Quota elimination hits Vietnam hard
For countries such as Vietnam the removal of quotas for World Trade Organisation members has served a hard blow writes Michael Fitzpatrick, particularly in the light of Vietnam's recent hard-won propulsion to the spot of number-two Asian textile importer to the USA.
The US International Trade Commission (USITC) recently ranked the communist bloc country as second only after China in terms of competitiveness among Asian textile and garment producers.
Vietnam, one of the world's poorest countries, appeared to be on a roll despite accusations of unfair trading and dumping.
Now with a bird flu epidemic looming, the country is holding its breath for the outcome of what the World Health Organisation has called one of the greatest threats to World health since the 1917 Spanish flu pandemic that killed millions globally.
Knowledgeable that such an outbreak may well be sparked in its own backyard, Vietnamese officials are keen to stress they have the disease under control. However a full-scale outbreak, like the SARS outbreak that devastated China two years ago, will bring calamity to Vietnam's trade and particularly to its apparel and textile exports.
EU quotas lifted
Vietnam was delighted when the European Union lifted quotas on its textile and clothing imports ahead of the country's expected accession to the WTO at the end of the year. However, the reality is that WTO member countries such as China have benefited more from the WTO open market since the start of the New Year.
The slowdown since the quota removals has been marked for Vietnam, with demand for Vietnam's best-selling apparel products on the EU market cooling considerably and exporter revenues decreasing dramatically.
According to Vietnam's Ministry of Industry, a slowdown had been expected but many in the industry were not prepared for the mammoth extent of loss of market share to China.
The industry's apparel and textile export earnings edged up only 1.4 per cent against the same period last year, bringing in only around US$566 million, said the Ministry of Industry (MoI) - a figure considerably lower than the industry's initial target of 18 per cent for the entire year.
Contrast this with textile and garment exports to the EU market valued nearly at US$800 million for 2004, a total representing 18.4 per cent of the national textile and garment export turnover, and the cause for concern becomes more tangible.
Vietnam's other main markets - the US, Canada and Turkey - represented around 70 per cent of the export turnover. Of these, the US remains the biggest importer, although this year's figures see Vietnam's sales to the US, too, have stagnated.
US exports sluggish
Vietnam's garment exports to the US remained sluggish at US$300 million, with exports of both quota and non-quota items to America having plunged.
Textile and garment exports to the US market were US$2.35-2.4 billion last year accounting for 55.2 per cent of Vietnam's national textile and garment export turnover. That was up by 21.5 per cent over 2003. Export turnover of quota-free products amounted US$750-800 million.
US quotas will be maintained this year and may possibly extend to additional categories after a petition was recently filed by a coalition of US textile industry associations. US quotas could finally be removed by the end of 2005, however, after Vietnam's admission to the WTO.
To tackle the sudden dip in orders and China's increased dominance, Vietnam's Ministry of Trade has urged companies to capitalise on locally made raw materials and accessories in order to cut costs.
The government says it is also doing everything in its power to make sure quotas are filled and applications for export licenses are dealt with quickly.
It is essential, says Vietnam's vice minister of trade Le Danh Vinh, to increase competitiveness to survive in the light of 2004 and 2005 quotas for textile and garment products and the WTO ruling.
"Non-WTO member countries including Vietnam, of which textile and garment exports will still be controlled by quantitative limits, will face unfair competition and loss of market share," he says.
"The elimination will be a big disadvantage to Vietnam's textile and garment industry because importers will seek goods from quota-free countries. Vietnam will lose market share and it will be difficult for Vietnam to gain market share growths in traditional quota markets."
Domestic exporters have encountered particularly harsh competition from Chinese enterprises that sell primarily to American and European importers. Chinese exports to the EU in high-demand categories such as trousers, sweaters, T-shirts and polo shirts have surged by 40-60 per cent.
Chinese garments represent a market share of 80 per cent for the world's largest importers, including America, Japan and the EU.
Labouring under lawsuits
Vietnamese exporters are also currently labouring under lawsuits as a result of breaching what the Americans have determined were their anti-dumping laws.
The Vietnam government says it now keen to extend help and advice on how to tackle such suits. Since 1994, Vietnam has faced about 16 anti-dumping cases triggered by countries importing from Vietnam goods such as footwear, textiles and garments, bicycle, agricultural products, mechanical tools, points out Le Danh.
The government has since organised seminars and such to help their exporters through the legal minefields they now face.
"According to economic and juridical experts, the US's textile and garment industry is seeking legal measures such as anti-dumping measures, anti-subsidy measures or countervailing measures to protect domestic products from the tough competition with imported cheap goods," Le Danh says.
"However, to bring foreign producers to a court for trial, it takes time for US producers to collect evidence such as rocketing import turnover and number of suppliers and plummeting prices. In short, such media news is baseless."
US legal and business experts say that an agreement on textile and garment imports (including the issue of quotas) will not solve the problems of anti-dumping, anti-subsidy or countervailing raised by importing countries.
"However, participants of the seminars wished to deliver a forecast on new changes in the US market so that Vietnamese textile and garment enterprises can properly prepare suitable measures to cope with possible cases triggered by the US textile and garment industry."
By Michael Fitzpatrick.
Companies: Warnaco Group Inc
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