Vietnamese textile companies are “beyond their capabilities” to profit from the TPP
According to the “Voice of Vietnam” report on April 27, Vietnam’s Ministry of Industry and Trade believes that the textile industry is Vietnam’s core interest in joining the Trans-Pacific Partnership Agreement (TPP). However, due to Vietnam’s over-reliance on imported raw and auxiliary materials for the textile industry, it has led to It faces huge challenges in terms of origin and supply chain of TPP’s “yarn principle”.
According to reports, TPP’s “Yarn-Based Principle” requires that Vietnam’s textile industry must further develop, especially investing in the development of yarn and cloth industries, to create opportunities for Vietnamese companies to deeply participate in the supply chain of TPP member countries. But so far, the domestic textile industry still needs to import 60% of raw materials and auxiliary materials from China, and domestic production mainly consists of knitwear and low-end textiles. Especially for high-end fabrics such as twill waterproof fabrics and towels, 70-80% rely on imports.
Currently, Vietnamese textiles still face relatively high tariffs in major export markets, including the United States (17.5%), Canada (17%), Mexico (30%), and Peru (17%). Although once the TPP comes into effect, import tariffs in the above-mentioned markets will drop significantly. Among them, for the US market, 73.1% of taxes will be reduced to 0% immediately, 19.7% will be reduced by 35-50%, and reduced to 0% in years 11-13. For the Canadian market, Vietnamese textile exports will enjoy zero tariff treatment immediately or after three years. For Mexico and Peru, Vietnam’s textile tariffs will be completely reduced to 0% in the 16th year. But actually profiting from it is not easy. The investment in a dyeing and finishing factory amounts to tens of millions of dollars, which makes small and medium-sized enterprises in Vietnam’s domestic textile industry “beyond their capabilities”. In addition, they also face fierce competition from enterprises in mainland China and Taiwan.
According to reports, Vietnam’s Ministry of Industry and Trade believes that because Vietnamese companies are mainly engaged in processing or producing designated goods, they cannot control the use of raw materials. At the same time, most domestic enterprises have backward production technology, old styles, quality that cannot meet customer requirements, and lack market competitiveness. Therefore, some experts believe that to solve the problem of TPP’s rules of origin requires enterprises in the domestic textile industry to strengthen mutual cooperation, and export enterprises to actively seek cooperation with raw and auxiliary material manufacturers to minimize imports, which can not only meet the origin requirements but also ensure prices. Competitiveness. However, the report believes that the current ability of Vietnamese domestic enterprises to form a complete industrial chain of yarn-printing and dyeing-garment is still insufficient. Most domestic enterprises are concentrated in the garment-making link with the lowest added value of products. Vietnamese textile companies are unable to profit from TPP
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