Implementation of yarn-forward principle in the TPP would attract entrepreneurs to invest in Vietnamese textile industry for manufacturing materials that would be used for production of garments meant for export to the US at zero-tariff. Vietnam exports $7.6 billion worth of garments to the US. And with the current growth rate, the export turnover would be $13 billion by 2020. However, with the Trans – Pacific Partnership agreement TPP, the figure would be as high as $22 billion, according to Mr. Le Quoc An, Senior Advisor to the Vietnam Textile and Apparel Association. He said that this is not an “illusion,” if Vietnam can grab the opportunities to be brought by TPP. An said he personally has received at least 10 invitations for cooperation from the companies from Singapore, Hong Kong and China, who said they wanted to look for suitable places to set up textile factories in Vietnam.
According to the General Department of Customs, by November 15, 2012, Vietnam had exported 15,687 billion dollars worth of garments and fibers. However, in order to make such exports, it had to import 10.77 billion dollars worth of materials, including six billion dollars worth of cloth imports.
Also according to the customs agency, China has been the biggest supplier of fabric and materials to Vietnam (3.5 billion dollars in the first 10 months of 2012), followed by South Korea and Taiwan.
Investing in textile industry to prepare for TPP
Le Quoc An from VITAS said that TPP would bring more opportunities to Vietnam to export $ 9 billion more than the trend-line $ 13 billion worth of products to the US by 2020. However, he also said that if Vietnam still heavily depends on the material imports from China, Taiwan and South Korean, it would not be able to obtain the nine billion dollars.
The 16th round of TPP negotiations concluded last week in Singapore. A core issue of negotiation is the ‘yarn forward’ principle, put forward by the US. The principle, if approved, would require Vietnam to make its garments from raw materials made in Vietnam or the TPP countries in order to enjoy zero preferential tariffs on its garment exports to the US.
The “yarn-forward principle” has prompted investors to inject their money in the textile industry. Textile factories to be set up in the near future would supply Vietnamese garment producers, who would export their products to the US and enjoy the zero export tariff.
TPP is believed to bring not only economic benefits, but social benefits as well. According to Vitas, in order to generate one billion dollars worth of garment exports, Vietnam would need 100,000 workers. As such, if Vietnam can export 22 billion dollars worth of products by 2020 as predicted, this means that millions of new jobs would be created.
The Southeast Asian nation of Vietnam annually exports about US$ 7.6 billion worth of clothing items to the US. If the country maintains its present growth rate, its exports would touch US$ 13 billion by 2020. But the TPP has the potential to take this figure to US$ 22 billion, Le Quoc An, Senior Advisor to the Vietnam Textile and Apparel Association (VITAS) told VietNamNet Bridge.
The TPP aims to enhance trade and investment, promote innovation, economic growth and development, and support the creation and retention of jobs in TPP partner countries.
At present, Vietnam depends on China, Taiwan and South Korea, to a great extent, for its raw material imports.
Hence, the implementation of yarn-forward principle in the TPP would attract entrepreneurs to invest in Vietnamese textile industry for manufacturing materials that would be used for production of garments meant for export to the US at zero-tariff.
Posted: Dec 23, 2012. Updated: Mar 17, 2013, 3/24/13, 4/3/13.