A number of textile and garment firms in Vietnam may benefit from the EU-Vietnam Free Trade Agreement (EVFTA) expected to be signed next year. This is especially true for firms that have close production chains, from fiber, cloth, yarn, and buttons to finished products. There will be ample opportunities to upgrade the value chain for the textile and garment sector as EVFTA will provide tariff preferences to Vietnamese exporters to the EU.

Vietnamese producers can upgrade their value chain, adding weaving or knitting stage to existing cutting and sewing. At present, this operation is particularly challenging, as it requires financial resources and high-skilled workers to manage the high-technology machinery. Vietnam, rich in labor and limited in available capital, is deeply engaged in the low-end of garment manufacturing activities (the cut and sew stage of production). The textile and garment sectors actually show huge differences between each other. Textiles are more capital-intensive, relying on technology and requiring highly skilled workers. They add higher value than the garment sector, which is labor-intensive and mainly reliant on low skilled workers.

However, many textile and garment firms in Vietnam might not be able to enjoy the benefits of EVFTA as many companies that import materials from countries like China, Taiwan, and Hong Kong, and not from EVFTA members.