Vietnam: pros and cons of free trade agreements

According to the latest reports from foreign media, Vietnam’s textile exports increased by leaps and bounds in 2015. The free trade agreements signed between Vietnam, the European Union, and the United States have stimulated large-scale exports of textiles and clothing from Vietnam.
According to statistics, Vietnam’s textile and apparel exports increased by 10% year-on-year in 2015, lower than the growth levels of 23% in 2013 and 16.2% in 2014. In 2015, more than 50% of Vietnam’s textile and apparel exports were to the United States, a year-on-year increase of 13%. Followed by Japan, South Korea, the EU market and Cambodia, exports to the UK are also gradually growing.

It is understood that the EU’s demand for textiles and clothing continued to be weak in 2015. Vietnam’s textile and clothing exports to the EU grew slowly, with a year-on-year increase of 3.2%, accounting for 2.8% of Vietnam’s total textile exports.

In order to expand market share, Vietnam continues to adjust its product structure. In addition to pure cotton products, it also increases the production of chemical fiber clothing. In 2015, Vietnam’s chemical fiber clothing exports more than doubled year-on-year. It is expected that in the future, pants and shirts produced in Vietnam will be mainly exported to the United States, Mexico and China.

The signing of the TPP agreement is a major factor in promoting Vietnam’s textile and apparel exports. It is understood that the TPP agreement stipulates that clothing produced by member countries using yarn and cloth produced in the country of origin can enjoy zero-tariff preferential treatment. However, China, Hong Kong, Taiwan and South Korea are not TPP member countries and therefore cannot enjoy this preferential treatment.

Vietnam’s textile and apparel production relies heavily on imported raw materials. As domestic demand continues to increase, more and more foreign companies are setting up factories in Vietnam.

In addition to the TPP agreement, in December 2015, Vietnam and the European Union signed a 7-10-year free trade agreement. The rules of origin also restrict Vietnam’s textile and apparel export interests and speed up the progress of building factories abroad. At the same time, South Korea is also actively signing a free trade agreement with Vietnam. If the agreement is reached, Korean fabrics can enter the Vietnamese market with zero tariff. Vietnam: Pros and cons of free trade agreements

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