In early 2014, the head of Vietnam Textile Group (Vinatex) said that when the US-led Trans-Pacific Strategic Economic Partnership Agreement (TPP) is signed, Vietnam’s textile industry will be able to achieve the export target of US$25 billion by 2020. Currently, Vietnam is conducting multiple negotiations to sign the TPP with relevant parties.
According to Vietnamese media reports on October 19, in order to achieve the goal of US$1 billion in turnover in the next five years, Vietnamese textile enterprises have proposed solutions such as expanding production, increasing investment in production line technology, and improving self-sufficiency in raw materials.
There is no doubt that the TPP will bring new opportunities to Vietnam and allow Vietnamese textile companies to gain more development opportunities. However, at the same time, Vietnamese textile companies are also facing tremendous pressure and challenges.
Can “Made in Vietnam” textiles reach a new historical height?
Export taxes on ready-made garments may drop sharply by 12%-32%
A few days ago, according to Reuters, Washington intends to broker an agreement. According to this agreement, Vietnam will become one of the big winners among the members of the Trans-Pacific Strategic Economic Partnership (TPP) and will gain some share of the apparel market from China and other non-agreement members. And Mexico or Central American countries will not benefit from this.
Today, thanks to regional trade agreements, half of all U.S. yarn and fabric products are exported south of the border, where cheap labor is used to turn them into garments. In most cases, these garments will become duty-free items “repurchased” by American consumers.
The garment industry is a priority industry in Vietnam. But the apparel industry is just one of many issues other countries need to consider. In return for supporting Washington on textiles, these countries may seek concessions in other areas.
Other countries that have joined or are about to join the TPP include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru and Singapore.
The treatment of different industries depends on the economic impact the United States has on them. In practice, it would mean waiting longer for tariffs to be reduced on cotton products such as underwear and men’s knitted shirts. Central American countries hold more market share in these areas. Products in which China has a dominant production position, including down jackets and synthetic fiber clothing, will soon reduce related tariffs, thus giving Vietnam certain advantages.
In fact, Vietnam’s exports to the United States have increased by 38% since 2010, even as tariffs increased the cost of its products by one-third. Researchers predict based on relevant models from the Peterson Institute for International Economics that Vietnam’s exports will further increase by 46% by 2025, while exports from Mexico, China and India will decrease.
Higher labor and environmental standards stipulated in the new agreement are expected to push up production costs in Vietnam. But when labor costs alone are considered, the United States and Central American countries are no match for their Asian rivals.
In mid-2014, China’s share of the U.S. apparel market dropped from more than 39% in 2010 to less than 37%. Vietnam’s share of the US apparel market has increased to more than 10%.
Julia Hughes, head of the Fashion Industry Association of America, said: “Vietnam’s clothing is already cheaper than China’s. After the implementation of the tax-free preferential policy, its tax amount may be sharply reduced by 12% to 32%. This will have a huge impact The difference.”
The Ministry of Commerce of China did not respond to relevant questions. The China Chamber of Commerce for Import and Export of Textiles declined to comment.
TPP drives foreign companies to invest in Vietnam
Since TPP tariff reductions and exemptions are conditional, major manufacturing processes such as spinning, weaving, printing and dyeing must be carried out in TPP member countries. In order to enjoy the tariff reduction and exemption policies, many companies are actively moving their factories to Vietnam. The revenue of some garment manufacturers increased by 50% in 2013.
The growing trend covers Vietnam. In the first quarter of this year, Vietnam’s textile exports increased by 20%. Textile companies from many countries and regions around the world have already set up production plants in Vietnam, or are accelerating their entry into Vietnam, and many of them are OEM companies for major international brands. However, it is also reported that because Vietnamese garment manufacturing companies do not have large-scale capital reserves, it is difficult to invest in establishing their own yarn and textile factories, and they mainly need to rely on China and other Southeast Asian countries. Some economists pointed out that in the textile and apparel industry, the signing of the TPP will mainly benefit foreign companies investing in Vietnam, rather than local Vietnamese companies.
Now, the Thai Garment Manufacturers Association has regarded Vietnam as an attractive investment destination. Vietnam’s “People’s Daily” reported on October 28: The Thai Garment Manufacturers Association said that the EU’s import tariffs on Thai textile and clothing products will increase from the current 9.6% to 12%, which will make Thai textile and clothing products lose their value to a certain extent. Competitiveness. In response to this situation, Thai textile and apparel companies are planning to transfer production lines to neighboring countries such as Vietnam and Myanmar that have low labor costs and enjoy the Generalized Preferential Tariff System (GSP). Currently, about 30 Thai textile and apparel manufacturers have set up second production plants in neighboring countries, mainly in Vietnam.and Cambodia.
