Industries prepare for Pacific trade pact
Opportunities and challenges await local businesses when the Trans Pacific Partnership is finally agreed, but following a number of sticking points that arose at the last round of negotiations in Singapore this month, the 12 member countries will have to wait until next year for a deal to be signed.
Textile exports from Vieät Nam to the US could grow by 13-20 per cent a year by 2017 and could even hit US$25-30 billion by 2025 if and when the 12 nations in the Trans Pacific Partnership reach an agreement.
This is the opinion of Leâ Tieán Tröôøng, vice-president of the Vieät Nam Textile and Apparel Association (VITAS) and vice-president of the Vieät Nam National Textile & Garment Group (VINATEX).
According to his calculations, each $1 billion of turnover could create about 200,000 jobs for local employees.
Tröôøng said among TPP members, the US accounted for 43 per cent of Vieät Nam's garment export turnover, Japan for 11 per cent and other members for 4 per cent of local textile exports, which reached $11 billion in 2012. When the import tax was reduced from the current 17 per cent to zero under TPP, local textile industries, which earned an export turnover of $17.2 billion last year, would gain.
Ministers from the 12 countries involved in the Trans Pacific Partnership have so far failed to conclude the free-trade pact after a four-day meeting that ended in Singapore on December 10. Having missed the much touted end-of-year deadline, they now await solutions to thorny trade issues involving farm products and automobiles involving Japan and the United States.
The trade ministers and representatives decided to continue talks next month and will try their best to end them as early as possible, according to Deputy Industry and Trade Minister Traàn Quoác Khaùnh, head of the Vietnamese delegation to the negotiations. Khaùnh told a Vietnam News Agency reporter the many issues that had to be resolved included intellectual property rights and reform of State-owned enterprises. If the export interests were not satisfactorily met, it would be hard to negotiate other fields, he added.
Khaùnh said that when the TPP was put into place, Vieät Nam would benefit from its position as a TPP member, especially the country's export sector, as all import taxes would be removed.
Khaùnh said Vieät Nam would have a chance to participate in global production chains, which would pave the way for the country to further promote the restructuring of its economy and reform model, thus increasing job opportunities and improving the business environment to attract more investment.
At plenary sessions of the TPP meeting from December 7-10, besides tackling issues such as trade liberalisation in goods, services, investments, and government procurement, delegates discussed areas such as intellectual property rights, technical barriers to trade, labour, the environment, agriculture, investment, financial services, telecommunications and state-owned enterprises.
Addressing a press conference after the meeting, US trade representative Michael Froman said the parties reached a consensus on many issues and identified existing ones for further debate.
Regarding the garment sector, one of the important issues of the concerned parties, including Vieät Nam, Froman said the US side had held discussions with Vieät Nam and its TPP partners about market access.
Voõ Trí Thaønh, deputy head of the Central Institute for Economic Management said: "To overcome the challenges that will face the country once TPP is realised, it is necessary to take measures to support small and medium-sized enterprises, while implementing specific target programmes and perfecting Vieät Nam's social welfare system.
Industry and Trade Minister Vuõ Huy Hoaøng, said when the TPP agreement was reached, it would help boost export development and increase foreign direct investment (FDI) in Vieät Nam. Furthermore, he said it would offer Vieät Nam a great opportunity to accelerate the restructuring process in association with the innovation of an economic growth model.
However, according to Hoaøng, the agricultural sector would be the most vulnerable because Vieät Nam was basically an agricultural country with small-scale manufacturing, low labour productivity and high costs.
Therefore, during the negotiations with the US and other members, Vieät Nam asked for consideration to be made of the differences in development between member countries.
Vieät Nam had asked for a suitable roadmap to implement TPP commitments for slow developing countries like Vieät Nam in fields such as tax reduction and exemption.
On the other hand, Vieät Nam's agricultural businesses, including seafood firms, needed time to develop a roadmap to overcome shortcomings and to improve product competitiveness. According to the WTO centre at the Vieät Nam Chamber of Commerce and Industry, a TPP agreement will chal-
lenge local seafood traders because taxes on imported seafood would be slashed to almost zero, meaning local traders would face more competition.
Meanwhile, the centre said that zero tariffs on exports to other TPP countries would have little affect on the fisheries industry, which is making billions of dollars in annual exports each year, especially to TPP members such as the US and Japan.
For instance, in the US, one of the largest importers of Vietnamese seafood, most import tax lines for Vietnamese seafood are already a low 0.3 per cent for fresh seafood and 4.7 per cent for processed seafood.
The centre said that, when reached, the new TPP agreement would not reduce food hygiene and safety standards, technical barriers or trade remedies that Vietnamese seafood exports have often faced in the US, the EU or Japan.
The export value of Vietnamese seafood in the first 11 months of this year increased year on year by 9.1 per cent to US$6.11 billion, according to the Ministry of Agriculture and Rural Development. The US was the largest importer, accounting for 22 per cent of total export value. The export value of seafood to other countries also went up, with exports to China rising 58.6 per cent; to Canada, 28.2 per cent; and to Thailand, 8.3 per cent.
