Vietnam – U.S. Trade Status and Outlook, Oct 2014

U.S. Imports from ASEAN @ 141025Remarkably, just seven years after WTO accession in 2007, Vietnam is now one of the top three ASEAN exporters to the U.S., ahead of Thailand and Malaysia. Vietnam accounts for 20% of ASEAN exports to the U.S. and if present trends continue, will have a market share of over 30% by 2020.

Despite domestic and international economic difficulties, Vietnam – U.S. trade continues to expand, and  may reach $34.9 billion in 2014, after hitting $24.9 billion in 2012, and $29.7 billion in 2013, a healthy increase of almost 20% two years in a row.

U.S. imports of textiles and apparel from Vietnam may reach $9.8 billion in 2014, approaching a 10% share of the U.S. market.

Vietnam - U.S. Trade, 2000 - 2020e @ 140712 chartHCM City, Oct 25, 2014. Vietnam’s exports to the U.S. are likely to reach $29.4 billion (up 19%), and imports from the U.S. about $5.5 billion (up 10%). Vietnam’s exports of textiles and apparel will account for about one-third of Vietnam’s total exports to the U.S. See table below.

Vietnam - U.S. Trade Table @ 141025

Source: U.S. Department of Commerce  Trade Statistics and Apparel Imports). Note that totals may not equal the sum of the parts because of  “rounding error.” 

The below charts and tables show U.S. imports from ASEAN, where Vietnam is now the leading exporter to the U.S., ahead of Thailand and Malaysia. With the conclusion and implementation of the Trans-Pacific Partnership (TPP), the ASEAN Economic Community 2015, the Vietnam – EU Free Trade Agreement, and the Trade Facilitation Agreement, Vietnam’s international trade and GDP are likely to demonstrate even stronger growth. Click the below image for to zoom in more details on Vietnam and U.S.-ASEAN trade in goods.

U.S. Imports fr ASEAN Chart and Table @ 141025

Source: U.S. Department of Commerce

Vietnam continues to lead U.S. textiles and apparel imports growth

The below U.S. Commerce Deparment report of U.S. imports of textiles and apparel during January – August 2014 compared with the same period 2013 illustrates a continuing trend. While China is still well ahead of Vietnam as a supplier, it has reached a plateau and declined -0.32% compared with last year, while Vietnam continues on its growth path with an increase of 13.82% for the nine month period Jan – Aug, and an increase of 14.85% for 12-month period Sep 2013 – Aug 2014, the largest country gain.

U.S. textiles and apparel imports, Jan - Aug 2014

The below chart shows U.S. imports of textiles and apparel from China, “2nd Tier” countries, and others, from 2005, when U.S. import quotas for WTO member countries were removed, to 2014 and to 2025. The data for 2005-2013 are actual, 2014 estimates based on Jan – Aug trade data, and 2015 – 2025 estimates based on trend line extrapolation.

Note that imports from China grew rapidly from just over $20 billion in 2005 to more than $40 billion by 2011. However, imports from China have been on a plateau since then, while imports from the “2nd Tier” countries continue to edge up to over $30 billion by 2014.

U.S. textile and apparel imports fr China, 2nd Tier, Other @ 141025

The below chart and table show projected U.S. imports of textiles and apparel from the “2nd Tier” countries, the five leading importers after China. Within this group, Vietnam is showing the strongest growth, and may exceed $20  billion by 2025. The projections are based only on the assumption that present trends will continue, and do not include the expected impact of the TransPacific Partnership (TPP). One estimate projects Vietnam’s apparel exports to the U.S. under TPP “… would be as high as US$ 22 billion” by 2020. Another projects that Vietnam’s apparel and footwear exports would increase by 45.9% over the baseline by 2025. Click the link above, and go to slide 17. A third expert said she expects the TPP will “change the sourcing landscape drastically;” and Vietnam’s share of the U.S. apparel import market could go from 10% to 35% very quickly.” And Mr. Le Tien Truong, Deputy Director of VINATEX, expects that Vietnam’s exports of textiles and apparel could reach $50 billion by 2025.

