US Quotas Trouble Garment Industry

Viet Nam’s clothing manufacturers have used up nearly all their 2006 quotas for export to the USA but this time, unlike before, they can no longer start using next year’s quotas in advance.

Sai Gon Garment Joint-stock company No.2

“It’s a dilemma”, was how Nguyen Duc Thanh from the Ministry of Trade described the situation to a gathering of industry representatives and government officials in Ha Noi.
Although the beginning of 2007 will be a good time to end quota imposition, there are still many problems and it might be delayed until later, he told the “Vietnam’s Textile and Garment Industry on the Threshold of the WTO” forum organized by the National Committee for International Economic Cooperation.
Sales to US on the rise
In the first three quarters of 2006, the export of textiles and garments to the USA earned Viet Nam US$4.462 billion, or 84.2 percent of the target for the entire year, the Trade Ministry reported. This was a year-on-year increase of 34 percent.
The increase in sales is proceeding at a steady pace and has averaged 30 percent since the year began.

The USA accounted for US$2.17 billion, or 54.8 percent, of the export revenue, a year-on-year increase of 29.5 percent. Second was the European Union, which contributed US$819 million, up a whopping 51.6 percent.
While garment and textile exports to the largest markets (USA and EU) surged in the first nine months, exports to Japan only rose 3.4 percent to US$410 million.

Beside the big three, Viet Nam is also expanding its clothing sales to the Republic of Korea, Russia and Canada.

Of all the textile and garment categories, 25 have been exported in great numbers from Viet Nam to the USA under the quota system.
Le Quoc An, chairman of the Vietnam Textile and Garment Association, is worried because all the Vietnamese manufacturers rushed to complete their orders early in 2006 so the surge in sales to the USA might have been a temporary phenomenon and might not last.
Another reason for the stronger exports from Viet Nam to the US was America’s imposition of a special quota on Chinese exports of clothing and textiles.
If Viet Nam doesn’t prepare itself properly, An warns, its textile and garment makers are sure to get a shock when the USA removes all tariff barriers against China in 2008.
Problems, problems, problems 

Hansae Company makes sport clothes for exports

Manufacturers and officialdom have another difficulty to contend with these days – recently the U.S. decided to keep track of the garment and textile products imported from Viet Nam and investigate if any signs of dumping were detected.
The decision was aimed to lift the suggestion of quitting enactment of the bill on granting Viet Nam permanent normal trade relations (PNTR) by U.S. senators Elizabeth Dole and Lindsey Graham.  And last Friday, the senators withdrew their temporary holds on legislation that would authorize the Bush administration to grant Viet Nam PNTR status. (more)
Le Quoc An’s association thinks the decision is worse than having quotas.
However, Mr. Thanh thinks it’s a good chance for the U.S. to bring the PNTR issue before Congress for a vote since there is a very strong chance it will be passed.
According to the latest source in the U.S., the PNTR issue will not be included in the deliberations on November 13.
If the World Trade Organization decides in late October or November to admit Viet Nam while the PNTR issue remains unresolved, the U.S. will not apply the WTO’s regulations to Viet Nam.
A failure to join the WTO this year would be another big problem for the industry and government as a mechanism for managing textile-garment export to the U.S. has not been determined. To lift or not to lift quotas next year is the question.
Mr. Thanh said that if the quota system was to be done away with from 2007, then no quotas would be given out in the remainder of 2006.
So the manufacturers, who are flush with orders from America, are in a spot, to say the least. They are waiting anxiously for a mechanism for 2007 since, as things stand, they cannot make any business plans or take on new export orders for next year.

By Viet Lan – Translated by Yen Chuong

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