Why Did Vietnam'S Textile Exports Not Erupt In The Year When CPTPP Came Into Effect?

Vietnamese media quoted statistics from the Vietnam textile and Garment Association (VITAS), showing that Vietnam's total exports of textiles and clothing amounted to about 39 billion dollars in 2019, of which 5 billion 530 million of the total exports of the "trans Pacific Partnership comprehensive progress agreement" (CPTPP) increased by nearly 7%, accounting for 16.8% of total exports.

However, the export figures of Japan and Singapore, which are very high in Vietnam, are not very bright. Vietnam exported only 3 billion 900 million US dollars this year, an increase of 4%, while exports to Singapore were 95 million US dollars, down 12.5%.

Why did Vietnam fail to expect rapid growth in its exports to CPTPP members?

Yuan Bo, deputy director and Research Fellow of the Asian Research Institute of the Ministry of Commerce, told the first financial reporter that from the perspective of those members who are now in force by CPTPP, Vietnam has already had a free trade agreement (FTA) with most of its members, and the increment may not be so large. At the same time, the present regional and global economic situation must be included in the overall consideration. Yuan Bo said: "in fact, most of the East Asian region exports to the US and EU markets, and so does Vietnam."

CPTPP's high standards are hard to deal with

CPTPP came into effect in January 1, 2019.

Vietnamese media reported that after the entry into force, the textile industry orders did not "burst", the main reasons are probably the following four aspects.

First, as pointed out by Truong Van Cam, vice president and Secretary General of VITAS, many companies only account for about 70% of the same period in 2018. The reason is that importers from all over the world are shifting orders from Vietnam to Bangladesh, India or Burma.

Second, without the US CPTPP, Vietnam's expected revenue has been greatly reduced. According to Vietnamese data, Vietnam accounted for 45% of Vietnam's textile exports in 2018 and exports to Vietnam accounted for 12.5% of Vietnam's textile and clothing exports. Meanwhile, Japan's clothing purchasing power is declining in the 11 country CPTPP, which replaces Japan's largest export market position.

In addition, as Yuan Bo pointed out, there has been extensive bilateral or multilateral free trade agreements between CPTPP11 countries, and their textile imports and exports have long been complied with the concessions between these FTA.

Third, since CPTPP has put forward a more specific principle of "starting from yarn", that is, the place of origin of the yarn originated from the place of origin, and if the goods are made in the final processing stage of Vietnam, it is necessary to meet the requirements of the relevant code of commodity (HS) conversion and the new value added ratio of the domestic market to exceed 30%, so as to label "Vietnam made", which is the same as Vietnam's current textile industry. The deployment of the value chain is not consistent.

Nguyen Thi Thu Trang, director of the VCCI WTO center, once pointed out that Vietnam must import cotton, 80% fabrics and other materials from China and India, so the cost of Vietnam's products is much higher than that of foreign direct investment firm. Therefore, in the 2019 Global trade frictions, the Korean textile enterprises with relatively complete value chains in Vietnam became the beneficiaries. According to Vietnamese media reports, the export volume of 143 Korean textile and garment enterprises in Vietnam accounted for about 50% of Vietnam's textile and clothing exports to Vietnam this year.

Vietnam is actively preparing for docking EVFTA

In June 30, 2019, Vietnam and the European Union signed two comprehensive, high-quality and balanced agreements, namely, the free trade agreement between Vietnam and the European Union (EVFTA) and the investment protection agreement between Vietnam and the EU.

Among them, EVFTA is expected to take effect in 2020. In Vietnam, the agreement can effectively enhance the export competitiveness of domestic enterprises and enter the European market with a better attitude. It also marks Vietnam's further integration into the international community.

According to EVFTA official documents, according to the agreement, the two sides will gradually abolish 99% tariffs in 10 years, and Vietnam's main export products such as rice, aquatic products, clothing and footwear will receive tariff preferences.

At the same time, the agreement protects EU's geographical indication products, allowing EU enterprises to participate in Vietnamese government procurement and get equal treatment with Vietnamese enterprises.

Specifically for the textile and garment industry, the EU will eliminate 42.5% tariffs in this field and the remaining 3~7 will be adjusted within the next year. As for the benefits of the agreement, VCCI chairman Wu Jinlu said Vietnam's business environment will continue to improve, and the competitive advantage of Vietnamese goods in the short and medium term will be higher than that of ASEAN countries in the EU market.

At that time, Vietnam's textile, clothing and luggage industry will be further developed, and Vietnam's domestic enterprises will also have the opportunity to obtain advanced equipment and technology from the European Union through EVFTA, thereby improving labor productivity and product quality.

The European Union is the second largest export market in Vietnam. Its main exports include clothing and footwear.

The Vietnamese government had predicted that by the end of 2020, EVFTA would boost exports to Vietnam by 15.28% and boost Vietnam's exports to the EU by 20%.

By 2023, the agreement will push Vietnam's GDP to grow by 2.18% to 3.25% a year and 4.57% to 5.3% a year from 2024 to 2028.