Outlook of Sourcing from Vietnam (Updated: August 2017)

State of Vietnam’s Textile and Clothing Industry

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Vietnam has a substantial textile and clothing industry comprising around 4,000 enterprises, of which the majority were located in the country’s two principal population centers—Ho Chi Minh City and Hanoi. Around 70% of these enterprises were involved in the manufacture of clothing. A further 17% were involved in the fabric sector, 6% in the yarn sector, 4% in the dyeing sector and 3% in the accessories sector.

It is estimated that around 70% of Vietnam’s textile and clothing production is dependent on the cut and trims operations, using imported textiles and other inputs predominantly from China. This problem is not limited to a single category as the country needs to import man-made fibers, yarns, fabrics, and accessories as well as raw cotton.

The dyeing and finishing segments of the supply chain remain fairly underdeveloped. In the past, the Vietnamese government has issued tightly controlled permits for these operations. Also, there has been a deficiency of investment in these segments because of unclear regulations, and this has resulted in a bottleneck in the supply chain.

Similarly, high added-value design and “downstream” activities rely on the input of foreign companies are also underdeveloped. Consequently, in carrying out these activities, the industry relies heavily on the help or participation of foreign companies.

State of Vietnam’s Textile and Apparel Export

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Vietnamese textile and clothing exports began to gain momentum in 2001 when trading relationships were established with Western countries (e.g., the US-Vietnam Textile Agreement). The industry’s exports received a further boost after Vietnam joined the World Trade Organization (WTO) at the start of 2007, and the quotas which had been restricting imports of Vietnamese goods in the US market were eliminated.

In 2016, Vietnam’s textile and clothing exports totaled $28 billion (84% were clothing), which represented 16.0% of Vietnam’s total merchandise exports. Globally, Vietnam was the world’s third largest apparel exporter in 2015, after China and Bangladesh (WTO, 2016).

The Vietnam Textile & Apparel Association (VITAS) expects Vietnam’s textile and clothing exports to enjoy an average 15% annual growth in the next four years and exceed $50 billion USD by 2020.

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Vietnam’s textile and clothing exports went to around 180 countries. The United States is Vietnam’s top export market (around 40%), followed by the EU (around 12.5%), Japan (10.3%) and South Korea (8.1%).

Outlook of Sourcing from Vietnam by US Fashion Companies

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According to the 2017 US Fashion Industry Benchmarking Study, Vietnam is the 2nd most used sourcing destination by respondents. Particularly, the most commonly adopted sourcing model is shifting from “China Plus Many” to “China Plus Vietnam Plus Many”:

  • China typically accounts for 30-50 percent of respondents’ total sourcing value or volume. 
  • Vietnam typically accounts for 11-30 percent of companies’ total sourcing value or volume. 
  • For the “many” part, each additional country (such as US, NAFTA members and CAFTA members, EU countries and members of AGOA) typically accounts for less than 10 percent of respondents’ total sourcing value or volume.

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Respondents also see Vietnam overall a balanced sourcing destination, regarding “speed to market”, “sourcing cost” and “compliance risk”.

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Additionally, U.S. fashion companies intend to source more from Vietnam through 2019, but imports may grow at a relatively slow pace, possibly due to the United States’ withdrawal from the Trans-Pacific Partnership (TPP) and the increasing labor costs in the country.

References:Textile Outlook International (2017); WTO (2017); UN Comtrade (2017)

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2017 U.S. Fashion Industry Benchmarking Study Released

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The report can be downloaded from HERE

Key findings of the study:

While the majority of respondents remain confident about the five-year outlook for the U.S. fashion industry, the percentage of those who are “optimistic” or “somewhat optimistic” dropped to a record low since we began conducting this study in 2014. This change could be due to concerns about the “protectionist trade policy agenda in the United States” and “market competition in the United States from e-commerce,” the top two concerns this year.

  • The percentage of those who are “optimistic” or “somewhat optimistic” fell from 92.3 percent in 2016 to 71.0 percent in 2017, a record low since we began conducting this study in 2014. As many as 12.9 percent of respondents are “somewhat pessimistic” about the next five years, mostly large-scale retailers with more than 3,000 employees.
  • Despite the challenges, demand for human talent in the industry overall remains robust. This year, around 80 percent of respondents plan to hire more employees in the next five years, especially supply chain specialists, data scientists, sourcing specialists, and marketing analysts.
  • Cost is no longer one of the top concerns; respondents are less stressed about “increasing production or sourcing cost,” which slipped from #2 challenge in 2016 to #7 challenge in 2017. Only 34 percent rate the issue among their top five challenges this year, significantly lower than 50 percent in 2016 and 76 percent in 2015. Labor cost remains the top factor driving up sourcing cost in 2017.

