Renaissance Vietnam Textiles... EU Free Trade Agreement Ratification 'Tariff Elimination'

42.5% Tariffs on Clothing and Others Abolished

Increased Price Competitiveness

Expected Entry into $18 Trillion GDP Market

[Asia Economy Hanoi Jo Ara, Guest Reporter] Vietnam is dreaming of a renaissance in its textile industry, leveraging the Free Trade Agreement (FTA) with the European Union (EU). The abolition of tariffs is expected to enhance the competitiveness of Vietnam’s key textile products.

According to media reports including Vietnam News on the 18th (local time), the European Parliament recently ratified the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) in succession. As a result, once the EU-Vietnam FTA takes effect, 42.5% of tariffs imposed on Vietnamese clothing and other products will be immediately abolished, with the remainder eliminated within 3 to 7 years.

Vietnam News forecasted that Vietnam’s Gross Domestic Product (GDP) will increase by $18 trillion due to the FTA with the EU. This projection considers the abolition of tariffs on most exports from Vietnam to the EU, which will relatively enhance price competitiveness. The FTA also includes provisions for the substantial reduction of non-tariff barriers between Vietnam and the EU, as well as clauses to protect intellectual property, labor, environmental standards, and fair competition. Notably, Europe is home to fast fashion brands such as Zara, H&M, and Mango, which are strong players. This means Vietnamese textiles will secure a solid demand base.

Vietnam’s textile industry surpassed India in 2018 and has now established itself as the world’s second-largest textile and apparel exporter after China. It is Vietnam’s second-largest export sector and a massive industry employing 20% of the total workforce. According to data released last month by the Vietnam Textile and Apparel Association, the growth rate of the textile and apparel industry is expected to reach 11.5% this year. Especially amid the intensification of the US-China trade war last year, Vietnam benefited. The US included some clothing items in tariffs imposed on China, allowing Vietnam to enjoy a windfall.

Cao Huu Hieu, Executive Director of Vietnam Textile Group Vinatex, predicted that Vietnam’s textile and apparel exports will perform well following the FTA with the EU. Currently, Vietnam’s market share in the EU is less than 2%. This low market share is expected to foster growth in Vietnam’s clothing and textile industry.