TPP may help Vietnam sew up clothing exports

by UK Financial Times27 February 2016 Last updated at 15:00 PM - Vietnam looks set to become the biggest beneficiary of the US-led Trans-Pacific Partnership trade deal out of the four Southeast Asian participants, the other three being Brunei, Malaysia and Singapore.

This according to an article written by David Robinson recently published in the UK Financial Times.

The 12-country pact — covering about 40% of the world’s economy — will grant Vietnamese manufacturers tariff-free access to several large markets. It should also force Vietnam’s communist government to speed up the restructuring of its domestic economy and push ahead with the difficult task of privatising its influential state-owned enterprises.

Vietnam’s new leadership remains committed to the pact following the national party congress in January and it is expected to ratify the agreement this year, although the deal also requires ratification by the US Congress, where it faces a tricky passage.

Once ratified, the TPP will grant Vietnamese companies tariff-free access to the US, with which it does not presently have a free trade deal, along with other large markets such as Japan and Australia.

This will boost demand for Vietnamese exports and create a wealth of new jobs at home. The sectors that stand to benefit the most are apparel, footwear and textiles, which together accounted for 26% of Vietnamese exports in 2014.

These industries have already grown rapidly over recent years.

At present, US import tariffs on Vietnamese-made footwear can be as high as 48%, while certain items of clothing can face tariffs of 20%, according to the World Trade Organisation.

The TPP will cut these tariffs to zero or close to zero, depending on the goods. This promises to accelerate an already steady increase in Vietnamese exports to the US of footwear, which were up 23% in 2015, and apparel, which were up 14%. At present, only China ships more of these goods to the US.

Moreover, the reduction of tariffs will provide further incentives for Chinese footwear and apparel producers to relocate or expand across the border to Vietnam. Over the past decade, rising labour costs in China have encouraged lower-value-added industries to move production to the Mekong region, with Vietnam receiving the lion’s share.


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