Although U.S. fashion companies continue to seek alternatives to “Made in China,” China’s position as the top sourcing destination remains unshakable. Meanwhile, sourcing from Vietnam and Bangladesh may continue to grow over the next two years, but at a relatively slow pace.

  • 91 percent of respondents source from China; while 100 percent sourced from China in our past three studies, China is still the top-ranked sourcing destination this year, and the percentage of those expecting to decrease sourcing from the country fell from 60 percent in 2016 to 46 percent this year—and many more expect to maintain their current sourcing value or volume from the country in the next two years.
  • Likely reflecting the United States’ withdrawal from the Trans-Pacific Partnership (TPP) and the expectation of increasing labor costs, only 36 percent of respondents expect to increase sourcing from Vietnam in the next two years, much lower than 53 percent who said the same in 2016.
  • Respondents are cautious about expanding sourcing from Bangladesh in the next two years, with only 32 percent expecting to somewhat increase sourcing While “Made in Bangladesh” enjoys a prominent price advantage over many other Asian suppliers, respondents view Bangladesh as the having the highest risk for compliance.

U.S. fashion companies continue to maintain truly global supply chains.

  • Respondents source from 51 countries or regions in 2017, close to the 56 in last year’s study.
  • 6 percent source from 10+ different countries or regions in 2017, up from 51.8 percent in last year’s survey. In general, larger companies have a more diversified sourcing base than smaller companies. Additionally, retailers maintain a more diversified sourcing base than brands, importers/wholesalers, and manufacturers.
  • Around 54 percent expect their sourcing base will become more diversified in the next two years, up from 44 percent in 2016; among these respondents, over 60 percent currently source from more than 10 different countries or regions.
  • The most common sourcing model is shifting from “China Plus Many” to “China Plus Vietnam Plus Many.” The typical sourcing portfolio today is 30-50 percent from China, 11-30 percent from Vietnam, and the rest from other countries.
  • While Asia as a whole remains the dominant sourcing region for U.S. fashion companies, the Western Hemisphere is growing in popularity. This year, we see a noticeable increase in sourcing from the United States (70 percent, up from 52 percent in 2016) and countries in North, South, and Central Americas, which offer a shorter lead time and relatively lower risk of compliance.

Today, ethical sourcing and sustainability are given more weight in U.S. fashion companies’ sourcing decisions. Respondents also see unmet compliance (factory, social and/or environmental) standards as the top supply chain risk.

  • 5 percent of respondents say ethical sourcing and sustainability have become more important in their company’s sourcing decisions in 2017 compared to five years ago.
  • 100 percent of respondents currently audit their suppliers, including how suppliers treat their workers, suppliers’ fire safety, and suppliers’ building safety. The majority (93 percent) use third-party certification programs to audit, with a mix of announced and unannounced audits.
  • As many as 90 percent of respondents map their supply chains, i.e., keep records of name, location, and function of suppliers. More than half track not only Tier 1 suppliers, suppliers they contract with directly, but also Tier 2 suppliers, i.e. supplier’s suppliers. It is less common for U.S. fashion companies to map Tier 3 and Tier 4 suppliers though, which could be because of the difficulty of getting access to related information with such a globalized and highly fragmented supply chain.

Free trade agreements (FTAs) and trade preference programs remain underutilized, and several FTAs, including CAFTA-DR, are utilized even less this year than in previous years.

  •  Of the 19 FTAs/preference programs we examined this year, only NAFTA is used by more than 50 percent of respondents for import purposes.
  • Even more concerning, some U.S. fashion companies source from countries/regions with FTAs/preference programs but, for whatever reason, do not claim the benefits. For example, as many as 38 percent and 6 percent of respondents, respectively, do not use CAFTA-DR and NAFTA when they source from these two regions.

Respondents unanimously oppose the U.S. border adjustment tax (BAT) proposal and call for the further removal of trade barriers, including restrictive rules of origin and high tariffs.

