According to Vietnam’s “Vietnam News” report on September 11: The Vietnam-European Union Free Trade Agreement (EVFTA) rules of origin limit the source of raw materials for enterprises. Experts say that in order to seize export opportunities to the EU, Vietnamese textile and clothing companies must overcome the obstacle of raw material shortages.
Data from Vietnam’s Ministry of Industry and Trade show that the EU has huge demand for textiles and clothing, with annual imports of approximately US$250 billion. In 2019, Vietnam’s exports to the EU were US$4.3 billion, a year-on-year increase of 3.8%, accounting for only 2% of the EU market. The Ministry of Industry and Trade stated that the EVFTA, which will take effect from August 2020, is expected to help Vietnam’s textile and apparel industry increase exports to the EU by 67% by 2025. However, according to EVFTA’s commitment, in addition to meeting strict quality standards and enjoying preferential tariffs, local companies must also implement strict origin requirements, especially the requirement to apply rules of origin starting from the fabric link, which means that products exported to the EU must use Fabric produced in Vietnam or EU. The agreement also allows the use of raw materials from Vietnam and the EU’s mutual free trade partners. This has become a weakness of Vietnam’s textile and apparel industry, as most raw materials are imported from countries that have not signed a free trade agreement with the EU.
Vu Duc Giang, chairman of the Vietnam Textile and Garment Association, said that local textile and clothing manufacturers should use domestic raw materials in the production of products exported to the EU, but in fact many people Don’t know where the raw materials come from. In addition, new generation FTAs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EVFTA have very strict regulations on materials and manufacturing processes.
Relevant Vietnamese negotiation experts believe that to solve this problem, the textile and apparel industry can use fabrics imported from countries that have signed FTAs with the EU, such as South Korea, to enjoy EVFTA benefits tax rate. However, due to distance and price reasons, the quantity of fabrics imported from South Korea is very small. In the long term, Vietnam needs a comprehensive strategy to seize opportunities in the EU market. Some clothing companies said that in order to meet the EVFTA origin requirements, the company has signed contracts to import raw materials from EU free trade partners such as South Korea and Turkey, instead of purchasing from China.
In addition, the Ministry of Industry and Trade is formulating a development plan for the textile and garment industry to develop large-scale textile and printing and dyeing industries with wastewater treatment systems that meet international standards by 2040. The park will attract investors and create a textile-dyeing-garment-making cycle, which will help Vietnam’s domestic textile and garment industry join the global supply chain, reduce dependence on imported materials, and make full use of EVFTA and other free trade agreements. </p
