2007-02-08 Letter to Ministry of Trade re Apparel Trade after WTO Entry (English)

Tiếng Việt – Vietnamese

February 8, 2007

Respectfully to:The Minister of Trade
Copies to:The Office of Government
.The Minister of Industry
.The Minister of Planning & Investment
.The Minister of Foreign Affairs
.The Chairman of the Vietnam Textile and Apparel Association
.The Ambassador of the United States to Vietnam
.The Consul General of the United States in Ho Chi Minh City

RE: Apparel trade between Vietnam and the United States after WTO Entry

Based on Decree No. 08/1998/ND-CP of the Government dated 22 January 1998, promulgating the Regulations on the Establishment of Foreign Business Associations in Vietnam; and

Based on Article 4.5 of the Regulations that provides for the Leadership Board to represent the Association in putting forth proposals and measures to Vietnamese state management authorities for the purpose of protecting the lawful rights and interests of member businesses and contributing to the creation of a healthy business environment.

Let me offer congratulations on two important milestones achieved in 2006: First, Vietnam’s entry into the World Trade Organization. Your leadership, patience and hard work over the last several years were instrumental to this accomplishment. Second, the major milestone of U.S. imports from Vietnam reaching over $8 billion in 2006, just five years after the BTA went into effect. This is a tremendous achievement. The Ministry of Trade has been an asset to Vietnam’s export industries and deserves credit for its efforts.

Vietnam’s apparel industry has been a driving force, with U.S. imports of apparel in 2006 accounting for about $3.4 billion, or nearly 40% of total U.S. imports from Vietnam. Leading American Brands, many of whom are members of AmCham, consider Vietnam to be one of the world’s most capable and reliable apparel production platforms. Indeed, Vietnam is considered one of the few countries that can compete with, and in some cases exceed, China in the apparel industry.

However, the U.S. Import Monitoring Program that began on January 11, 2007, and the risk that the U.S. Department of Commerce will self-initiate anti-dumping investigations, especially for “sensitive categories” such as trousers, shirts, underwear, swimwear, and sweaters, has caused some U.S. big buyers to pause, and some have reduced orders in Vietnam. We believe it will take only a few to start the exodus, leading to a collapse of orders, exports, and jobs. Already, some well-established FDI factories have closed, and workers have lost their jobs.

AmCham has already expressed concern in a letter to US Trade Representative Schwab and Commerce Secretary Gutierrez that the Import Monitoring Program ”… would create so much uncertainty and business risk that it will discourage exports from Vietnam of these products.”

We have made a careful review of the current situation, including the prompt approval of the Permanent Normal Trade Relations by the U.S. Congress on December 11, 2006, the state of business planning by our members for 2007 and beyond, and consultation with VITAS in Ho Chi Minh City and the Ministry of Trade in Hanoi on December 1, 2006 and January 19, 2007.

After this review, we believe that the Government of Vietnam should do what is necessary, even on a unilateral basis, to preserve the apparel industry’s competitive edge and ensure that U.S. customers keep their current orders in Vietnam and continue modest growth in the volume of shipments in the second half of 2007.

We believe that the Ministry of Trade could address concerns of US customers about the U.S. “Import Monitoring Program” and the risk of self-initiation of anti-dumping investigations by the US Government through a number of important steps, including:

1. Make public announcement of the robust and timely implementation of Vietnam’s commitments regarding textiles and apparel in the May 31, 2006 Vietnam-US WTO Bilateral Market Access Agreement (“Agreement”), such as the commitments to:

  • Eliminate all WTO-prohibited subsidies received by the textile and apparel sector by the date of accession (January 11, 2007);
  • Rescind Prime Ministerial Decision 55 of 2001 which established a program to support development of Vietnam’s textile and apparel exports;
  • Notify WTO members, and provide further information on request, when Vietnam takes any action to eliminate prohibited subsidies; in addition, by the date of accession (January 11, 2007), Vietnam will provide a subsidy notification to the WTO Committee on Subsidies and Countervailing Measures; and
  • Ensure that state-owned and controlled enterprises will provide U.S. firms adequate opportunity to make sales to these firms.

2. Adopt immediately an Export License requirement for apparel exports to the US.

This would guard against companies outside Vietnam falsely claiming that their apparel is Vietnamese origin. This would also allow the Ministry of Trade to follow closely average unit value prices of apparel products and have data well before the U.S. Government tabulates such data from collection of import data at the U.S. ports of entry.

3. Tracking “sensitive categories” of apparel (trousers, shirts, underwear, swimwear, sweaters) through the use of the Export Licenses.

We believe that this initiative would encourage apparel factories producing goods for the US market to attract only highest unit value orders, which require greater skills, more sophisticated workmanship, and greater capital investment over time. This will ensure that the Vietnam apparel industry will continue its reputation as a high “value-added” production platform.

At the same time, we are not proposing that the Ministry in any way interfere with the market. Controls on what should be market-based decisions should be avoided.

Prompt action on the part of the Ministry of Trade is critical because most U.S. buyers will start placing orders after TET in mid-February for the 2007 Fall season, and the goods will arrive in the U.S. by July when the six-month review is imminent. Unless the Ministry of Trade takes prompt and positive action, on a transparent, efficient, and fair basis, we believe that most or all major high value U.S. buyers will begin their plans to exit Vietnam, which they have already prepared as a business contingency.

Major U.S. customers of Vietnam’s apparel industry believe that Vietnam managed its quota allocation better than any other country in the past two years, implementing a system that was known for a high level of professionalism, transparency and efficiency. We are confident that an Export License program would be run in a similar fashion.

In the interest of continued development of this vital industry, we respectfully request that the Vietnam Government proceed with this strategy to promote the continued confidence of its U.S. customers, and act even before any announcement of possible actions related to apparel trade by the U.S. Government. In this way, we believe the Vietnam Government would be acting in its own self-interest (to avoid imminent harm to the industry, loss of orders and jobs) rather than in response to the interests of outside parties.

Thank your for your consideration of our views, and best wishes for the New Year.

Respectfully yours,

/signed and sealed/

Christopher Muessel

Tiếng Việt – Vietnamese