  • 100 percent of respondents oppose a border adjustment tax; 84 percent “strongly oppose” it.
  • Respondents support initiatives to eliminate trade barriers of all kinds, from high tariffs to overcomplicated documentation requirements, to the restrictive yarn-forward rules of origin in NAFTA and future free trade agreements.
  • Respondents say the “complex standards on labeling and testing”, “complex rules for the valuation of goods at customs” and “administrative and bureaucratic delays at the border” are the top non-tariff barriers they face when sourcing today.

The benchmarking studies from 2014 to 2016 can be downloaded from https://www.usfashionindustry.com/resources/industry-benchmarking-study 

Sourcing Trends of U.S. Fashion Companies: Discussion Questions from FASH455

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The following questions are proposed by students in FASH455 (Spring 2017) based on the 2016 U.S. Fashion Industry Benchmarking Study. Please feel free to join the online discussion (please mention the question # in your comment).

#1 With many bricks and mortar stores closing and profits decreasing in many of these stores, why do you think that 92% of respondents are optimistic or somewhat optimistic about the fashion industry over the next five years? Do you believe that there is a technological advance or a change in organizational structure that is coming in the future that is keeping them hopeful?

#2 U.S. fashion companies today have a very diversified sourcing base. For example, overall 52% of respondents report sourcing from more than ten different countries. However, it seems quite challenging to ensure all the factories they are sourcing from are up to the company’s standards. Do you think with increased pressure to become more sustainable as well as have ethical working conditions across their supply chain, U.S. fashion companies will source from fewer countries in the future?

#3 According to the survey, controlling sourcing and production cost remains one of the top business challenges for U.S. fashion companies. Does it imply that it is unrealistic to expect companies to make commitments to sustainability and social responsibility at the sacrifice of their profit?

#4 U.S. apparel imports from Vietnam has been growing rapidly in recent years. Why do you think Vietnam has been able to expand as a garment exporter so quickly, outperforming most of its Asian competitors?

#5 As optimism continues to create new demand for human talent, more specifically for fashion designers, buyers and merchandisers, sourcing specialists, and social compliance specialists how can the fashion department at the University of Delaware further prepare us to excel at these positions? Any specific suggestions?

#6 What other sourcing and trade topics do you think the benchmarking study could include?

2016 August Sourcing at Magic Debriefing

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New landscape of sourcing

  • Sourcing is turning from regional to global. In the past, U.S. apparel companies/fashion brands set up regional offices to handle sourcing. Nowadays, companies are building a global infrastructure to develop, source and market their products around world. Global rather than regional sourcing also allows companies to improve sourcing efficiency and reduce total product and distribution cost while maintaining quality of their product and services.
  • U.S. apparel companies/fashion brands are going with fewer but more capable vendors (“super vendors”). For example, executive from a leading U.S. apparel brand said their company has shrunk their sourcing base by 40% in the past few years. At the same time, they now expect their vendors to be able to supply on a global scale, including having multiple manufacturing facilities around the world and being able to provide value added services such as design and product development.
  • Related, sourcing is shifting from cut-make-and trim (CMT) to full package. This is consistent with our findings in the latest USFIA benchmarking study which suggests that vendors are highly expected to have the capacity of supplying raw material.
  • U.S. apparel companies/fashion brands are also investing to build a more partnership-based relationship with vendors— help vendors reduce cost, become more innovative and have the same vision looking at the whole picture of the supply chain. At the same time, U.S. apparel companies/fashion brands see vendors as their “ambassadors” and want to know more about them—what they believe, what they can bring to the table and how they treat their workers.
  • Companies are redefining the role of sourcing in their businesses. Sourcing is no longer treated as a technical function, but an integral part of a company’s overall business strategy.  

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Made in USA

  • There is a noticeable interest in sourcing textiles and apparel “Made in USA” at Magic. A dozen U.S.-based apparel companies attended the Magic show and their booths attracted a heavy traffic. According to representatives from these companies, U.S. consumers’ increased demand for apparel “Made in USA” has been a strong support for their business growth in recent years.
  • Nevertheless, apparel “Made in USA” often contain imported inputs today. I specifically asked a few vendors where their fabrics come from. All but one company said fabrics were imported because it was so hard to find domestic suppliers, especially for woven fabrics. Interesting enough, some companies feel OK to label their apparel “Made in USA” even though they use imported fabrics. According to them, apparel can be labeled “Made in USA” as long as “domestic content exceeds 60% of the value of the finished product.”
  • At a seminar, some entrepreneurs which make and sell “Made in USA” apparel and accessories said price and production cost remain one of their top business challenges. I asked the panel whether going high-end is the only option for the future of apparel “Made in USA” given the high labor cost in the country. They disagreed—saying technology advancement and design innovation could help reduce production cost. However, all panelists admit they carry some luxury product lines. Additionally, some companies choose to emphasize concepts other than “Made in USA”, such as “hand-made” and “Pride in Seattle”, in order to make their products look more personal to consumers and allow more flexibility in sourcing raw material.