In the last quarter of 2013, the export value of seafood is estimated to reach $1.7 billion, 6.5 per cent higher than the same period of last year. The value for the whole year is expected to increase 5 per cent to $6.5 billion.
This meant that any TPP free trader agreement next year would not boost local fisheries or, on the other hand, have a negative affect. The WTO centre added that in the post TPP period, seafood enterprises should be ready to face fierce, but fair competition.
While most of the local media draw a beautiful picture of the relationship between the Vietnamese textile industry and the TPP, few mention the situation for small and medium textile companies which may enjoy nothing from a bigger market.
Nguyeãn Ngoïc Anh, director of DHA Textile Company in Baéc Ninh City, does not think his company will have a much better future when the Tran-Pacific Partnership (TPP) Agreement is signed.
He welcomes the news as positive for many companies, but not his. The company, a successful business providing work for 3,000 workers since it opened in May with forecast annual revenue of 200 billion ñoàng (US$9.5 million), exports 95 per cent of its products to the US.
DHA textiles, one of 6,000 garment exporting enterprises in Vieät Nam, was making products for famous brands such as Columbia, Timberland, E-land, Valentino, Forever 21, Bella, Chico's, Kmark, Under Amor, A.Fusion, ShyWoon, Footlooker, GEOX, CoterFiel, JackWoflSkin, Lyle&Scote, Access, said Nguyeãn Ngoïc Anh, director of the company in Baéc Ninh City.
"At the beginning we can benefit from making orders from the US," he said, but added that in the long run, under the TPP's ' yarn forward' or Rule of Origin, members were required to use TPP member-produced yarn to receive duty-free access, meaning that companies like us won't see a big change, said Ngoïc Anh. He said his company was using fabric materials mostly from mainland China and Taiwan. He only uses five per cent of domestic fabrics, which are always in short supply.
Anh added that he could not find any fabric partners in the US, New Zealand, Brunei, Chile, Vieät Nam, Singapore, Australia, Peru, Malaysia, Canada, Mexico or Japan.
At present Vieät Nam cannot produce enough cloth for the export garment trade so many manufacturers must import it from China, Taiwan and Korea, which are not TPP members. As those companies cannot meet the TPP's "yarn forward" or Rule of Origin.
There are thousands of garment companies in Viet Nam, but they don't directly export their products but make them for the others so the TPP's tax-free benefits will be earned by the exporters, not the garment companies.
Vinatex's deputy Leâ Tieán Tröôøng, said companies that produced both materials and garment textiles would benefit. He referred to Vinatex's Phong Phuù Textile Company, as a good example of a company which had a full production chain.
The few companies in Viet Nam that produce fibre, clothes and accessories and make garments will certainly benefit from any new agreement as they meet the "yarn forward" demand that everything be produced and made in a TPP member country.
Tröôøng said there were plans to produce garments containing 60 per cent of local materials by 2015 and 70 per cent by 2020. While only a few local Vietnamese companies are able to produce the full chain from fibres to garments, many Foreign Direct Invested (FDI) firms have already managed to lock into local fibre producers. This, of course, means they can take full advantage of the new system when it comes.
According to Viet Capital Securities Company's July report on the TPP, Vieät Nam has attracted more foreign manufacturers of fibre, cloth and apparel to set up business in Viet Nam and provide materials for Vieät Nam-based garment and textile firms.
Examples include the Chinese Texhong Textile Group, which started work on a $200 million fabrics plant in July. It plans to build another $400 million plant in south Viet Nam next year, South Korea's Hyosung has also expanded its production facility of spandex in the southern province of Ñoàng Nai.
The Viet Capital report also said TAL Hong Kong Development Company also planned a $200 million expansion of its existing $40 miliion factory to make fabrics, garments and textiles. South Korean textile and garment maker KyungBang has also opened a $40 million high-quality cotton yarn factory in the southern province of Bình Döông.
Last year, Tian Nan, a Chinese-Vietnamese textile and dyeing joint venture, was established to develop a $24 million cloth making project in the northern province of Nam Ñònh.
Minister of Industry and Trade Vuõ Huy Hoaøng said Vieät Nam authorities at all levels, enterprises, social organisations and people should join efforts to take advantage of opportunities the TPP agreement would create because, eventually, they would promote the country's economic growth.
Hoaøng said integration should be part of the reform and restructuring of the economy and the change of economic growth model of Vieät Nam. Therefore, sectors and enterprises should prepare thoroughly in order to integrate successfully.
Instead of more price competition, enterprises should pay more attention to improving the quality and design of products through advanced technologies and using more highly skilled workers.
Workers at the Ñöùc Giang Garment Corporation check garments for export. Vieät Nam expects to attract interest in the garment and textiles industry once the TPP agreement is signed.