United State is the Vietnam’s biggest export market, where 50 percent of Vietnam’s total textiles& garments are exported. And so Vietnam was expecting an export revenue increase of 30-40 percent in the first year of the Trans-Pacific Partnership (TPP) agreement implementation as well as it could be increased double after three to four years if took effect from this year onward. So when Donald Trump signs the executive order of withdrawing USA from TPP, it comes as a great shock for the country- particularly for the textile and apparel companies.
There is no question that TPP agreement was a big triumph for Vietnam and for this deal Vietnam’s exports to the U.S. went up. Total exports of textiles and garments from Vietnam to the US gained a year-on-year increase of 11.7 per cent to US$9.88 billion from January to November 2015. Customs statistics show that from January to November 2016, Vietnam’s textiles and garment shipments to the U.S., which accounted for 47.9 percent of the total during the period, edged up 4.7 percent from previous year to about $10.33 billion.
Vietnam was expecting that if TPP takes effect then the apparel export turnover would reach $16 billion by 2018, an increase of $3 billion, and to $20 billion by 2020 in US. A textile & garment expert and former chair of Vietnam Textile and Apparel Association (VITAS) Le Quoc explained three possible situations for Vietnam textile industry. If TPP could take effect, but the content of the agreement would change Vietnam’s export turnover to the US would be 50 percent lower than initially designed. But if TPP fails, Vietnam’s exports to the US will still enjoy MFN (Most Favored Nation) apart from many other WTO members. In this case, exports would depend on US economic performance. On the other hand, if there is no TPP, and the Trump administration imposes a monitoring scheme and anti-dumping duties on imports from Asia, including Vietnam then Vietnam’s exports would decline. The third option of Le Quoc’s analysis could be a possible scenario now.
According to Wikipedia, the 30 chapters of the agreement aim to “promote economic growth, support the creation and retention of jobs, enhance innovation, productivity and competitiveness, raise living standards, reduce poverty in the signatories’ countries and promote transparency, good governance, enhanced labor and environmental protections. The TPP contains measures to lower both non-tariffs, tariff barriers to trade, and establish an investor-state dispute settlement (ISDS).
This TPP would have eliminated the 17 percent tariff on U.S. imports of garments from Vietnam as the deal would have given Vietnam-based textile industrialists a great advantage in exporting their products to the U.S. However, withdrawal of TPP has concluded all these aspects as it is now about to elapsed without the involvement of the United States.
Under the deal, worker and environmental protections were mandatory, including workplace health and safety regulations, the elimination of child labor, and the protection of endangered species, which are greatly needed for country like Vietnam where there are huge insufficiency of these issues.
However, the authority of the country is not completely gloomy for Trump’s decision. The country’s economy is still well positioned to continue growing, with various other trade deals giving it good access to international markets including the recently negotiated EU free trade deal and other agreements through the Association of Southeast Asian Nations. Vietnam’s trade minister Tran Tuan Anh recently said, “The textile, seafood and footwear sectors would remain competitive even without the TPP. We are always ready for integration, not just because of TPP, but because it is a requirement and also a motivation for development.”
Though TPP created opportunities for Vietnam giving market access to North America and now it is restricted, but Truong Van Cam, Vietnam Textile and Apparel Association (VITAS) secretary general, said that Vietnam will still see its textile & garment exports to the US increasing, with or without TPP. “The export turnover to the market has been growing steadily by 12-13 percent each year, while the US import revenue has been growing by 3 percent only. Vietnam’s products just account for 9 percent of the US total textile & garment imports,” he said.
On the other hand, the country’s FDI hit a record last year, growing 9 percent to an estimated $15.8 billion and many foreign investors notified that the decision to invest in Vietnam was not purely based on a tariff benefit issue, and they will not go back from Vietnam.
In fine, it is undeniable that the TPP termination has disappointed companies, investors, workers, farmers and consumer more or less and the withdrawal of TPP affects greatly on Vietnam textile, however, the impact is reducible.