What’s the future for textiles & garments without the TPP?

What’s the future for textiles & garments without the TPP?

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With the collapse of TPP, the textile & garment industry will have to revise its investment and development strategy.

Textiles & garments has been an important export item for many years. In 2005, textiles and garments made up 14.9 percent of export turnover. In 2016, the figure rose to 17.8 percent.

In 2005-2016, Vietnam was one of the countries pioneering in global economic integration. It did not skip any free trade agreement (FTA), meaning that Vietnam has exploited all possible FTAs, at least in the medium term.

However, analysts said that even if the agreement became realistic, TPP would not be a ‘magic wand’ that helps the industry skyrocket. With the ‘yard forward’ principle, Vietnam’s textile and garment exports would enjoy preferential tariffs if they use input materials sourced from TPP member countries.

A research work by Vanzetti & Pham in 2014 showed that Vietnam only imports 5.3 percent of input materials from TPP member countries. This means that if the figure cannot improve, only 5.3 percent of Vietnam’s textile & garment output would enjoy preferential tariffs under TPP.

Analysts have every reason to doubt Vietnam would not be able to get many benefits from TPP. In fact, Vietnam did not carry out any research work on the quantitative benefits it could expect from TPP.

Vietnamese businesses were only inspired by surveys by international organisations that Vietnam would most benefit from TPP.

It’s still unclear how the textile and industry would work out after TPP collapsed. When TPP was under negotiations, three scenarios for the industry were drawn up.

First, Vietnam would increase imports from TPP member countries. The solution was not feasible and it should not be discussed further as the US has left TPP. Second, Vietnam would rely on external resources, a solution easily implemented.

In 2014-2016 alone, $2.563 billion worth of foreign direct investment (FDI) was poured into the textile & garment sector. However, this means that Vietnam’s supporting industries would depend on the foreign invested sector.

Third, Vietnam would rely on its internal strength. Establishing an inter-provincial cluster of textile & garment production centers has been suggested.

If the solution is implemented, the eastern part of the southern region, which now makes up 60 percent of total textile and garment export turnover, would be a good choice.

HCM City, the nucleus of the cluster, would focus on branding and designing, while other localities would be production centers.

This southeastern region makes up 50 percent of Vietnam’s most important indexes, including GDP, industrial production output and exports.

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