TPP the way forward for exporters

Once the Trans-Pacific Partnership (TPP) Agreement comes into force, the tariff imposed on items Vietnam and other TPP member countries exported into the US would gradually fall before being entirely removed. This could bring immense comparative advantages to export items, including Vietnamese textiles, clothing and footwear.

However, in the latest TPP negotiation session, a a US trade representative proposed to apply the ‘yarn forward’ principle into made-in-Vietnam textiles and garments.

Accordingly, local textile and garment products could enjoy preferential tariffs only when yarn, fabric and later production processes took place in TPP member countries, except fibre which can be made in other countries.

Vietnam Textile Apparel Association (Vitas) general secretary Dang Phuong Dung said if the principle was applicable, it would badly affect not only Vietnamese textile and garment firms but also US investors in Vietnam since they were involved in cutting and sewing phases.

Since the US is Vietnam’s major export market contribution of input to help balance interest of parties involving in TPP agreement, particularly minimising disadvantages to made-in-Vietnam export items are Vietnam’s big target in TPP negotiations.

Vinatex general director Tran Quang Nghi said the sector would actively contribute inputs to Vietnamese negotiation team in TPP as US market currently accounts for over 50 per cent of the sector’s total export value. If the TPP became effective, the sector would be one of the most beneficiaries with 95 product lines becoming tax free.

Parallel to the textile and garment sector, footwear will also see bright export prospects, as import duties into US market would be cut by half when the TPP became effective.

Compared to other free trade agreements, the TPP requires stricter requirements in environment, labour, intellectual property and other fields. However, the Vietnam Leather Footwear Association (Lefaso) assumed it was doing a smart job in handling the undertakings.

“TPP would provide golden opportunities for made-in-Vietnam footwear and bag products to grow presence in US market,” said Ho Chi Minh City Leather and Footwear Association chairman Ha Duy Hung.

Vietnam posted $7.1 billion from exporting textile and garment products to US market in 2011, half of the sector’s total export value, surging 13 per cent against 2010. Export of footwear to this market came to $2 billion and that of suitcases and bags to US market generated $700 million.