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Updates of sourcing destinations

  • Ethiopia: as I observe, Ethiopia is THE star at this year’s Sourcing at Magic. The country was repeatedly mentioned by panelists at various seminars as a promising and emerging sourcing destination. Several events at the show were also exclusively dedicated to promoting apparel and footwear “Made in Ethiopia”. A couple of reasons why Ethiopia is so “hot”: 1) the ten year extension of AGOA creates a stable market environment encouraging sourcing from Africa and investing in the region (and for sure the duty free access both to the US and EU market).  2) Located in the middle of Africa, Ethiopia is regarded as a hub that has the potential to take a leadership role in integrating the apparel supply chain in the region. 3) It is said that Ethiopian government is very supportive to the development of the local textile industry.  4) Many U.S. fashion companies feel sourcing from Ethiopia involves less risks of trade compliance than sourcing from some Asian countries such as Bangladesh.  
  • China: China unarguably remains the No.1 textile and apparel supplier to the U.S. market—in terms of numbers, around 60% vendors at the Magic show came from China. But I notice that booths of Chinese vendors didn’t have much traffic this time, an interesting signal for sourcing trend in the upcoming season. Nevertheless, while U.S. apparel companies/fashion brands are placing more emphasis on supply chain efficiency, quality of products, speed to market and added value in sourcing, “Made in China” will continue to enjoy many unique advantages over other suppliers. Plus, Chinse factories are actively investing overseas, from Southeast Asian countries to Africa. This makes Chinese factories likely to grow into “super vendors” that western fashion brands/retailers are looking for. To certain extent, macro trade statistics alone may not be able to fully reveal what is going on in apparel sourcing and trade.   
  • Vietnam: Regarding the future of Vietnam as a sourcing destination for U.S. apparel companies/fashion brands, somehow I hear more concerns than excitements at Magic. The uncertainty surrounding the ratification of TPP by the U.S. Congress definitely has made some companies hold back their investment and sourcing plan in Vietnam. Another big concern is Vietnam’s labor shortage and limited manufacturing capacity: apparel factories in Vietnam are already competing with electronic industry for young skilled workers. US companies also have to compete with their EU counterparts for orders in Vietnam. The newly reached EU-Vietnam Free Trade Agreement (EVFTA), which is very likely to be implemented earlier than TPP, provides Vietnam duty free access also to the EU market. And EVFTA adopts a much more flexible rule of origin than TPP, making it easier for Vietnam factories to actually use the agreement.

Sustainability

The awareness of social responsibility and sustainability has much improved: everyone in the industry is talking about them and have a view on them. On a voluntary basis, some companies are making efforts to improve traceability of their products, i.e. to help consumers know exactly where their clothing comes from and what is happening at the upstream of the supply chain. Yet, how to encourage factories to share their information and control tier 2 and tier 3 suppliers remain a challenge. 

by Sheng Lu

Note: Sourcing at Magic is one of the largest and most influential annual textile and apparel sourcing events hosted in the United States. Special thanks to the Center for Global and Areas Studies at the University of Delaware for funding the trip.

Vietnam’s Apparel Exports Slow in First Half of 2016

Growth rate of Vietnam

According to Thanh Nien News, Vietnam’s textile and apparel (T&A) exports only increased 5.1 percent to $10.7 billion in the first half of 2016. This was the lowest growth rate since 2010. Data from the General Statistics Office of Vietnam shows that Vietnam’s T&A exports totaled $22.63 million in 2015, up 8.2 percent from a year earlier.

In the U.S. market, apparel imports from Vietnam also see a much slower growth in the first five months of 2016: 4.1% by value (compared with 13.1% on average between 2010 and 2015) and 5.0% by quantity (compared with 11.8% on average between 2010 and 2015).

