Input material catch for Vietnam towards exploiting CPTPP, EVFTA fully

by Apparel Resources

23-May-2019  |  3 mins read

Vietnam Garment Industry

Do the much-hyped Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EVFTA (expected to be signed in June this year), going to open a new chapter of growth and opportunity for the Vietnam’s garment and textile industry?

Being preferential trade agreements that would enable Vietnam to enjoy duty benefits, one would expect CPTPP and EVFTA to go many a mile towards enhancing Vietnam’s exports.

Continuing with the impressive growth rate of the past year (16 per cent in 2018 compared with 2017, reaching US $ 36 billion in exports) which manifested itself in the first quarter of 2019 (11.9 per cent, with an export volume of US $ 8.6 billion), Vietnam Textile and Apparel Association (Vitas) is already expecting to touch the target of US $ 40 billion in exports well before expected. And now with the two agreements coming to effect in tandem soon, exports are expected to skyrocket further.

Well, it may not! Even though the EU-Vietnam FTA (EVFTA) and CPTTP, is believed to open new markets (Canada, Australia, New Zealand, Peru and Chile) while also giving a further boost to exports to Europe, there is a big catch.

As per experts, Vietnam may not be able to take full advantage of the preferential tariffs of the two important FTAs, CPTPP and EVFTA, because of issues related to input materials.

Regarding the product origin, under CPTPP’s ‘three-step rule’, the process of spinning, weaving, dyeing, finishing and sewing must be implemented in CPTPP member countries, which unfortunately Vietnam is unable to fulfil yet, as it has to import 50 per cent of fabric from China, 18 per cent from South Korea and 15 per cent from Taiwan, all of which are non-CPTPP nations.

Despite the challenges, the industry is still hopeful of making substantial gains.

As per Deputy Chair of Vitas Truong Van Cam, the EU-Vietnam FTA (EVFTA) promises an opportunity to export US $ 100 billion a year worth of textiles and garments.

What’s more, it’s not only the FTAs, the ongoing trade war between China and US could add a new component to Vietnam’s growth.

According to industry insiders, if the Chinese garments are subjected to US taxation, a part of orders would be redirected to Vietnam for sure.

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