How many T-shirts will Vietnam have to export to earn the money to purchase one of Boeing’s $140-million aircraft? The US National Textile Association would be appalled at the answer. After hearings were held by the US Department of Commerce (DoC) regarding Vietnam’s apparel imports monitoring scheme on April 24, questions could also be asked about what happened to the win-win scenarios and level playing fields that were to come with WTO membership.

The US National Textile Association is insisting on the continued application of the imports monitoring scheme for Vietnamese-made apparel products, according to Mr Le Quoc An, Chairman of the Vietnam Textile and Apparel Association (Vitas), which led the Vietnamese delegation at last month’s hearing. The Association argued that “Vietnam is operating a non-market economy and it is therefore necessary to apply a special monitoring program to control imports from the country.” Predictions by Mr Fred Burke, Managing Lawyer at Baker & McKenzie law firm, late last year have proved to be prescient. “It is certain that some economic sectors in Vietnam will face tougher competition, while many others will benefit when the economy joins WTO,” Mr Burke told VET in the days before membership was confirmed. “In my view, the first and hardest hit will be the garment sector.”

The tough global game
Just after Vietnam won its membership bid late last year, the Bush Administration, when trying to persuade Congress to ratify the granting of Permanent Normal Trade Relations (PNTR) status to the country, promised two Congressmen from North Carolina that a monitoring program would be introduced if evidence was found that Vietnamese garment exports were being dumped in the US and harming US manufacturers,.

The program began almost immediately, in January. The Administration agreed to begin monitoring apparel imports from Vietnam and to consider self-initiation of anti-dumping lawsuits. Vietnam, of course, vigorously complained about the program. Vitas, together with other government bodies and enterprise associations sent a letter of appeal to DoC, while the Ministry of Trade asked local exporters to report in detail on all textile and apparel exports to the US market.

DoC’s Assistant Secretary for Import Administration, Mr David Spooner, said that the monitoring has not had a negative impact on trade, citing an increase in imports from Vietnam in January. During his visit to Vietnam last month, he said that no violations had been found in the country’s textile and apparels exports to the US since the monitoring began. He assured Vietnamese exporters that the US was committed to creating a transparent monitoring mechanism that would neither affect Vietnam’s textile and garments industry nor the Vietnam-US bilateral trade relationship.

The program is also facing opposition from within the US. The National Retail Federation (NRF) told the Bush Administration during last month’s hearing that US retailers have sharply curtailed orders for garments from Vietnam since the monitoring got underway, in readiness for any possible dumping lawsuits. The NRF asked the Bush Administration to immediately narrow the scope of the program. “Implementation of the monitoring program has had a chilling effect on apparel sourcing for Vietnam,” NRF Vice President and International Trade Counsel Mr Erik Autor said. “Pending orders from the country have plummeted. At least one prominent retailer has ceased all orders from Vietnam, another has cut its orders by 80 per cent, and many others have cut their orders substantially.”

Mr Autor added that imports delivered in January this year were based on orders typically made six to nine months earlier – before the monitoring had begun. Orders have now decreased sharply, he said, and should be reflected in decreased import deliveries in the summer, He had previously warned that allowing the government to unilaterally instigate dumping cases could discourage retailers from sourcing goods from foreign countries. “This could really jack up the prices of retail goods - possibly more than doubling the price,” he told KPMG Global’s Consumer Markets magazine. “This really is a risky issue for retailers because, down the road, they could be hit with a huge bill from US Customs. [Companies] may also have to withdraw from Vietnam.”

According to Mr Chris Runckel, President of Runckel & Associates, a Portland, Oregan-based consulting firm, the cost apparel production is less expensive in Vietnam than in other economies such as China. Vietnam is gaining an edge, said Mr Runkel, who helps companies set up operations in Asia. Due to domestic demand, the cost of making goods in other Southeast Asian economies has increased. While others are still among the top sourcing countries for many goods, inexpensive labour costs and increasing quality have induced many retailers to buy from Vietnamese manufacturers. In addition, he added, Vietnam is a much smaller country and its intellectual property laws are easier to enforce. “Vietnam is working to bring their intellectual property laws in line with foreign investor needs,” Mr Runckel said.

In this context, some American manufacturers believe that sourcing from Central America has its benefits, as it takes about a week to ship finished products to the US compared to 45 days from China. But Central American manufacturers haven’t been as aggressive as their Vietnamese counterparts, Mr Runckel insisted, which has translated into greater efficiencies and lower costs than most Central American nations. Companies such as Nike are contracting with companies in Vietnam to produce goods, and the country is also attracting retailers, lured by its high number of young people.

Looking for solutions
Now is the time to think of win-win solutions, analysts say. “If Vietnam does not react in a timely and proper manner its textile and garment sector will be hit hard and miss the chance presented by WTO membership to increase exports,” said Ms Dinh Thi Anh Tuyet, a lawyer with the Vilaf Hong Duc law firm in Hanoi. An overall, long-term solution is necessary to secure the jobs of millions of the sector’s employees, she added.

Firstly, she went on, Vietnam exporters should thoroughly study all WTO and US documents about the matter, to rebut the arguments of US manufacturers.

Secondly, Vietnam should think of a bilateral consultation mechanism with its US partners to reduce the possibility of the case going to court, and instil confidence among US importers with clear facts. “The consultation mechanism could resemble the lobbying that Japan succeeded with in the US some years ago over their steel exports,” Ms Tuyet said.

Vietnam’s textile and apparel producers had been nominated as being one of the country’s biggest winners from WTO entry. The sector currently comprises 187 state owned enterprises, 800 limited liability, joint stock and private companies, and 180 foreign-invested ventures, employing about 1.1 million workers. Last year, Vietnam exported $5.8 billion worth of textiles and garments, up 20 per cent year-on-year and double the amount sent overseas in 2002. The industry targets collectively boosting that figure to $7 billion in 2007, a projection predicated on greater exports to the US. “The import monitoring program blatantly discriminates against imports from Vietnam, singling out its trade and discouraging US importers and retailers from doing business with the country,” the statement from Vitas said. 

Source: VNEconomy