Women’s Wear Daily
04.23.2014
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Debate Builds on Vietnam WTO Bid

A trade battle over Vietnam's 11-year effort to join the World Trade Organization is flying just below the radar in Washington.

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WASHINGTON — A trade battle over Vietnam's 11-year effort to join the World Trade Organization is flying just below the radar in Washington.

The stakes are high for the apparel and textile industry and lobbyists on both sides are mustering their forces.

Domestic textile producers fear Vietnam's entry into the WTO would eliminate its quotas, unleashing an apparel and textile industry supported by a managed currency and subsidies from Vietnam's Communist government. The U.S. industry is pushing for the Bush administration to make safeguard quotas, similar to those levied on China last year, a condition of Vietnam's accession to the global trade body.

"It's ludicrous to expect that they're going to make substantial reform and modification at a reasonable pace toward an open market economy if we give them accession to the WTO," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition. "That should be the carrot that is used to, in essence, force them to adopt a more open trading environment or a more market-based economy."

Importers, denying the utility of safeguards in protecting the domestic industry and remembering the headaches of working under them in China, fear their inclusion in any Vietnam deal.

"There is a great deal of industry concern on both sides of this issue," said Scott Quesenberry, special textile negotiator in the U.S. Trade Representative's office, who spoke at the WWD Sourcing Leadership Forum earlier this month.

"To say whether it's going to happen is way premature," he said of the possibility of a textile safeguard in Vietnam's accession agreement.

Even though restrained by quotas since 2003, Vietnam's imports to the U.S. rose 5 percent last year to 950.6 million square meter equivalents, worth $2.9 billion, making it the 12th-largest supplier of apparel and textiles to the U.S.

Where U.S. textile firms see shades of China in Vietnam, importers see an opportunity to diversify their sourcing in Asia.

"They don't have the same number of people, the same number of facilities," said Brenda Jacobs, counsel for the U.S. Association of Importers of Textiles & Apparel, comparing Vietnam to China. "They don't have the same level of vertical integration. They're not going to make the same wide range of products."

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Jacobs also said safeguard quotas would undermine the value of joining the WTO for Vietnam.

"The U.S. has never tabled it and Vietnam could never accept it," she said. "For Vietnam, apparel exports are a more significant proportion of their trade [than in China] and they need to bring in currency."

Vietnam needs to pass a few more hurdles before it can join the WTO, including finishing up bilateral talks with the U.S. on the subject and completing multilateral negotiations within the WTO. Congress also has to extend the vital designation of Permanent Normal Trade Relations to the country. Vietnam and Canada completed bilateral talks last week.

Bob Zane, senior vice president at Liz Claiborne Inc., said if Vietnam is going to concede to some restrictions on exports to the U.S. market, it should skip over antisurge protections such as safeguards and go right to an import agreement.

This would essentially bypass what happened last year, where Chinese imports to the U.S. surged, prompting the Bush administration to impose safeguard quotas, which caused uncertainty in the import community. The U.S. and China ultimately worked out a deal to regulate trade through 2008.

"What frightens me and my colleagues is that, if Vietnam subjects its industry to an antisurge mechanism similar to what the Chinese did, then we will probably see a repeat of the chaos that we saw in China," said Zane, who is also chairman of the USA-ITA. "Personally, I've had it with unpredictably. I don't like it. It's a lousy way of doing business."

There is no telling how much Vietnam's imports would increase if the country joined the WTO, though it lacks the resources to become another China.

However, Cass Johnson, president of the National Council of Textile Organizations, said Vietnam has shown it has the ability to flood the U.S. market. Apparel and textile imports from the country jumped to 827.4 million SME in 2003 from 32.7 million SME in 2001, even after being constrained by quotas during May of that year.

"It's very important for us to get an effective safeguard against Vietnam," Johnson said.

The importers' argument against safeguard quotas on Vietnam follows the same lines as did their case against restrictions on China: They won't bring business back to U.S. producers, but give it to other countries. U.S. textile groups, on the other hand, contend the restraints will help apparel production in Central America, a key market for American textile exports.

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"The battle lines are the big Asian suppliers [and] the big Central American and Mexican suppliers," said Johnson.

Though there is no real consensus on how the Vietnam accession talks will pan out in the apparel and textile area, some importers reading the tea leaves see continued restraints on the Southeast Asian nation.

"I don't see any great sentiment for free trade in Washington," said Tom Haugen, president of sourcing firm Li & Fung USA, who thinks Vietnam will more than likely have safeguards built into its accession agreement. "You're going to have [Congressional] elections this year, so therefore people are looking for something to run behind, hide behind actually."

At a Glance

  • Capital: Hanoi
  • Type of Government: Communist state
  • Size: Slightly larger than New Mexico
  • Population: 83.5 million
  • Gross Domestic Product: $3,000 per capita
  • Source: CIA World Factbook
The Fiber Price Sheet
The last Tuesday of every month, WWD publishes the current, month-ago and year-ago fiber prices. Prices listed reflect the cost of one pound of fiber or, in the case of crude oil, one barrel.
Fiber
Price on 3/27/06*
Price on 2/27/06
Price on 3/28/05
Cotton
58.07 cents
56.79 cents
47.09 cents
Wool
$2.43
$2.49
$2.55
Polyester staple
83 cents
81 cents
66 cents
Polyester filament
80 cents
78 cents
76 cents
February Synthetic PPI
115.1
113.8
109.0
Crude oil
$64.26
$62.91
$54.84
*The current cotton price is the February average on fiber being delivered to Southeastern region mills, according to Agricultural Marketing Services/USDA. The wool price is based on the average price for the week ended MARCH 24 of 11 different thicknesses of fiber, ranging from 15 microns to 30 microns, according to The Woolmark Co. Information on polyester pricing is provided by the consulting firm DeWitt & Co. The synthetic-fiber producer index, or PPI, is compiled by the Bureau of Labor Statistics and reflects the overall change in all synthetic-fiber prices. It is not a price in dollars but a measurement of how prices have changed since 1982, which had a PPI of 100. Oil prices reflect last week's closing price on the New York Mercantile Exchange of future contracts for light, sweet crude oil to be delivered next month.
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