Trans-Pacific Partnership Agreement to Boost Vietnam–U.S. Textile Trade
Feb. 6 – The proposed Trans-Pacific Partnership (TPP) is likely to have a positive impact on Vietnamese exports to the United States, and will boost the performance of Vietnam’s export processing zones. The TPP is an agreement that will seek to create a large free trade zone, linking together key players among the Pacific economies.
The TPP has previously endured criticism from Beijing due to the exclusion of China. This has in part lead to the creation of another free trade agreement that further opens up Chinese markets to Asia in the Regional Comprehensive Economic Partnership. In some quarters, the TTP’s actual political aim is to force the Chinese to commit to better market access for Asia and to improve the quality of its products or risk facing increased American purchasing choices and regional supplier competition.
Chinese political commentary aside, however, the TPP also seeks to encourage an upgrading of many Vietnamese manufactured products which currently fail to meet U.S. standards. In Vietnam, 80 percent of Vietnamese textile fabrics fail to meet U.S. quality standards and are forbidden for export to the United States. One expected impact of the TPP agreement is increased investment into Vietnamese technology and manufacturing by American investors. When combined with the proposed TPP tariff reductions, it will assist Vietnamese companies to upgrade and meet international quality standards in the textiles sector. This then further opens the American market to Vietnamese companies. At the present, the Vietnamese textile industry has concentrated on supplying lower quality goods to China, which has less stringent quality demands and pays less margin for its imports than the American market.
The TPP agreement is expected to be fully negotiated and finalized later this year, a situation that will increase competition for the Chinese manufactured textiles industry by Vietnamese competitors. This will trigger increased foreign investment into Vietnam’s export processing zones than what has until now been almost exclusively a China-dominated arena.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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