Shoe makers step up presence

The potential benefits of the TPP has sparked massive interest from US footwear manufacturers

A report released last week by the United States International Trade Commission (USITC) entitled “TPP Agreement: Likely Impact on the US Economy and on Specific Industry Sectors” stated that the TPP would help Vietnam attract more foreign footwear investors and boost exports to the US, one of the largest footwear markets in the world.

USITC chairman Meredith M. Broadbent said that “Already, several major US footwear companies have begun sourcing a significant share of their footwear purchases from Vietnam”.

“In light of the many challenges facing Chinese footwear factories in recent years, including rising labour and material costs, labour shortages, employee turnover, and closures, US footwear companies have been diversifying their supply chains, and view Vietnam as an attractive alternative footwear supplier,” Broadbent said.

Over the past few years, China’s production costs have increased 15-20 per cent on average.

In 2015, Nike’s contracted factories in Vietnam manufactured 43 per cent of total Nike brand footwear, compared with 32 per cent in China and 20 per cent in Indonesia.

Even before the signing of the TPP, some large footwear companies increased their footwear production in Vietnam.

Wolverine, a US firm specialising in work boots, hinted that in light of the TPP’s expected benefits, it would shift more of its sourcing from China to Vietnam.

In another case in late March, South Korea’s Tae Kwang Industrial Co. Ltd announced a $171.4 million project to produce shoes in the southern city of Can Tho.

Also, Taiwan’s PouYuen Vietnam in Ho Chi Minh City is expanding worker recruitment. With a turnover of VND23 trillion ($1.05 billion) in 2014, the firm is now employing over 92,000 workers in Vietnam and is partnered with over 60 famous brand names such as Nike, Adidas, Mizuno, Timberland, Lacoste, Columbia, Converse, and New Balance.

PouYuen is a member of Taiwan’s Pou Chen Group, one of the world’s biggest footwear manufacturers. In addition to PouYuen, Pou Chen also has many other firms like Pou Hung, Pou Sung, and Pou Chen Vietnam, which has a total revenue of over $1.5 billion in Vietnam, or 15 per cent of the country’s total footwear export revenue.

Under the USITC’s estimates, US imports of footwear from all TPP countries would annually rise by $1.6 billion (23.4 per cent) above the projected 2032 baseline. “Vietnam would account for most of the US footwear imports from TPP countries. The growth of imports from Vietnam is expected due to the additional savings offered by the TPP’s elimination of US duties on imports from Vietnam,” stated the USITC report.

The average US tariff on footwear imports from Vietnam, which accounts for 99.5 per cent of the value of US footwear imports from TPP countries, is 12.5 per cent, this will be eliminated within the first 12 years of the TPP.

The US Footwear Distributors and Retailers Association estimates that by 2019 Vietnam will supply 22 per cent of all US footwear imports.

Currently, of the 12 TPP countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the US), Vietnam is the largest footwear supplier to the US market, accounting for 88 per cent of all US footwear imports from the TPP countries in 2015.

According to the USITC, US footwear imports from Vietnam have continued to rise, from $2.9 billion in 2013 to $3.55 billion in 2014, totalling $4.33 billion last year. Interestingly, US exports of footwear to Vietnam has also increased, from 60.1 million in 2013 to $86.4 million in 2014 and totalling $103.7 million last year.