Vietnam

The new trade data echos the findings in the latest 2016 US Fashion Industry Benchmarking Study. Although Vietnam remains one of the top sourcing destinations, respondents seem to be more conservative about Vietnam’s growth potential in the next two years. Only 4 percent of respondents expect a strong increase of sourcing value or volume from the country, which is a substantial drop from 21.4 percent in the 2015 study.

2016 U.S. Fashion Industry Benchmarking Study Released

[Note: The 2017 U.S. Fashion Industry Benchmarking Study has been released]usfia 2016 cover_Page_1

The report can be downloaded from HERE

Key Findings of the study:

I. Business environment and outlook in the U.S. Fashion Industry

  • Overall, respondents remain optimistic about the five-year outlook for the U.S. fashion industry. “Market competition in the United States” is ranked the top business challenge this year, which, for the first time since 2014, exceeds the concerns about “increasing production or sourcing cost.”

II. Sourcing practices in the U.S. fashion industry

  • U.S. fashion companies are more actively seeking alternatives to “Made in China” in 2016, but China’s position as the No.1 sourcing destination seems unlikely to change anytime soon. Meanwhile, sourcing from Vietnam and Bangladesh may continue to grow over the next two years, but at a slower pace.
  • U.S. fashion companies continue to expand their global reach and maintain truly global supply chains. Respondents’ sourcing bases continue to expand, and more countries are considered potential sourcing destinations. However, some companies plan to consolidate their sourcing bases in the next two years to strengthen key supplier relationships and improve efficiency.
  • Today, ethical sourcing and sustainability are given more weight in U.S. fashion companies’ sourcing decisions. Respondents also see unmet compliance (factory, social and/or environmental) standards as the top supply chain risk.

III. Trade policy and the U.S. fashion industry

  • Overall, U.S. fashion companies are very excited about the conclusion of the Trans-Pacific Partnership (TPP) negotiations and they look forward to exploring the benefits after TPP’s implementation.
  • Thanks to the 10-year extension of the African Growth and Opportunity Act (AGOA), U.S. fashion companies have shown more interest in sourcing from the region. In particular, most respondents see the “third-country fabric” provision a critical necessity for their company to source in the AGOA region.
  • Free trade agreements (FTAs) and trade preference programs remain underutilized in 2016 and several FTAs, including NAFTA and CAFTA-DR, are utilized even less than in previous years. U.S. fashion companies also call for further removal of trade barriers, including restrictive rules of origin and remaining high tariffs.

The benchmarking study was conducted between March 2016 and April 2016 based on a survey of 30 executives from leading U.S. fashion and apparel brands, retailers, importers, and wholesalers. In terms of business size, 92 percent of respondents report having more than 500 employees in their companies, while 84 percent of respondents report having more than 1,000 employees, suggesting that the findings well reflect the views of the most influential players in the U.S. fashion industry.

For the benchmarking studies in 2014 and 2015, please visit: https://www.usfashionindustry.com/resources/industry-benchmarking-study

FASH455 Exclusive Interview with Herb Cochran, Executive Director of Amcham Vietnam

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 (photo courtesy: Amcham Vietnam)

Herb Cochran is the Executive Director at the American Chambers of Commerce (AmCham) Vietnam. He has helped transform AmCham Vietnam into an influential organization that promotes trade and investment between Vietnam and the United States, with a focus on developing networking, information-sharing, and advocacy activities to improve the business environment.

Herb mobilized AmCham Vietnam members’ substantial efforts to conclude negotiations on the Vietnam-U.S. Bilateral Trade Agreement and Vietnam’s WTO Accession, and to have these two agreements approved by the U.S. Congress. As a result, trade between Vietnam and the U.S. increased from $1.2 billion in 2000 to about $36 billion in 2014. And Herb expects that total Vietnam-U.S. trade will reach $ 72 billion in 2020.

With Herb’s leadership and support, AmCham Vietnam’s committees and industry sector experts have helped improve mutual understanding on key issues in U.S.-Vietnam trade and investment, including implementation of trade agreements, preserving Vietnam-U.S. apparel trade, strengthening governance and anti-corruption efforts, improved industrial relations, Project 30 (simplification of Vietnam’s administrative procedures), work force development for modern manufacturing, promoting trade and investment between the U.S. and Vietnam’s Southern Key Economic Region, and the Asia Development Bank’s strategy for the economic and social development of Vietnam and the Greater Mekong Subregion.

