Vietnam And EU Sign Free Trade Agreement, Pressure On Vietnamese Textile And Garment Industry

Vietnam and the European Union will soon complete the signing of the free trade agreement (EVFTA).

This agreement will bring benefits and challenges to many major industries in Vietnam.

It is noteworthy that the commitments of the agreement will have a greater impact on agriculture and industry in Vietnam.

According to EU-MUTRAP program expert Mr. Paul Baker, the impact of EVFTA on Vietnam's industry is more than 6 industries, including textile and garment industry, leather and footwear, automobiles, high technology, handicrafts and processed wood products.

All industries can grow significantly and compete, but Vietnam still faces many challenges.

In the textile and garment industry, Vietnam's textile and garment industry has a strong dependence on imports of raw materials, and the added value of the industry is quite low (about 40%). Among them, the main source of raw materials for imports is China, Korea and Taiwan, and machinery and equipment are imported from China, Japan and other countries.

Vietnam's textile and garment industry is difficult to surpass countries with competitive advantages in terms of price, standards, design and technology advantages.

In addition, the requirements of EU consumers and the rules of origin, registration, inspection, certification and chemical control of products are also obstacles to Vietnam's export of European and wooden products.

The restrictions on energy, high pport costs, and high quality standards have led to the fierce competition between Vietnam's wood industry and handicrafts industry in the European market.

Vietnam has actively expanded its cotton growing area to 76 thousand hectares by 2020.

The textile industry is a pillar industry in Vietnam. However, the output of cotton in Vietnam is very low, which can only meet 1% of its domestic production demand, and the cotton needed for the garment and textile industry is heavily dependent on imports.

In the first seven months of this year, Vietnam's cotton imports rose by 34% to a record 458 thousand tons, and the total value of imports of cotton increased by 36.3% to 919 million US dollars over the same period.

Ho Thi Kim Thoa, Vietnam's minister of industry and trade, said that the total area of cultivated land in Vietnam was reduced from 30 thousand hectares to 10 thousand hectares, resulting in a significant decline in cotton production.

Cotton is the main raw material for industrial development. Vietnam needs more than 400 thousand tons of cotton to meet the rising domestic industry development needs.

At present, the raw material cotton for Vietnam's garment industry will still be imported from abroad.

Although the government has approved the adoption of a cotton growing development project (2015 to 2020), cotton growers still face various difficulties.

Because of the higher income from planting other crops, more and more Vietnamese farmers are no longer paying attention to cotton planting.

To this end, the Vietnam National Textile and garment development group will set up a cotton plantation to ensure the basic supply of raw materials and provide experience guidance for farmers.

Encourage domestic farmers to expand the scale of cotton production.

In 2015, Vietnam's textile and garment exports amounted to $190 to $19 billion 500 million, and the target was 250 to $27 billion in 2020.

To achieve this goal, Vietnam is actively carrying out a number of textile industry development plans, including the production of 1 billion meters of cloth for export, the promotion of human resources development in the textile industry, and the expansion of cotton planting area to improve self-restraint rate.

In 2014, Vietnam Textile Group (Vinatex) will invest in 57 projects, including 5 spinning projects, 8 weaving projects, 24 sewing projects and 2 cotton plantations.

It is estimated that the cotton planting area will reach 76 thousand hectares by 2020.

However, the industry pointed out that under the constraints of natural conditions, it is difficult to achieve the target. Vietnam will still need to import large quantities of raw cotton in the future.