HONG KONG — The Vietnamese textile industry is set to receive a major boost from the ratification of the Trans-Pacific Partnership agreement, according to an analysts’ report.
“Removal of these tariffs would make Vietnam-made products much more competitive,” said a research note published Wednesday by Daiwa Capital Markets analysts John Choi and Carlton Lai.
The U.S. imports $22 billion in apparel, textiles and footwear from the TPP countries. Vietnam is the second-largest apparel supplier to the U.S.
behind China, which is not involved in the trade pact.
Currently, the U.S. imposes tariffs of 12 percent to 20 percent on apparel imports from Vietnam, compared to a 10 percent to 25 percent tariff on imports from China.
Although exact details of the TPP deal are yet to be finalized, the trade deal is expected to include a “yarn-forward rule” which would stipulate that only fabric produced from the yarns of TPP-member countries would qualify for duty-free status.
This inclusion will “likely limit the immediate benefits of the TPP to Vietnam as a whole, due to the country’s lack of homegrown yarn supplies,” Daiwa’s note said.
Vietnam sources about 88 percent of its textiles from China and South Korea and typically contributes in the later stages of garment production
“The deep-pocketed Chinese textile suppliers that already have established operations in Vietnam,” like Shenzhou International, Texhong Textiles or those investing significantly such as Pacific Textiles are likely to benefit, the note claimed.