Prior to joining AmCham, Herb was Commercial Attaché at the U.S. Embassy in Hanoi and Principal Commercial Officer at the U.S. Consulate General in Ho Chi Minh City. He helped establish the commercial office of the U.S. Embassy in Hanoi, hiring staff and establishing trade and finance programs, including the U.S. Export-Import Bank, Overseas Private Investment Corporation (OPIC), and U.S. Trade and Development Agency (USTDA). In 1998-99 he established the commercial office of the U.S. Consulate General in Ho Chi Minh City.

Herb also served as Regional Director, East Asia and Pacific, U.S. Commercial Service, based in Washington DC. His responsibilities included program, personnel, and budget support for the commercial departments of 15 United States Embassies in the Asia/Pacific region, from Tokyo, Seoul, and Beijing in Northeast Asia, to all the countries of Southeast Asia, and down to Australia and New Zealand. Other international working experiences of Herb include: Commercial Counselor at the U.S. Embassy in Bangkok, Thailand, Commercial Attaché at the U.S. Embassy in Tokyo, Japan, U.S. Consulate General in Osaka, Japan, and Action Officer at the State Department’s Office of Japanese Affairs.

Born in North Carolina, Herb earned a B.A. from the University of North Carolina at Chapel Hill (History), and a Certificat from the Institut d’Études Politiques (Sciences Po) in Paris. He is also a graduate of the Industrial College of the Armed Forces in Washington DC (National Defense Strategy).

Interview Part

Sheng Lu: Can you provide us an overview about the US-Vietnam business ties?

Herb Cochran: Vietnam has succeeded at attracting foreign direct investment (FDI) and increasing trade. U.S. – Vietnam trade in 2015 will likely reach over $45 billion, another annual increase of over 20%. Vietnam accounts for 25% of all U.S. imports of goods from the Association of Southeast Asian Nations (ASEAN). The numbers are likely to reach $80 billion and a 33% market share by 2020.

More details can be found from a few recent AmCham statements to government officials and to press inquiries:

Note: Vietnam Business Forum a “structured dialogue” of about three hours 2 times a year, in June and in December, where the business associations present their views of the business ties and business environment and suggest areas for improvement.

Sheng Lu: What are the main reasons that U.S. companies come to invest in Vietnam? Are most U.S. business operations in Vietnam profitable?

Herb Cochran: Foreign Direct Investment into Vietnam has been increasing recently, as companies prepare for ASEAN integration, for the Trans-Pacific Partnership (TPP), and for the expectation that 59% of global middle class consumer spending will be in the Asia – Pacific region by 2030, up from 23% in 2009. For example:

These are all world-class factories, by global companies, for export to ASEAN, TPP, and Asia-Pacific markets. Not to mention the high-tech investments by Intel, Samsung, Apple, and others in the microelectronics and consumer electronics sector.

Main reasons that U.S. companies come to invest in Vietnam include:

  • Availability of low cost labor
  • Availability of trained personnel
  • Stable government and political system

Regarding Vietnam’s business and investment environment, please also see the summary below from ASEAN AmChams’ Business Outlook Survey 2016.

ASEAN survey

Sheng Lu: Given the increasing labor cost in China, many people see Vietnam as an alternative sourcing destination for labor-intensive products such as apparel and footwear. What’s your view on this trend?

Herb Cochran: I agree. In Aug 2013, we had a delegation visit AmCham HCMC from AmCham Hong Kong, Footwear and Apparel Committee. They said, “We represent 80% of the apparel and footwear sourcing in the world. We are in Hong Kong because most of our sourcing is in China. But we are leaving China, for various reasons. Vietnam’s participation in TPP is certainly an attraction, but we are leaving China with or without TPP. We want to know if Vietnam will welcome us.”

It should be particularly noted that between 2013 – 2015, about $3 billion was announced in FDI in textiles to meet the yarn-forward rules of origin requirements of TPP. One estimate projects Vietnam’s apparel exports to the U.S. under TPP “… would be as high as US$ 22 billion” by 2020. Another projects that Vietnam’s apparel and footwear exports would increase by 45.9% over the baseline by 2025. A third expert said she expects the TPP will “change the sourcing landscape drastically;” and Vietnam’s share of the U.S. apparel import market could go from 10% to 35% very quickly.” [Note: 35% of the U.S. apparel imports market is $35 billion. I think this is the most interesting estimate, a microeconomic estimate from an industry expert and not a “macroeconomic model estimate.”]  And Mr. Le Tien Truong, Deputy Director of VINATEX, expects that Vietnam’s exports of textiles and apparel could reach $50 billion by 2025. [I think this estimate is overoptimistic.]

