70% of Vietnam’s raw materials are imported from China, so Vietnam’s textile and garment industry is facing the crisis of being unable to enjoy the preferential tariff treatment in EVFTA. Pham Xuan Hong, president of Saigon Textile Company No. 3, said that currently, Vietnam’s textile and garment industry still mainly imports raw materials from China that are not on the list of countries that enjoy EVFTA preferential treatment. The cumulative origin rules in EVFTA allow Vietnamese companies to use raw materials originating in South Korea or third countries where both parties have signed free trade agreements, such as Japan and other ASEAN countries. However, the prices of raw materials in the above-mentioned countries are relatively high and the varieties are not abundant.
Some other companies have changed their strategies to buy more domestic fabrics, but after adding 10% value-added tax, their prices are higher than imported goods. Expensive, resulting in the benefits brought by tariff reduction and exemption treatment being insufficient to lower the selling price and compete with products from other countries.
In addition to the difficulties in raw materials, weaving and dyeing is also a weak link in Vietnam’s textile and apparel supply chain. Nguyen Van Kam, vice chairman of the Vietnam Textile and Apparel Association, said that there was a large-scale weaving and dyeing project that was unable to obtain an investment license from the local government due to environmental issues, so it was announced that it would withdraw from the Vietnamese market. If the initiative cannot be created in this link, textile and apparel companies will not be able to benefit from it.
Before the EVFTA officially takes effect, the textile and apparel industry will still have to face various difficulties that cannot be solved with the goal of becoming a beneficiary of the agreement. Specifically, in view of the EVFTA, the import tax rate for 100% of Vietnamese textiles and clothing will be reduced to zero within a maximum of 8 years after the agreement takes effect. The EU will eliminate tariffs on 77.3% of Vietnam’s textile and clothing exports after five years and the remaining 22.7% of exports after seven years. Thanks to its tariff advantages, the competitiveness of Vietnamese textiles and apparel against products from other countries such as Bangladesh, Cambodia, and Pakistan may increase. EVFTA is expected to increase Vietnam’s textile and apparel exports by US$157 million in the first year after it takes effect, and by more than US$1 billion in 2025.
Vietnam has actively introduced policies to promote the development of supporting industries, and Chinese companies also need to prepare for rainy days
In order to enjoy EVFTA To bring preferential treatment, over the years, various companies have worked hard to build a complete supply chain. Le Jin Chang, president of Vietnam Textile and Apparel Group, said that the group has concentrated on negotiations with Uniqlo, H&M, Zara and other suppliers to shift the supply of raw and auxiliary materials to Vietnam, aiming to meet the requirements of the origin of EVFTA and thereby benefit from it.
In the short term, No. 10 Garment Company also focuses on ordering raw and auxiliary materials from domestic manufacturers, aiming to meet the requirements of EVFTA regarding the origin of raw and auxiliary materials in the region. In the long term, the company also plans to develop a domestic raw material supply source development strategy, which will help the company optimize the benefits brought not only by EVTFA but also by other new generation free trade agreements. At the same time, risks arising from concentration on certain raw material and excipient supply markets are reduced.
Recently, Vietnamese Prime Minister Nguyen Xuan Phuc signed a resolution No. 115/NQ-CP to promote the development of supporting industries and will create 2,000 companies that can directly supply multinational companies within ten years. parts companies to ensure that these large companies can operate in Vietnam.
The goal proposed by the resolution is: by 2025, Vietnamese enterprises will be able to produce highly competitive supporting industrial products and meet 45% of the basic needs of domestic production and consumption. Accounting for about 11% of industrial output value, it is expected that about 1,000 companies will be able to directly supply products to assembly companies and multinational companies.
By 2030, supporting industrial products will meet 70% of demand and account for about 14% of industrial output value. About 2,000 companies will be able to directly supply assembly companies in Vietnam and supply products to multinational corporations.
In order to achieve the above goals, the resolution formulates incentive measures, including specific mechanisms and policies for effective and simultaneous formulation, improvement and implementation, creates favorable conditions for the development of auxiliary industries, and formulates preferential treatment interest rate. Other measures include effectively attracting investment, strengthening business ties between Vietnamese enterprises and multinational enterprises, and domestic and foreign production and assembly companies; building centralized supporting industrial parks; developing the materials industry to increase the autonomy of raw materials, etc. The resolution also emphasizes promoting the development of domestic and foreign markets, improving scientific and technological capabilities to achieve breakthroughs in technological infrastructure, technology transfer, and improving the ability to absorb technology, emphasizing through national skills upgrading projects and links between training institutions and enterprises. Develop human resources.
In addition, the resolution also calls for the establishment and improvement of a statistical system to promote connections between Vietnamese suppliers and multinational companies; improve the effectiveness and efficiency of national management and support for industrial policies; and Improve statistical quality to ensure timely, complete and accurate information.
Some Vietnamese media said that after the relevant policy agreement takes effect, it will help Vietnam reduce its dependence on single markets such as China. For multinational companies that plan to move their production lines out of China, Vietnam will be more attractive. For our country’s foreign trade companies, future competition from the Southeast Asian market cannot be underestimated, and companies should prepare in advance!
U.S. clothing imports from China halved in July
July , U.S. apparel imports continued to fall sharply, but the decline was slightly smaller than in June.The main reason is the sharp decline in imports from China. Overall, U.S. clothing imports continued to rise month-on-month in July, partly due to seasonal drivers.
Compared with the same period last year, the volume and value of U.S. apparel imports fell by 22% and 32% respectively, but the decline slowed down, lower than the 34% and 43% in June. The year-on-year decrease in imports in July was mainly due to the 50% year-on-year drop in China’s clothing imports, but the import volume to Vietnam and Bangladesh only dropped 11% year-on-year, and the clothing imports to Cambodia increased by 19% year-on-year.
Compared with previous months, China’s current market share of U.S. apparel imports is disappearing faster, reflecting that Asian apparel production is accelerating the transfer from China to other regions. In volume terms, Vietnam’s share of U.S. apparel imports increased by 2.7% in July. , Bangladesh decreased by 1%, and Cambodia increased by 31.2%.
From January to July 2020, the average unit price of U.S. apparel imports was US$2.86/square meter. The average unit price in 2019 increased by 1.55%, and the cumulative decrease from January to July in 2020 was 5.23%. . From January to July 2020, the average unit price of U.S. clothing imports from China was US$1.88/square meter. The average unit price for the whole year of 2019 fell by 4.10%. The average unit price from January to July 2020 fell by 18.88% cumulatively.
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