Thursday, March 18, 2004
Vietnam garment makers struggle to fill US orders
Reuters Hanoi, March 18
Vietnam's clothing makers are scrambling for quotas to fill a deluge of orders from the United States, even as Washington scrutinises possible violations of a textile pact that could lead to lower Vietnamese shipments. A textile delegation from Washington is in Hanoi this week to assess the bilateral pact, which took effect in May 2003, and to establish if garments labelled as made in Vietnam have been smuggled from China to pump up Vietnam's textile volume.
Under the agreement, Washington can apply penalties including reducing quotas if such cheating occurred. The two-day talks, billed as a "consultation", wrap up on Thursday.
"The Vietnamese government has already had some measures to prevent the illegal transshipments," said Le Quoc An, chairman of industry group Vietnam Textile and Apparel Association.
An says a US customs inspection of some 100 Vietnamese factories last year found that "maybe six or 10 factories had some problems" with illegal shipments.
One US apparel industry veteran says he doesn't believe there is widespread fraud. "There's no economic benefit to Vietnam, which is one of the fastest, most efficient, lowest cost production sites in the world. It doesn't make sense."
After crude oil, textiles are Vietnam's second-biggest earner. Hanoi has projected total textile exports of $4.25 billion in 2004. Vietnam earned $2.4 billion from textile sales to America in 2003, up from $900 million in 2002 and just $50 million in 2001.
Trade between the two former war foes expanded after a bilateral agreement went into effect in December 2001. But since then the two have clashed over accusations Vietnam is selling catfish and shrimp to America at unfairly low prices.
Popular garments made in Vietnam include knit shirts, sportswear and trousers for retailers such as The Gap, The Limited and JC Penney.
MAJOR BLOW
Any quota cutback would be a major blow to factories in the communist country that are already desperate for allocations to supply American stores under a pact that caps export increases at two to seven percent a year depending on the type of garment.
The caps were instituted at the urging of the US textile sector, which was alarmed by a surge in Vietnam's imports.
Hanoi has been doling out the scarce quotas but has been slowed by a lack of familiarity with the complex task, which covers 38 clothing types and assesses suppliers by a formula including past performance, amount of orders and location.
An said there aren't enough quotas to go around. For 2004, Vietnam will probably be able to fill only half of the orders it receives from America, the biggest market for Vietnamese goods.
One reason is that some factories had already borrowed quotas for 2004 last year.
The mood among some foreign-invested factory operators is gloomy. If quotas aren't finalised soon, "factories will probably close down by the middle of the year," one executive said.
The textile pact, which runs out at the end of 2004, rolls over until Vietnam joins the World Trade Organisation, which it aims to do by 2005. Its membership will be crucial, since WTO members like China will be exempt from textile quotas from 2005.
Some US retailers are positioning themselves by building their own factories instead of sub-contracting.
JC Penney, Vietnam's biggest clothing buyer, is moving ahead with a factory in northern Thai Binh province, said Rodney Birkins, director of sourcing at the retailer.
It was unclear when Washington would announce a decision on whether to reduce Vietnam's quotas.
© Hindustan Times Ltd. 2004.