According to reports, Chinese knitted apparel product manufacturer Shenzhou International recently stated in an interim report that harsh trade policies and rising manufacturing costs in major importing countries are compressing market share. The company plans to set up fabric and apparel factories in Vietnam. Some other Chinese-funded enterprises also plan to use Vietnam as a base, such as Tianhong Textile and Hutai Textile.
Will “Made in Vietnam” squeeze out “Made in China”?
According to Reuters, some industry experts believe that the TPP will stimulate further changes in global textile and apparel trade. China’s share of the US apparel market in 2010 was 39%, which fell below 37% in mid-2014, while Vietnam’s share of the US apparel market has climbed to more than 10%. “Vietnam (manufacturing costs) are already lower than China, and the tax exemption at that time may provide 12%-32% tax reduction, which will have a huge impact.” said Julia Hughes, president of the American Fashion Industry Association.
According to an article written by Reuters reporter Krista Hughes, if the United States can get what it wants in the TPP negotiations, then “Made in China” will no longer be so common in American clothing stores.
In terms of exports, according to statistics from the General Administration of Customs of Vietnam, in the first nine months of this year, the export volume of knitted products in Vietnam’s national textile industry reached approximately US$1.9 billion, and the export volume of textile products increased to US$15.51 billion, an increase of 18.9% over the same period last year. Pham Xuan Hong, vice president of the Vietnam Textile and Apparel Association, said that after Vietnam joins the TPP, Vietnamese companies will enjoy more preferential tariffs, so this is also a driving force to help Vietnamese companies expand their export markets, especially the US market share. By then, it will be relatively easier for some large companies in the industry to reach the goal of US$1 billion in turnover within five years.
However, today’s Vietnamese textile industry still relies heavily on imports in the field of raw materials and accessories. The competitiveness of Vietnamese enterprises is actually still weak.
Therefore, Fan Xuanhong said that in order to vigorously develop domestic raw materials and auxiliary materials in Vietnam, enterprises in the Vietnamese textile industry should strengthen close cooperation in the fiber-textile-printing and dyeing-sewing links in the manufacturing process, and gradually change the production form from processing FOB (raw materials Procurement, semi-finished products) goods transition to ODM (independent design, production and sales of products) goods. Only in this way can Vietnamese enterprises still achieve sustainable and healthy development in the fiercely competitive market.
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Exports of textile machinery products to Vietnam have grown rapidly
After my country’s textile industry exports encountered the “cold wave” last year, exports showed significant signs of recovery in the first half of this year, and the export growth rates of textile raw materials, products and textile machinery all showed recovery growth.
According to data, in the first half of this year, my country exported a total of US$123.26 billion in textile raw materials and products, an increase of 12% over the same period last year. Among them, the export of natural fiber products was US$11.54 billion, an increase of 14.6% over the same period last year; the export of chemical fiber and industrial textile products was US$19.99 billion, an increase of 8.1% over the same period last year; the export of clothing and accessories products was US$91.72 billion, an increase of 14.6% over the same period last year. An increase of 12.6%. In addition, my country’s textile machinery exports in the first quarter were US$1.17 billion, an increase of 7.5% over the same period last year.
In the first half of this year, my country’s export volume of clothing and accessories products was US$91.72 billion, an increase of 12.6% over the same period last year. Among them, exports to the EU were US$18.17 billion, a year-on-year increase of 3.3%; during the same period, exports to the United States and Japan were US$15.65 billion and US$10.93 billion, a year-on-year increase of 7.5% and 0.3% respectively. The total export volume to the above three major markets accounted for 48.8% of my country’s total exports of clothing and accessories products during the same period.
In addition, in the first half of this year, my country’s textile machinery exports totaled US$1.17 billion, a year-on-year increase of 7.5%. Among them, exports to India were US$240 million, an increase of 16.3%, and exports to Vietnam were US$110 million, a rapid increase of 1.3 times.
If Vietnam joins the TPP, how will China respond to “Made in Vietnam”?
In early 2014, the head of Vietnam Textile Group (Vinatex) said that when the US-led Trans-Pacific Strategic Economic Partnership Agreement (TPP) is signed, Vietnam’s textile industry will be able to achi…
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