for 42 per cent.
Meanwhile, the domestic fabrics and textile industry remained underdeveloped, and mired by a lack of diversity and low product quality. “Thus it’s likely that most Vietnamese textile firms will not benefit from the TPP’s lowered tariffs unless they invest in raw materials supply.”
Source: http://vietnambreakingnews.12.mine.dungnq.com/
Keywords: Trying times, Vietnamese firms, after TPP
