Vietnam is likely to overtake Bangladesh in the global apparel export market share in next 10 years once the Trans Pacific Partnership (TPP) takes shape, according to a new study. The TPP is a proposed freed trade agreement, US-led trade pact involving 12 countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam that collectively account for 40% of the world GDP. It is currently under negotiation and is likely to take effect in 2015. According to a research report by Standard Chartered Bank released last month, the agreement is likely to benefit Vietnam’s apparel industry, while hurting South Asian competitors like Bangladesh and Sri Lanka. “Vietnam could overtake Bangladesh in global apparel export market share by 2024, raising its share to 11% from 4% currently. Bangladesh’s market share would increase only marginally in this scenario to 7% from current 5%, while Sri Lanka’s would decline from the current 1%.” On this basis, Vietnam would beat Bangladesh to become the second-biggest apparel supplier after China when its apparel exports swells to US$115bn, it said. “If no TPP deal is struck at all, Bangladesh and Vietnam are likely to stand neck-and-neck by 2024, each with an 8% apparel export market share.” The news has added additional pain to the local manufacturers who have already been counting heavy losses every day due to the non-stop transport blockade and frequent strikes since January 5 that paralyses Bangladesh. “It will bring disaster for the country’s apparel industry, the mainstay of the economy, once the TPP is done,” President of Bangladesh Garment Manufacturers and Exporters Association Atiqul Islam told the Dhaka Tribune yesterday “To save the industry, we have to deal with the issue very smartly and diplomatically. We have no time to wait … we need to act right at this moment,” he said. The BGMEA president sees that the current political unrest may lead the American buyers earlier than expected to divert orders in Vietnam for taking advantage of TPP. “The US buyers might start to build relationship with Vietnam exporters right now due to the current political upheaval,” he said. According to StanChart researcher Radhika Kak, the TPP trade pact, expected to be signed in 2015, will have wide-ranging consequences for the global apparel industry. Irrespective of the fine print, the agreement is likely to benefit Vietnam’s apparel industry, while hurting South Asian competitors like Bangladesh and Sri Lanka, she said. The StanChart report, however, said a TPP agreement with stringent Rules of Origin (ROO) requirements would likely lead to limited immediate gains for Vietnam’s apparel manufacturers. “Rather, the benefits would accrue gradually as the domestic textile industry develops. A wave of foreign investment in Vietnam’s textile industry has already begun, ahead of a potential TPP deal.” The report suggested that Bangladesh and Sri Lanka need to take steps to protect their own apparel industries in the face of a potential TPP deal. In the near term, Bangladesh should focus on capturing more of China’s current market share in the EU. Compliance with global safety and labour norms could help it to achieve this, as it would ensure continued access to EU Generalised System of Preferences (GSP) privileges, even after it graduates from Least-Developed Country status, it said. “It should also work to regain US GSP privileges. In the long term, up-skilling of the labour force will be necessary for Bangladesh to move up the value chain.” Kak said the push for strict ROO requirements reflects the US government’s desire to protect its domestic textile industry from increased competition from non-TPP textile manufacturing countries. “While the agreement with stringent ROO would not provide immediate gains for Vietnam’s apparel manufacturers, benefits would gradually boost the domestic textile industry.” The report said Vietnam’s apparel industry has called for maximum flexibility via the “cut and sew rule” which would give apparel manufacturers the flexibility to source yarn and fabric from lower-cost destinations (including non-TPP countries), requiring only assembly of the final product to be done in the TPP country. Flexible ROO requirements would likely result in gains for Korea and Japan, the primary suppliers of textiles to Vietnam’s apparel industry while China and Hong Kong would likely see little impact, as they are big suppliers to all three countries (Vietnam, Bangladesh and Sri Lanka), it said. Asian suppliers such as India, Pakistan and Thailand, as well as some European countries, would be likely losers, as they are preferred suppliers to Bangladesh and Sri Lanka, it said.
