More money will have to be ploughed into Vietnam's textile industry for the Asian country to achieve accelerating growth of textile and garment exports to Canada, after the Comprehensive Partnership and Trans-Pacific Partnership (CPTPP) came into effect on December 30, Vietnamese exporters say.
The restrictive yarn-forward rules of origin adopted by the CPTPP, an 11-member pact that was formed after the 2017 decision by the USA to drop out of its precursor, the Trans-Pacific Partnership (TPP), rules out the use of Chinese-made fabrics, which Vietnam has been heavily relying on.
Whereas China is not part of the CPTPP, Vietnam, on November 12 last year, formally became the seventh member of the pact to ratify its terms. A CPTPP act gained Royal Assent in Canada on October 25, with the Canada Border Services Agency, on December 5, issuing a customs notice announcing the implementation.
Vietnam had a 7.7% share of Canada's US$13.3bn garment market in 2017, making it only the fourth largest apparel supplier to the country, trailing China (40.6%), Bangladesh (11.1%) and even Cambodia (8.1%).
The CPTPP offers Vietnam a real chance to improve these sales, given that Canadian tariffs on Vietnamese garment imports now covered by the new deal currently average the relatively high rates of 17.1% for knitted apparel (HS Chapter 61) and 15.9% for woven apparel (HS chapter 62). As a result, the Vietnam National Textile and Garment Group (VINATEX) has recently sent a delegation of Vietnamese textile and garment companies to Canada to look for opportunities and identify any existent bottlenecks.
"It will be a real challenge for us to satisfy the yarn-forward rule, because we still import a lot of materials from China, given that it is still the most competitive supply so far," says Hoang Thuy Oanh, deputy general director of Danang City-based Hoa Tho Textile – Garment Joint Stock Corporation, one of the companies included in the delegation.
She tells WTiN.com that "our local textile suppliers have not even begun to compete with suppliers from China and some other countries in view of the gaps between them and the foreign suppliers in terms of prices and services."
Hoang adds that sourcing from other CPTPP members is not an alternative due to their weaknesses in materials supply.
"It would take a joint effort by enterprises and the government in Vietnam to overcome these obstacles, rather than action by individual companies," she says.
Sheng Lu, an associate professor at the Department of Fashion and Apparel Studies, at the University of Delaware, points to yet another increasingly pressing issue – Vietnam's limited size – at least compared to its giant Chinese neighbour to the north.
He questions whether Vietnam, with a population of less than 100 million, can realistically grow its garment exports much further after the implementation of the CPTPP and the EU-Vietnam Free-Trade Agreement (EVFTA), the latter envisioned for implementation also in 2019.
"My recent study shows that CPTPP and EVFTA could intensify the competition for resources, such as labour, between the apparel industry and other export-oriented sectors in Vietnam, as the latter also try to expand their production and exports by taking advantage of the two trade agreements," Lu says.
"On the other hand, the CPTPP and EVFTA will make Vietnam the only leading apparel exporting country that can get access to almost 40% of the world's apparel import market duty-free, and this creates a strong incentive for investors from China, Hong Kong, Japan and South Korea to invest in Vietnam's textile sector," he adds.
