Vietnamese clothing manufacturers rely on Chinese fabrics, U.S. brands dissatisfied

To support local exporters, the U.S. government will require countries joining its new Pacific trade area to reduce imports from China, but the bill has encountered resistance from businesses and government officials, who point out that the move Will lead to disruption of global supply chains.
The U.S. Senate is expected to approve a bill on Wednesday aimed at expanding President Barack Obama’s powers in trade negotiations. Prior to this, supporters and opponents of the bill had been engaged in a desperate “fight”, leaving its supporters under pressure to prove that the Trans-Pacific Partnership Agreement (TPP) would create jobs in the United States.
With this in mind, U.S. trade negotiators have made a request to Vietnam, a major apparel exporter, that the country need to reduce its dependence on textiles produced in China so as to obtain the best value from the United States. preferential market treatment, a requirement that is not part of the Trans-Pacific Partnership agreement itself. The goal is to create new markets within Vietnam for the U.S. textile industry. Currently, the U.S. textile industry employs approximately 250,000 people, and its exports last year were worth $20 billion.
“The United States and Mexico are both large textile producers.” said Eliza Levy, spokesperson for the National Council of Textile Organizations. “Vietnam only needs to change the source of yarn and fabric imports from China to the United States and Mexico.”
U.S. fashion brands objected to the move, saying it ignored the complexity of global supply chains. Among exporters of clothing and footwear products to the United States, Vietnam is the second-largest exporter after China, with sales of $13.1 billion last year. However, Vietnam only produces enough fabric to meet one-fifth of its needs, so it needs to buy about $4.7 billion worth of fabric from China, roughly half of its total annual imports.
What clothing brands want to see is that all goods produced in the new trade area will be exempt from tariffs when entering the U.S. market, regardless of where the fabric is produced. For many of Vietnam’s apparel and footwear exports to the United States, trade negotiations on the Trans-Pacific Partnership could see the U.S. tariffs it pays fall sharply from 7% to 32% to zero.
Julia Hughes, president of the U.S. Fashion Industry Association, an industry organization representing the interests of U.S. clothing brands, said that U.S. textile exporters cannot meet Vietnam’s quantitative needs, which will force Vietnam’s clothing manufacturers to Still have to rely on Chinese fabrics. Under current regulations, “Vietnam doesn’t get a lot of duty-free access” to the United States, Hughes said.
The U.S. apparel industry believes that the Trans-Pacific Partnership Agreement will help the industry. The U.S. apparel industry employs 3 million people, including designers and retail workers. But within the U.S. Congress, the question of whether free trade will endanger manufacturing employment is a controversial issue.
U.S. negotiators defended their position. U.S. Deputy Assistant Trade Representative Trevor Kincaid said that the Trans-Pacific Partnership Agreement will “bring new opportunities to U.S. businesses, including opportunities related to Vietnam’s textile and apparel industry.” He said the U.S. government was “single-mindedly focused on getting the best deal possible for America’s labor and export industries.”
Vietnam has its own ideas. The country is rapidly developing its local textile industry, which will help it bypass relevant restrictions. “Vietnam is seeking to reduce the garment industry’s dependence on imported products from China in order to better benefit from the Trans-Pacific Partnership Agreement.” Phan Chi Dung, a senior official at the Ministry of Industry and Trade of Vietnam, said. But he also said there was little chance that U.S. producers would fill the gap.
Recently, companies from Hong Kong, South Korea and Taiwan have invested hundreds of millions of dollars in textile factories in Vietnam, hoping to subsequently obtain duty-free access to the US market.
Hong Kong TAL Apparel Ltd. said that one-sixth of the shirts it produces are sold to the United States, and said it is investing US$240 million in building a textile factory in Vietnam, scheduled to be completed in 2017, to provide Its two Vietnamese garment factories provide raw materials.
Li Guoquan, CEO of TAL Garment Co., Ltd., believes that it will take five years for Vietnam’s textile industry to become self-sufficient. He pointed out that the costs of U.S. textile suppliers are too high and the distance from Asian markets is too long, so they are not competitive.
With rising domestic wages and expectations for the Pacific Free Trade Area, Chinese companies are also moving factories to Vietnam.
Chinese clothing maker Youngor Group Co., Ltd., which operates a factory in the northern Vietnamese province of Nam Dinh, is planning to source textiles from Vietnam instead of its own factories in China, hoping to Export products to the United States duty-free through this method. “ourMajor competitors have moved to Vietnam and many companies are relocating. ” said Yu Jian (transliteration), deputy general manager of Youngor Vietnam Company.
Ou Kui, manager of Yanian Garment Co., a Chinese clothing company in Hanoi, is focusing on producing zippers, buttons and other accessories to help Chinese investors meet “local content” requirements.
According to a recent report released by the U.S. Congress, if Vietnam’s textile industry can expand quickly enough, its exports to Mexico may even rival that of the U.S. textile industry. Mexico is also involved in trade talks on the Trans-Pacific Partnership.
The trade deal will allow Vietnam to continue sourcing textiles and yarn from any country included in a “supply short list” as it faces pressure from U.S. brands. However, Hughes of the American Apparel Industry Association pointed out that this list is too restrictive and cannot be modified in the future, so it will hinder the business of American brands.