Chinese textile industry may be affected as US and Vietnam push for TPP

China’s export industries, the textile sector in particular, may possibly be affected as the US and Vietnam join hands in pushing the trade partnership. Vietnamese Communist Party chief Nguyen Phu Thong held talks on July 7 at the White House with US president Barack Obama covering the Trans-Pacific Partnership (TPP), the 12-nation free trade plan that Obama hopes to implement as a legacy of his two-term presidency.

In TPP negotiations, the US insists on the “yarn forward” principle applied to the textile trade, which requires that only fabric produced from yarn made by a TPP country will qualify for duty free status.

The US is negotiating the TPP with eleven countries which include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

According to the analysis, in line with the “yarn forward” principle, the US might ask Vietnam to reduce textile imports from China.

Although there remains differences in their respective views about state enterprises, environmental protection and labor standard laws, trade relations between the US and Vietnam have continued to grow.

In 2014, US-Vietnam trade amounted to US$35 billion, with an average annual growth of 20% over the past three years, and the US bearing an unfavorable imbalance amounting to US$24 billion. The Chinese trade sector has forecast that by 2020, US-Vietnam trade value could be worth US$57 billion.

Nguyen during his meeting with Obama stated that Vietnam has endeavored to be integrated in regional as well as global economic developments. He also expressed hope that the US can support Vietnam in the process of TPP negotiations.

An HSBC report said that the TPP is an agreement that will favor small countries because with the partnership they may get easier access to large markets such as the US and Japan.

Vietnam is not a major producer of textiles, with only 20% of the market supplied by domestic manufacturers. It imports an average of US$4.7 billion in textiles from China every year.

But for Vietnamese garments and shoes, the US is second-largest export market In 2014, Vietnamese exports in this category of goods amounted to US$13.1 billion.

In a recent survey conducted by the US poll organization Pew in nine of the 12 countries currently in TPP negotiations shows that the Vietnamese public is most supportive of the free trade plan, with 89% of the respondents supporting the deal.