U.S. imports of textiles and apprel fr 2nd Tier countries

U.S. Apparel Imports @ 141025

Source: Chart and table created by author, based on data from US Department of Commerce Apparel Imports Data

Vietnam leads U.S. textiles and apparel imports growth “Overall apparel import growth used to come from China and Bangladesh, but today Vietnam is the main driver. I don’t think you will see that trend abate in the short term.” Nate Herman, Vice President of International Trade, American Apparel & Footwear Association.

Vietnam’s Minimum Wage Outlook, Increased FDI Investments in Textiles and Apparel Supporting Industries

The growth of Vietnam’s textile and apparel and other consumer goods (footwear, furniture, etc.) exports to the U.S. is likely to increase steadily because of the slowdown of labour cost increases (minimum wage adjustment) for 2014 compared with previous years, and the increased FDI investments in textiles and apparel supporting industries  in anticipation of the TransPacific Partnership.

The proposed 2015 Minimum Wage Adjustment is on a par with increases in 2013 (17.5%) and 2014 (15%). The proposed MW in Region 1 for 2015 would be 3.1 million vnd/month. If present trends continue, the minimum wage in Region 1 will be about 5 million vnd/month in 2020.

Vietnam’s 2014 Minimum Wage Adjustment showed “moderation,” with a 15% increase compared with a 17.5% increase in 2013, while inflation is projected just over 6%. The Minimum Wage Adjustment for 2014, the first since the establishment of the National Wage Council under the revised Labour Code of 2012, was more moderate than adjustments in recent years, much lower than the 26~34% increase proposed by the Vietnam General Confederation of Labour, and even slightly lower than the original proposal in September 2013 by MOLISA of 2,750,000 vnd/month in Region 1. And at the June 5, 2014 Vietnam Business Forum, Mr. Vu Tien Loc, Chairman of VCCI and Permanent Co-Chairman of the Vietnam Business Forum, proposed that  the process for  adjusting the minimum wage be extended for two years (2015-2016), with the maximum increase is based on inflation rate and GDP growth each year, so as to ensure that the increase of minimum wage is predictable and appropriate with the increase of labour productivity in order to ease the burden of fast growing costs for businesses.

Vietnam's Minimum Wage, 2011-2020
Vietnam's Minimum Wage, 2011-2020

The expected slowdown in labour cost increases are substantial when compared with the outlook in 2012, when projected minimum wage adjustments were expected to reach as much as 4,000,000 vnd/month in Region 1 by 2015 based on the Party Central Committee Decision 23-KL/TW, May 29, 2012 to “Adjust the minimum wage more rapidly in the private sector so that by 2015 the minimum will reach the level of the Basic Needs Wage.” . The topic of the “Minimum Wage” and the “Basic Needs Wage” is still under discussion by the National Wages Council, but it seems there is not a foregone conclusion as was expected in 2012. Both the “Basic Needs Wage” and the “National Wages Council” were established in accordance with the revised Labour Code of June 2012. While Vietnam’s minimum wage adjustment for 2014 was relatively moderate at 15%, Indonesian unions demanded increases of 50%, and Indonesian minimum wage increases for 2014 averaged 19%, on top of the 30% increases in 2013. In key competitor country Bangladesh, minimum wages were increased by 77%.

Click here to see …

Vietnam – U.S. Trade before BTA, 1996-2000.

