What does Trans Pacific Partnership mean for Vietnamese Clothing Industry?

While the whole world is looking at TPP passage, the Vietnamese Clothing Industry will have a special interest in TPP proceedings. Vietnam is one of the major apparel exporters to the United States and a free trade agreement would mean a cost reduction of up to 16.5% due to tariff waiver. Such a reduction will make Vietnamese apparels more competitive in the US market alone.

Let us take for example Cotton T-Shirts. In 2014, the United States Import for these articles was $3.9 billion. The major import was from Honduras who had 12% ($503 million) of the import share while Vietnam was 8th with 5.1% ($205.6 million) worth of imports. For 2015, Vietnam has already exported t shirts worth $173.9 million dollars till July, while the leaders Honduras have exported $299.4 million. Now please note that this data is only for t-shirts. There are many other categories of clothing where Vietnam is doing extremely well (like Shirts, where it is the top exporter to US).

So what does TPP mean for Vietnamese T Shirt manufacturing? If we note that in the top 10 exporters to US, only Mexico and Vietnam are TPP partners. Thus any reduction in tariffs will give an advantage to these two countries over other countries which will lead to greater exports from Mexico and Vietnam. Moreover, considering Vietnam, China and India are the only Asian countries in top 10 suppliers, we will see an influx of many manufacturers from other Asian countries to Vietnam to take advantage of the partnership benefits.

With the stated benefits for Vietnamese clothing industry, what effects can we see on the economies of non-TPP countries esp. China and Honduras, for whom US is the main export market? What will the influx of new manufacturers mean for labor rates in Vietnam? With the TPP taking a backseat, what is the future of the market where many foreign companies are trying to get a foothold?

*US Import data for T shirts and shirts taken from https://usatrade.census.gov for HTS code 610910.

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