A historical round of bilateral talks on Vietnam’s accession to the World Trade Organisation (WTO) with the US ended in a success. However, Vietnam had to make a concession. Accordingly, Vietnam will have to remove its Decision N0 55 on accelerating the local textile and garment industry. According to economic experts, the talks on Vietnam’s textiles and garments ended more successfully than it had been predicted. However, the question is how the removal of the Decision 55 will affect the Vietnamese textile and garment acceleration programme and the whole industry.
The American side accused that the Vietnamese Government of involvement in providing subsidies for the textile and garment industry with a decision to mobilise US$4 billion for the industry. This conflicts with the rules of the WTO, which states that all enterprises and industries have to be equal among WTO member countries. According to Luong Van Tu, deputy trade minister and head of the Vietnamese delegation to the talks, said: “All countries provide subsidies and US$4billion is not a small amount, equal to annual export turnover of the Vietnamese textile and garment industry.
However, in comparison with subsidies from other countries, the figure remains very small. However, Vietnam has to implement the commitment.” Any interference of the State or subsidy of the Government will have to be removed completely before a country becomes a member of WTO. For any reason and in any form, support from the State or the Government is considered anti-competitive.
When Vietnam removes its Decision 55, how will the local textile and garment industry cope without US$4billion at request of the US? The answer from Vietnamese enterprises is that the fact will have no effect or produce little effect. That is why the Vietnamese side accepted the request quite easily. Even though the programme began in 2000, the disbursement for the programme is very slow, in particular from Vinatex. In fact, the programme is less influential to enterprises, especially private enterprises. "If the programme is terminated, only those enterprises which rely on subsidies will be affected. The number of such enterprises accounts for between just 10 and 12 per cent,” said Le Quoc An, chairman of the Vietnam Textile and Garment Association. While Vietnamese textiles and garments accounts for just three or four per cent of the US market, much lower than 28 per cent of China, the constraint the Vietnamese textile and garment industry’s acceleration by the US is unreasonable demand. Even though not many Vietnamese enterprises benefit from the programme, for the American side, their demand is just to kill any future threat.
The success from the talks is that Vietnamese enterprises will no longer worry about quotas when Vietnam joins WTO. Not only the US market, one of the biggest markets for Vietnamese textile and garment industry, but also its ‘backyard’ markets in South America will open up to Vietnamese textiles and garments. However, Vietnam will face fiercer competition from other countries in this labour-intensive industry. Moreover, Vietnam now faces another side of international integration as foreign-made textiles and garments will flood the local market. This will be a tough challenge for Vietnamese enterprises, especially when materials and accessories for local production are mainly imported.
An said that the textile and garment industry was calling for investment from the private sector for the acceleration programme. Accordingly, investment will be concentrated on renewing technology and equipment, thus helping local textile and industry to catch up with other countries when Vietnam joins WTO. “Foreign-invested enterprises contribute 40 per cent of Vietnam’s textile and garment export turnover, so they play an important role in the industry’s acceleration programme,” An added. At the same time, the Vietnamese Government is striving to reduce its interference into the industry as it has asked Vinatex, the biggest State-owned textile and garment group in Vietnam, to sell its stocks to the market to privatise it.
According to information from the Vietnam Textile and Garment Association, apart from its efforts to implement the commitment, Vietnam’s export of textiles and garments remains busy. In early May alone, Vietnam textile and garment export turnover reached US$15million per day. According to the Ministry of Trade’s forecast, the export turnover of textiles and garments in May will reach US$400 million. If the figure is achieved, alongside US$1.74billion in the first four months, the local textile and garment industry will earn over US$2billion in the first five months. Textiles and garments will have the highest export growth rate in early months of 2006.
Among the main export markets of Vietnamese textiles and garments in the first four months, the US was still a leader with a total value of around US$1billion, up by between 38 and 40 per cent against the same period last year, accounting for 58 per cent of total export turnover of Vietnamese textiles and garments. The EU market regained its growth tempo with US$350million, up by 70 per cent, and Japan, US$250million. The export to those markets which used to impose quotas gained a high growth rate, 80 per cent in Canada and 200 per cent in Turkey.
Doan Phuong
Vietnamese
