The Shortage Of Raw Materials Affects The Implementation Effect Of Vietnam EU FTA

According to Vietnam news on September 22, Vietnam EU free trade agreement (evfta) Rules of origin limit the sources of raw materials for enterprises. In order to seize the export opportunities to the European Union, Vietnam's textile and garment enterprises must overcome the obstacles of raw material shortage, experts said.

According to the data of Vietnam's Ministry of industry and trade, the EU has a huge demand for textiles and clothing, with an annual import volume of about 250 billion US dollars. In 2019, Vietnam's exports to the EU reached 4.3 billion US dollars, a year-on-year increase of 3.8%, accounting for only 2% of the EU market. According to the Ministry of industry and trade, evfta, which will take effect in August 2020, is expected to help Vietnam's textile and garment industry increase its exports to the EU by 67% by 2025. However, according to evfta, in addition to meeting strict quality standards and enjoying preferential tariff, local enterprises must also implement strict origin requirements, especially the application of rules of origin from the fabric link, which means that the fabrics exported to the EU must use fabrics produced by Vietnam or EU. The agreement also allows the use of raw materials from Vietnam and the EU's common free trade partners. This has become a weakness in Vietnam's textile and clothing industry, as most raw materials are imported from countries that have not yet signed free trade agreements with the EU.

Wu Dejiang, President of Vietnam textile and clothing association, said local textile and garment manufacturers should use domestic raw materials in the production of products exported to the EU, but in fact many people do not know the source of raw materials. In addition, new generation FTA, such as the comprehensive and progressive trans Pacific Partnership Agreement (cptpp) and evfta, has very strict regulations on materials and manufacturing processes.

In order to solve this problem, experts from Vietnam and other countries can use FTA to negotiate on the use of textile industry. However, due to the distance and price, the number of fabrics imported from South Korea is very small. In the long run, Vietnam needs a comprehensive strategy to seize the opportunities in the EU market. A clothing company said that in order to meet the evfta origin requirements, the company has signed a contract to import raw materials from EU free trade partners such as South Korea and turkey instead of purchasing from China.

In addition, the Ministry of industry and trade is formulating a development plan for the textile and garment industry. By 2040, a large textile and printing and dyeing industrial park with an international standard wastewater treatment system will be developed to attract investors and create a textile dyeing clothing cycle. This will help Vietnam's textile and garment industry to join the global supply chain, reduce dependence on imported materials and make full use of evft A and other free trade agreements.