Vietnam – U.S. Trade Status and Outlook 2011 – 2020e (Jan 24, 2012)

Vietnam – U.S. Trade Status and Outlook 2011 – 2020e (Jun 26, 2012)

Vietnam – U.S. Trade Status and Outlook 2012 – 2015e (Dec 2012)

Vietnam – U.S. Trade Status and Outlook 2013 – 2021e (Dec 2013)

Vietnam – U.S. Trade Status and Outlook (Apr 2014)

Vietnam – U.S. Trade Status and Outlook (Jul 2014)

Source of data

US Department of Commerce Trade Data
US Department of Commerce Apparel Imports Date
Vietnam Trade Data: General Statistics Office of Vietnam

More trade data from the U.S. Department of Commerce

US Imports fr Vietnam by end-use category, 2004-2013 (latest data available)
US Exports to Vietnam by end-use category, 2004-2013 (latest data available)

Additional Background about Key Trade and Investment Agreements

U.S.-Vietnam Bilateral Trade Agreement – After 5 years (2002-2006) – Executive Summary This report assesses the impact of implementing the U.S.-Vietnam Bilateral Trade Agreement (BTA) on Vietnam’s trade, foreign investment and economic structure over the five years following its coming into force on December 10, 2001. It particularly focuses on bilateral relationships between the two countries in the context of the parallel and mutually reinforcing process of Vietnam’s accession to the World Trade Organization (WTO), completed on January 11, 2007. The report is co-authored by research staff from the Vietnamese Ministry of Planning and Investment’s Central Institute for Economic Management (CIEM), the Ministry’s Foreign Investment Agency (FIA), and the Support for Trade Acceleration (STAR Vietnam) Project funded by the U.S. Agency for International Development (USAID). Includes: • Executive Summary (17 pages, pdf file) • Powerpoint Presentation with Highlights of the Report (ppt file) • Full Report: Assessment of the 5-Year Impact of the BTA on Vietnam’s Trade, Investment, and Economic Structure (146 pages, pdf file)

Update and Background on Vietnam’s WTO Accession and Implementation (including Apparel Trade) Aug 2, 2006 – Jan 11, 2007, with a Summary and Overview of Vietnam’s WTO Accession Agreement, and also links to downloads of complete information on the Working Party Report (260 pages), Commitments on Goods (560 pages), Commitments on Services (60 pages). Also, includes USTR Fact Sheets on U.S.-Vietnam WTO Bilateral Market Access Agreement, General Overview, Agricultural Goods, Industrial Goods, Services, Textiles and Apparel. Click the link above for more information.

U.S. Trade Representative Trans-Pacific Partnership Updates Outlines of the Trans-Pacific Partnership Agreement (TPP) At the APEC 2011 Summit in Hawaii, APEC Leaders announced the achievement of the broad outlines of an ambitious, 21st-century Trans-Pacific Partnership (TPP) agreement that will enhance trade and investment among the TPP partner countries, promote innovation, economic growth and development, and support the creation and retention of jobs. Five defining features will make the TPP a landmark 21st-century trade agreement, setting a new standard for global trade and incorporating next-generation issues that will boost the competitiveness of TPP countries in the global economy. Click the link above for more information.

ASEAN Economic Community (AEC) – 2015 Each ASEAN Member Country shall abide by the the ASEAN Economic Community (AEC) Blueprint, and implement it by 2015. The AEC Blueprint will transform ASEAN into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy. The AEC Blueprint including its strategic schedule is annexed to this Declaration of ASEAN Heads of State/Government, Nov 20, 2007: ASEAN Economic Community (AEC) Blueprint 2015. Additional updated information since 2007 can be found in this ASEAN Economic Community Handbook for Business 2012.

Balance of market access opportunities and concessions

The Vietnam – United States Bilateral Trade Agreement indicates that there should be a balance of “market access opportunities” and “concessions.” “The Parties shall seek to achieve a satisfactory balance of market access opportunities through the satisfactory reciprocation of reductions in tariffs and nontariff barriers to trade in goods resulting from multilateral negotiations.”—U.S. – Vietnam Bilateral Trade Agreement, July 13, 2000 Chapter I, Article 3. General Obligations with Respect to Trade. “The Parties agree to establish a Joint Committee (“Committee”) on Development of Economic and Trade Relations between Vietnam and the United States of America. The Committee’s responsibilities shall include the following: B. ensuring that a satisfactory balance of concessions is maintained during the life of this Agreement;”—Chapter VI, General Articles, Article 5. Consultations.

By: Herb Cochran, Executive Director

Published: Oct 25, 2014.