US Advances Part of 2005 Garment and Textile Quota

US Advances Part of 2005 Garment and Textile Quota

The Ministry of Trade has announced that the US has agreed to advance Vietnam six per cent of the 2005 quotas for textiles and garments exported to the US to help enterprises continue to export to the market while they await a new agreement between the two countries.

Le Van Thang, deputy head of the Import and Export Department under the Ministry of Trade, said that certain products would be provided with six more per cent of quotas in 2004. Four double categories, including categories 338/339 and 347/348, which are considered key categories will be advanced eight per cent of their 2005 quotas.

Thang said that the proportion was regulated in an agreement signed by the two countries, which will terminate late this year. The proportion of quota loans of between six and eight per cent is equal to the volume of textiles and garments which can be exported within one month. These advanced quotas will however influence those in 2005, when Vietnam and the US sign a new agreement.

Thang added that borrowed quotas would be distributed to export enterprises according to two criteria. Enterprises will receive more quotas for their involvement in distributed categories and the level of quotas will be divided up between enterprises according to the number of machines involved in producing products in the above-mentioned categories.

Accordingly, enterprises which produce textiles and garments of distributed categories with more than 1,500 machines will receive two more categories, enterprises with between 2,000 and 3,000 machines will receive three more categories and enterprises with more than 3,000 machines, four more categories. 

Le Van Dao, general secretary of the Vietnam Textile and Garment Association, said that the number of quotas granted by the US to Vietnam was much lower than the production capacity of the enterprises, and a loan of between six and eight per cent was just enough for enterprises to continue in the short term while they wait for a new 2005 agreement.

The US and Vietnam signed the textile and apparel agreement in 2003. Accordingly, quotas for Vietnam’s textile and garment export to US are put at US$1.7 billion. Quotas for the following year will be increased by seven per cent. The agreement will terminate late this year. According to the Ministry of Trade, enterprises have used most of their quotas for 2004.

In early 2005, like many other members of the World Trade Organisation (WTO), the US will begin to remove quotas imposed on textiles and garments of member countries. Vietnam is still not a member of the WTO so quotas will continue to be imposed on Vietnam’s textile and garments exported to the US, until Vietnam is admitted to the organisation.

Quotas granted by the US are lower than the production capacity of Vietnamese producers. As a result, it is difficult for enterprises to see eye to eye with the Ministry of Trade - the agency in charge of distributing quotas. For example, the Ministry of Trade has recently suggested that quotas should be concentrated on major enterprises, instead of small and medium-sized enterprises. This suggestion certainly did not win support from enterprises.

Before the reactions of enterprises to the Ministry’s decision, Thang said that there should be a harmonious option for the distribution of quotas and, perhaps, the existing distribution method will be maintained. Accordingly, enterprises that have recorded great achievements and other major enterprises will receive priority in quota distribution.

• P.V