Investment is needed in the textile and dyeing industry to benefit from EVFTA
Investment is needed in the textile and dyeing industry to benefit from EVFTA
The textile industry, as an export sector, is poised to enjoy numerous advantages as the Vietnam-EU Free Trade Agreement (EVFTA) comes into effect. However, these benefits will only materialize if Vietnam's exporters meet the provisions outlined in the EVFTA, with the most crucial being the rules of origin for goods.
According to statistics from the Textile Association, Vietnam currently imports up to 80% of fabric for garment exports, with over 50% coming from China, 18% from South Korea, and 15% from Taiwan (China).
Under the EVFTA, Europe requires Vietnamese textile products to use domestically produced fabric, known as the "fabric-forward" rule of origin. Additionally, the EU accepts cumulation of origin, meaning Vietnam can import fabric from South Korea, with which the EU already has a Free Trade Agreement, to produce shirts and still enjoy preferential treatment when exporting to the EU.
This implies that more than 80% of imported fabric not originating from South Korea will not qualify for tariff preferences when producing textile goods for export to Europe.
To benefit from the EVFTA advantages, the Vietnamese textile industry must redirect its focus, shifting from importing fabric from China to importing from South Korea. In the long term, substantial investments are needed in the weaving and dyeing processes to gain control over the domestic fabric supply.
Tran Quoc Khanh, Deputy Minister of the Ministry of Industry and Trade and head of the government's EVFTA negotiation delegation, stated that Vietnam currently exports fiber to China independently, without being dependent on it. With fiber availability, investing in the textile industry will allow the production of fabric that meets the rules of origin for entry into the EU.
Once Vietnam gains control over raw materials and complies with the rules of origin, textile and garment products will have broader access to many markets beyond just the EVFTA agreement.
