USA-Vietnam Signed Textile Pact

Trade chiefs from the US and Vietnam on 25 April 2003 formally signed an agreement which will see Vietnamese textile exports to America pegged at $1.7 billion in the first year followed by a 10% annual increase thereafter.

The pact will start on May 1 and includes 38 quota categories, including cotton knit shirts and cotton woven trousers, which have been blamed by US textile chiefs for scores of plant shutdowns and thousands of job losses.

Specifically, the two sides agreed on quotas for 38 of the 40 originally proposed categories. Only luggage (Category 670) and man-made fibre coats (Category 634/635) were dropped from the list. For cotton knit shirts (Category 338/339), the bilateral agreement would impose a quota of 14 million dozen. For cotton woven trousers (Category 347/348), the quota would be slightly above 7 million dozen. This represents cutbacks from the current level of trade of 21% and 57%, respectively, and this reduction is significant, particularly because these two categories accounted for more than 50% of the total value of Vietnam's apparel exports to the US last year. The quotas for all other categories are set at the level of trade for the twelve-month period ending in February 2003 plus 10%. For example, for woven shirts (Category 340/640), the quota of 2 million dozen would translate into a cutback of 46% from the current level of trade.

The quotas will rise 7% a year for cotton products and 2% a year for wool products.

Although all quotas will end on December 31, 2004, the agreement will continue until Vietnam is a member of the World Trade Organisation, likely to be in the next couple of years.

Vietnam has emerged as one of the world's leading bases for clothing producers and last year shipped $975m of textiles and apparel to the US.

Vietnam's textile and garment exports almost doubled in the first three months of 2003 amid a flood of orders from the US. Vietnam has already shipped $530 million of textile goods to the US in the first three months of this year. However, exports to the EU and Japan slumped around 20%. 

Nevertheless, the fact remains that the negotiated deal makes no one really happy. US importers and retailers arguing that the quotas are too small and do not cover the orders US firms already have placed in Vietnam this year. The US Association of Importers of Textiles and Apparel (USA-ITA) stressed that the quotas for cotton knit shirts and cotton pants "may sound large", it also pointed out that this quota was already 50% filled in January and February 2003. US apparel importers would like to see the Vietnamese textile and apparel industries grow stronger to be able to become a reliable source of low-cost, quality products and as a competitive alternative to China.

On the other hand, the US textile industry  will continue arguing that the quotas contained in the deal are too large and will harm US producers by reducing orders from Mexico and the Caribbean, where producers use US yarn and fabric to get duty-free access to the US market.

 

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