The TPP trade pact that will include Vietnam is expected to be wrapped up this year. And U.S. import tariffs, the biggest market for Vietnam’s leading export, textiles and apparel, will be cut from 17-32 percent now to zero. But Vietnamese firms are unsure if they will benefit. Many are anxious since foreign investors with deep pockets are planning to set up operations in the country to take advantage of the lowering of import taxes by many large economies that will sign up for the trade deal. Many textile and garment companies in the region have already begun to move to Vietnam.
Vietnamese companies are meanwhile trying to enlarge their limited feedstock production capacity to comply with TPP’s regulations on origins, for instance apparel has to be made using yarn and other materials produced in member countries.
Figures from the Vietnam Textile and Apparel Association (VITAS) showed that 70% of more than 3,700 textile factories in the country make apparel; only 6% produce yarn, 17% make cloth, and 4% dyeing.
Local producers depend largely on fabric imported from China. Insiders said a yarn factory costs tens of millions of dollars, a sum most Vietnamese businesses cannot afford.
Pham Xuan Hong, deputy chairman of Vitas, said unless the government helps by making cheap loans available for yarn projects, the industry would not benefit from the TPP at all. The government also needs to zone certain areas for dyeing plants since they are shunned everywhere due to pollution concerns, Hong said.
Agricultural and food products
Experts warned that the TPP is even worse news for agricultural products since many technical barriers related to labels, packaging, and chemical traces need to be surmounted to enjoy the tax breaks.
Van Duc Muoi, chairman of the Ho Chi Minh City Food Association, said the barriers could leave a lot of Vietnamese agricultural produce with no actual benefit.
“We will face difficulties in exporting animal products to the US, Australia, and New Zealand… We are not competitive in this area due to limited technologies and frequent disease outbreaks,” he said.