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Vietnam Talks Raise Classic Issues

In what is shaping up to be a big showdown in trade, the domestic textile industry and importers and retailers are facing off over Vietnamese imports.

WASHINGTON — In what is shaping up to be a big showdown in trade this year, the domestic textile industry is squaring off with importers and retailers over imports from Vietnam.

This story first appeared in the February 13, 2003 issue of WWD.  Subscribe Today.

U.S. negotiators will soon determine whether to place quotas on everything from cotton knit and woven tops to nightwear that retailers such as J.C. Penney, Sears, Target, Gap and Dress Barn produce in Vietnam and ship to the U.S. The stakes are so high that merchants including Eddie Bauer, Federated Department Stores and Kmart sent a joint letter to U.S. Trade Representative Robert Zoellick this month urging him not to place restrictive quotas on apparel.

David Spooner, special textile negotiator for USTR, will head to Vietnam next Wednesday to launch formal talks on a textile agreement with the Communist country, accompanied by advisors from the domestic industry and import and retailing communities.

At issue is which apparel and textile categories the U.S. will choose to negotiate quotas on, the size of those quotas, growth rates and whether the U.S. will tie quota growth increases to improvements in labor standards in the textile and apparel agreement.

The U.S.-Vietnam bilateral trade agreement, which went into effect in December 2001, contains a provision for negotiations for a separate textile and apparel deal.

Jim Leonard, deputy assistant secretary of Commerce for textiles, apparel and consumer goods industries who is part of the delegation accompanying Spooner, said a labor provision will be part of the negotiations, though he would not elaborate.

Apparel and textile imports from Vietnam mushroomed in 2002, according to the U.S. Department of Commerce. For the year ended Nov. 30, imports rose 867 percent to 308 million square meters equivalent and represented a 0.82 percent share of the U.S. import market. Vietnam is the 22nd largest supplier of apparel to the U.S. and accounts for 1.6 percent of total clothing imports.

Domestic interests are seeking to have the government restrain many, if not all, apparel and textile imports from Vietnam, while importers are seeking to exclude cotton knit and woven tops, cotton trousers and cotton sweaters. Some imports from Vietnam increased by more than 1,000 percent and many categories rose more than 100 percentage points for the year.

“I call it more than a surge,” said Donald Foote, director of the agreements division of Commerce’s Office of Textiles & Apparel, who is also part of the U.S. delegation. “I call it an explosion.”

Leonard pointed to the increase in imports from Vietnam and declines in domestic production and employment. He said, “The CBI and Mexico are down, while China continues to be way up, so it is hard to say who is taking what away from whom. But if you look at the numbers, Vietnam continues to grow.”

Global quotas on apparel and textiles among the 145 World Trade Organization members will be phased out at the end of 2004. If the U.S. forces a typical three-year agreement with Vietnam, the country would be at a significant competitive disadvantage in 2005, since most of the world’s foreign suppliers would ship to the U.S. quota-free and Vietnam would be restricted. Vietnam is not a member of the WTO, which allows the U.S. to seek a quota agreement and maintain those restrictions.

Vendors and retailers that import goods contend that Vietnam is attracting business from other Asian suppliers, not replacing U.S. manufacturing. They feel unrestricted trade throughout 2003 would provide a more accurate base level of Vietnam’s true production capacity, at which time quotas could be imposed.

Maybe most importantly, Vietnam offers importers an alternative to sourcing in China.

Domestic textile and apparel factions claim that import surges from Vietnam are hurting the sector by taking away potential business from U.S. makers and from Central America and Mexico, which are significant buyers of U.S. fabrics and yarns.

J.C. Penney moved sourcing to Vietnam in the fall of 2001 and currently produces some 5 percent of its imports in Vietnam, according to Peter McGrath, president of purchasing at J.C. Penney Co. and chairman of the U.S. Association of Importers of Textiles & Apparel.

He has asked U.S. trade negotiators to exclude cotton knits and woven tops, cotton trousers and cotton sweaters from quota limits in the bilateral agreement.

“Retailers and importers are up in arms over the USTR’s concern about this country, which only represents a 1.6 percent import market share, particularly in the light of the fact that [global] quotas will be removed in 22 months,” said McGrath. “Putting a cap on Vietnam now will have the effect of raising prices throughout Asia because of quota charges in other countries and that is the negative effect importers are upset about.”

Liz Claiborne moved a small amount of production to Vietnam about six months ago, according to Frank Kelly, vice president of customs and international trade operations at Liz Claiborne said, “It is important that Vietnam establishes trade before quotas are put on it. We don’t have a problem with the U.S. putting quotas on piece goods and yarns.”

Charles Bremer, vice president of international trade for the American Textile Manufacturers Institute, said the categories of “immediate concern” are knit shirts, manmade fiber and cotton coats and trousers, woven shirts, dresses, nightwear, coveralls and luggage.

“This is where trade is at significantly high levels and Vietnam is not restrained in these categories, but other countries are,” said Bremer. “This is 308 million SME worth of business we did not get and we need.”