News Analysis: Imported raw materials the biggest challenge for Vietnam to enter TPP
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E-mail Xinhua, August 14, 2013
Dependence on imported raw materials would be the biggest challenge to the Vietnamese garment industry when the Trans-Pacific Partnership (TPP) comes into force possibly by the end of this year, according to experts here.
The TPP's rule of origin requires nations to use a TPP member- produced yarn in textiles in order to receive duty-free access.
Vietnam's garment and textile industry remains reliant on imported raw materials from many countries, which are not TPP members, including China.
According to the Vietnam Textile and Apparel Association (Vitas) , in 2012 the total import value of raw materials and spare parts in service of the garment sector's production for domestic consumption and for exports reached 11.3 billion U.S. dollars. Of which, cotton imports cost 875 million U.S. dollars (accounting for 98 percent of the demand); yarns and threads with 1.4 billion U.S. dollars (54 percent); fabrics with over 7 billion U.S. dollars (88 percent); and spare parts with over 2 billion U.S. dollars.
In the first seven months of this year, the sector earned 9.636 billion U.S. dollars from garment and textile exports, a year-on- year increase of 16.3 percent, while it disbursed 7.646 billion dollars, up 18.2 percent, for imported raw materials.
Specifically, imports of cotton cost 680 million U.S. dollars ( up 30 percent) over 4.7 billion U.S. dollars for fabrics (up 18.8 percent), over 1.3 billion U.S. dollars for other materials (up 18. 2 percent), and 857 million dollars for yarn (up 7.5 percent).
Efforts to increase raw materials made in Vietnam have not been successful. They are often sold at higher prices than the imported ones and delivery takes a longer time. Investment in knitting and dying is also not welcomed in many localities due to concerns over environmental impacts.
The 19th round for TPP negotiations is scheduled at the end of August in Brunei. The United States, the biggest importer of Vietnamese garment and textile products, accounting for about 50 percent of the industry's export turnover, is among 11 members joining the negotiations.
Currently, Vietnamese garment and textile exports to the U.S. market are taxed from 17.3 percent to 32 percent, which will be reduced to zero when the TPP agreement is enacted.
Vietnam's garment and textile exports to the United States are expected to increase from the current 7 percent to 12-13 percent, earning some 30 billion U.S. dollars a year by 2025. By then, the U.S. market will account for 55 percent of Vietnam's total exports of garments and textiles, over the current share of about 50 percent.
Vietnam is the second biggest garment exporter to the United States with a market share of 8 percent, after China.
Vietnamese garment firms expect that TPP negotiators would agree that Vietnam, along with Malaysia and Mexico, could import raw materials from non-TPP member countries and still receive duty- free access.
The 11 countries that have joined the TPP negotiation include Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Endi
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