Vietnam Europe Free Trade Agreement Comes Into Force, Textile Export Competition Expands Again

Recently, a piece of news has attracted the attention of all textile workers in China

The free trade agreement between Vietnam and the European Union came into effect on August 1. According to the agreement, the EU immediately eliminated 85.6% of the tariff on Vietnam, equivalent to 70.3% of Vietnam's exports to the EU. Seven years later, 99.2% of Vietnam's tariff will be eliminated, which is equivalent to 99.7% of Vietnam's exports to the EU, and the remaining 0.3%. The EU promises to import with zero tariff in the form of quota. On the contrary, Vietnam will eliminate 48.5% tariff on EU exports (64% of total imports). After 7 years, 91.8% of the total import tariff (97.1% of the total import) will be eliminated, and 98.3% of the total import tariff will be eliminated 10 years later (accounting for 99.8% of the total import).

For a long time, the import and export trade between EU and Vietnam has a strong complementarity. The EU exports medium and high-end industries to Vietnam, and Vietnam exports its labor-intensive products and some low-end electronic products to the EU. At present, Vietnam has become the third largest textile export country in the world after India. In the current free trade agreement between Vietnam and the European Union, textiles are involved in the first tier of products subject to immediate tariff cancellation.

In recent years, the amount of clothing exported from Vietnam to the EU has gradually increased. In 2019, Vietnam's export to the EU has increased from US $2.8 billion in 2000 to US $41.54 billion, of which more than US $5 billion is clothing exports, accounting for more than 10% of the total exports. In recent years, the amount of clothing imported by EU from Vietnam has also maintained a steady growth, with a growth rate of about 28.6% last year.

　　 At present, Vietnam's clothing and textile industry has occupied a place in the international market. In the past, the strategy of purchasing clothing from many other countries, such as the United States, China and many other countries. Now it's 30-50% in China and 10-30% in Vietnam, plus other countries. The formal entry into force of the free trade agreement will undoubtedly help Vietnam further expand its export volume, and at the same time, it may further aggravate the domestic and foreign troubles in China's textile industry.

At present, what kind of problems are facing China's textile industry?

Inside

In the post epidemic era, the phenomenon of overcapacity in the textile industry has become more prominent, and conventional products are still unsalable. Both weaving enterprises and traders are still facing the situation of production and marketing difficulties and poor orders. Even if some of the products have been sold well recently and some manufacturers have gone to stock a little, it is difficult to drive the whole market to improve. Most manufacturers are still facing the expectation of accumulated inventory.

It can be seen that weaving factories can't change the market situation, even if they have just started to reduce production and demand, it is still difficult to be cautious in the future.

foreign

The epidemic situation in foreign countries is still spreading, and tens of thousands of new cases are confirmed every day, which has formed a greater resistance to the export of textile and clothing products. At the same time, the political tension between China and the United States, China and India has also clouded the prospects of the textile and clothing industry.

　 For the United States: In the early morning of July 21, the Bureau of industry and security of the U.S. Department of Commerce suddenly announced that 11 Chinese enterprises would be included in the "entity list", including Changji Yida textile, Hotan TEDA garment and Nanjing Xinyi cotton textile. On May 24, Huafu subsidiary, the world's largest color textile enterprise, was also included in the list.

　　 For India: India has been acting constantly recently, increasing tariffs, withholding goods from customs, boycotting domestic products, blocking app, and strengthening the verification of certificate of origin... The Indian government expects to impose 20% - 25% tariff on imported PV modules from August, raise the basic tariff of solar modules to 40% within one year, and plan to raise the tariff of PV inverter made in China to 25%. At present, there is no domestic policy to impose tariffs on inverters in India. India's 500-550 commodities in leather products, agricultural products and textiles are competitive with China. Judging from India's tough attitude towards Chinese goods, it is not impossible to impose textile tariffs in the future.

At present, China's textile industry is facing overcapacity in domestic sales, epidemic situation and political factors in export sales. Now, coupled with the diversion of export orders brought about by Vietnam EU free trade agreement, the textile industry is in dire straits this year. However, it is worth noting that the products enjoying zero tariff in this FTA should comply with the EU origin principle—— In other words, the raw materials of export products must be originated from Vietnam, the European Union or other countries that have signed free trade agreements with the EU.

This means that at the present stage, China does not have to worry too much about the greater impact on domestic textile exports after the entry into force of the Vietnam European Free Trade Agreement. After all, the fabrics used by Vietnamese textile and garment enterprises are still mainly imported from China and other countries. If they want to enjoy zero EU tariff, enterprises can not use imported fabrics, but the existing textile printing and dyeing enterprises in Vietnam In a few cases, the supporting production capacity is far less than that of the domestic market with a very high degree of industrial integration.