Below is a historical comparison of U.S. imports of apparel from China, “2nd Tier Countries,” and “Other.” from 2005 to 2025. The actual trade statistics from 2005 to 2015 show that U.S. Imports of Apparel from China doubled from 2005 (when quotas on WTO members were lifted) to 2010, but they have been “flat” since then. Value of imports from 2016 to 2025 are forecasted numbers.

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Sheng Lu: In your view, what commercial opportunities does the Trans-Pacific Partnership (TPP) present to U.S. companies in Vietnam, especially in the textile and apparel industry?

Herb Cochran: The most authoritative study was done by Professor Peter Petri of Brandeis University and the Peterson Institute. According to the findings:

The TPP would increase Vietnam’s exports from the expected “baseline” in 2025 without TPP of $239.0 billion (of which apparel and footwear exports would total $113 billion) by $67.9 billion to $307 billion (of which apparel and footwear exports would increase by $51.9 billion to $165 billion). In percentage terms, total exports would increase by 28.4% over the baseline, and apparel and footwear exports would increase by 45.9% over the baseline. Total Net Exports increase: 67.9 / 239.0 = 28.4%.

In addition, the expected Gross Domestic Product (GDP) growth benefits are substantial, Vietnam’s GDP in 2025 with TPP, would be 10.5% higher than the baseline estimate. This is particularly important now that Vietnam is in a “structural growth decline” period, according to the World Bank. Those are economic projections that give a general idea.

Sheng Lu: How is TPP discussed in Vietnam such as its local media?

Herb Cochran: Very positively. For example, see the below link: “89% of public in Vietnam thinks the TPP is “ … a good thing.” http://www.amchamvietnam.com/30448353/89-of-public-in-vietnam-supports-tpp-pew-research/

Part of the reason for this positive viewpoint is the series of seminars that we in AmCham HCMC organized in 2013 to explain about the TPP, create better understanding of and support for the TPP especially in the Vietnam business community.

Sheng Lu: What is the outlook for TPP ratification in Vietnam?

Herb Cochran: Very good. At the closing ceremony of the 14th Plenum of the 11th Party Central Committee, the Party General Secretary, Nguyen Phu Trong, said members of the Party Central Committee reached consensus on the signing and ratification of the Trans-pacific Partnership Agreement in conformity to laws on signing and joining international treaties. Mr. Trong said: “The TPP will bring great benefits but also opportunities and challenges to Vietnam. These challenges have been identified during Vietnam’s 30 years of renewal and international integration. With efforts, creativity, and determination of the Party, army, people, and the business community, we are confident that we will overcome all challenges and grasp opportunities created by the TPP to achieve rapid, sustainable growth.”

Sheng Lu: While living in Vietnam, have you encountered any culture shock? Can you share some stories with our students?

Herb Cochran: No culture shock. During my career as a U.S. Foreign Service Officer, I lived in Vietnam, Japan, and Thailand for about 22 years, so I am used to living abroad. And I have lived in Vietnam since Jan 1997. I guess rather than “culture shock,” you might say that I have “culture insights” from time to time. The most common insight here in Vietnam is how polite, warm and gracious most people are. It is still a traditional society, very family oriented. One cultural insight is how they celebrate “death anniversaries” for many years, with special celebrations on certain multi-year anniversaries, to keep family ancestors in their memories, called lễ giỗ.

Sheng Lu: Last but not least, for our students interested in working/interning in Vietnam, do you have any suggestions?

Herb Cochran: It’s very tough to get started. Click the below link for some comments that I have put together in response to many questions: http://www.amchamvietnam.com/faqs/faq-how-do-i-find-employment-opportunities-with-amcham-member-companies/. A short commentary is that I think it is probably better to start in the U.S. with a large organization that has global operations, e.g. Walmart, Nike, etc., and learn about that organization’s international operations and get started that way. Especially when your students are younger, maybe not yet married, no children, etc. One real problem for American citizens is that they are taxed in the U.S. and in the country of employment, so that they are generally 25% to 50% more expensive than U.S. non-citizens.

–The End–