With the recent joint statement issued by the economic and trade ministers of 12 countries, the much-watched Trans-Pacific Partnership Agreement (TPP) announced the end of negotiations. Some local footwear and apparel companies said in an interview with reporters yesterday that although it is still unknown when the agreement will take effect, it will definitely enhance the competitiveness of traditional industries in Vietnam and other countries along the route in the future. It is the consensus of the interviewed companies that traditional labor-intensive enterprises should improve their competitiveness by reducing costs, increasing R&D and improving management levels.
Current situation
30% of Wenzhou’s shoes and 20% of clothing are exported to TPP member countries
The TPP negotiations involve 12 countries including the United States, Japan, and Australia, covering 40% of the global economy. Some analysts pointed out that after the agreement is officially implemented, it will enhance the competitiveness of traditional industries in Vietnam and other countries along the route. As a result, domestic labor-intensive industrial products such as shoes and clothing are bound to face greater pressure to survive.
Statistics from Wenzhou Customs show that our city’s current exports of labor-intensive products such as shoes and clothing account for nearly 50%. From January to September this year, the city’s exports to TPP member countries were nearly 21.8 billion yuan, accounting for approximately 27.49% of the city’s total exports during the same period. Among them, footwear exports are about 6.249 billion yuan, and clothing exports are about 1.405 billion yuan. The two account for more than 1/3 of the total exports to TPP member countries. During the same period, the city’s footwear exports totaled approximately 20.25 billion yuan, and clothing and clothing accessories exports totaled approximately 7.291 billion yuan. In other words, 30% of Wenzhou’s shoes and nearly 20% of its clothing were exported to TPP member countries.
Impact
It may intensify the transfer of export orders from traditional industries to countries such as Vietnam
Wenzhou Customs conducted a preliminary survey on more than 20 shoe and clothing manufacturing companies. Relevant interviewed companies said that TPP will enhance the competitiveness of traditional industries in Vietnam and other countries along the route.
The relevant person in charge of Wenzhou Customs said that taking shoes as an example, Wenzhou’s current export tariff to the United States is around 8%, and the TPP reached on the 5th of this month will allow Vietnam and other member countries to implement low or zero tariffs on each other in future trade. . “This may further intensify the transfer of export orders from traditional industries to countries such as Vietnam, which will further squeeze the share of our city’s Laomi products in the international market.”
Some shoe companies reported that their American customers have begun to look for suitable factories in Southeast Asia and are ready to transfer leather shoe orders to Southeast Asian countries. In the first three quarters of this year, our city’s exports of shoes, clothing, and bags all showed a downward trend, with year-on-year declines of 12.35%, 18.24%, and 11.32% respectively. “Many American businessmen have communicated with the company before, hoping that we can move production to Vietnam.” Zhou Jinmiao, vice president of Kangnai Group, believes that the future implementation of TPP will have an impact on total export volume, but it will have a negative impact on the entire shoemaking industry. The impact will not be devastating. “Looking at the output of the entire industry, it still maintained growth from January to August, and there is a vast domestic market.”
On the other hand, because local Vietnamese companies are unable to produce basic shoemaking raw materials, they rely on procurement from China. However, according to the TPP origin principle, if Vietnam wants to enjoy zero tariffs, it must import shoemaking raw materials from TPP member countries, which will also inhibit domestic shoe companies from exporting shoemaking raw materials and semi-finished products to Vietnam.
Some garment companies interviewed said frankly that in the face of the continuous improvement of domestic production factors and shrinking profit margins, the most realistic approach is to transfer excess production capacity. “Many Korean and Taiwanese garment companies have moved to Southeast Asian countries. Since the local garment industry chain is relatively complete, we are also willing to establish processing zones in Southeast Asian countries and only retain the high-end parts of the industrial chain such as research and development in Wenzhou.” There are garments Business owners said that industry associations have also organized inspection trips to Southeast Asia and other countries.
Coping
Replace people with machines, focus on research and development and improve management to reduce costs
In response to the possible impact of the TPP, it is the consensus of the interviewed companies to use machine substitution to reduce costs and focus on R&D to improve competitiveness.
By applying laser technology to the multi-process integrated automatic processing of shoe parts, Juyi Group can reduce the number of employees by at least 4 people on one piece of equipment. After the introduction of equipment such as vibrating cutter head cutting machines and mid- and back-cut machines, the company’s personnel increased from 2011 to 2011. The number of employees has been reduced from 3,800 to 3,300 now, with an attrition rate of approximately 15%.
According to the relevant person in charge of Zhejiang Dia Clothing Co., Ltd., during this year’s Spring Trade Fair, clothing brands independently developed by well-known domestic and foreign designers introduced by the company were favored by merchants from Europe and the United States. “By analyzing consumer psychology, the brand-style clothing designed with European and American culture as the main theme received US$1.22 million in intended orders in the first three days of the exhibition. It is expected that the company’s clothing exports will increase by more than 30% throughout the year.”
“It seems that R&D requires continuous investment, but it can also play a role in reducing costs.” Zhou Jinmiao said that Kangnai Group’s total exports in 2014 were US$37.85 million, of which ODM accounted for 15%. “With the help of various exhibitions, merchants directly purchase enterprises In the past, if customers provided shoe samples for designed products, the company would have to go through repeated demonstrations and it would be difficult to shape them at once, and the cost would go up virtually.”
Opinion
Traditional industries should transform into fashion industries
IndustryInsiders analyze that although Vietnam is expected to take advantage of the TPP to accept more orders from the United States and Canada, its current export scale is still small, so the impact will be limited for the time being.
“In addition to cheap labor, Vietnam is not as good as China in terms of logistics costs and corporate management levels, and its impact on China is still limited.” Zhou Jinmiao said that in the first quarter of this year, some American businessmen were hesitant, “but when they arrived in Southeast Asia, they found that the production conditions were not as good as It took us more than two months to finally deliver the order to us.”
Zhou Jinmiao also said that traditional labor-intensive industries should be upgraded to the fashion industry. “In countries such as Italy, Spain, and Portugal, their shoemaking companies have turned to producing high-end products.” A set of data from Wenzhou Customs shows that Wenzhou The average price of exported leather shoes is now US$11, while the average price in Italy is more than US$30.
In June this year, Lin Yifu, vice chairman of the All-China Federation of Industry and Commerce, came to Wenzhou to hold discussions with some business people. Regarding the possible future impact of the TPP, he encouraged traditional enterprises such as shoes and clothing to “go out” and negotiate terms with the local government as a team. However, the destination Not Southeast Asia. “The current increase in labor costs in Southeast Asia is not lower than that in China. Some industries will have to wait for another three to five years at most and will be relocated.” In Lin Yifu’s view, moving to India also carries certain political risks, “like Ethiopia and Tanzania. , Senegal and other African countries are good choices, and they are also very willing to cooperate.”
