The recently-negotiated Trans-Pacific Partnership (TPP) could boost Vietnam duty-free access to the US market. However, this may not be positive for the Indian textile and garment industry.

For Indian garment exporters, Vietnam could be the new Bangladesh. This is because of a massive duty disadvantage vis-a-vis competitors, stringent labour laws, poor infrastructure, and inadequate policy support in India. Due to the lure of duty-free access to the US and other TPP markets, some Indian companies may shift base to Vietnam, says analysts, just as they did some years ago to Bangladesh to grab duty advantage in exports and low labour costs.

Vietnam is now the world’s third-largest garment exporter. The US accounted for 22-30 percent of India’s garment exports in recent years and Indian exporters have to pay duty in the range of 14-32 percent for the shipment of textiles and garments there. Thus, the threat seems to be real.

As Shailesh Pathak, Executive Director, Bhartiya Group, says that they employ 6,000 people in their fashion business in Chennai and Bangalore, and there is a high probability that 4,000 of those jobs may move to Vietnam in the next one year. However, some other players, while recognising potential threat from Vietnam, chose to await the full text of the TPP.

Director, Arvind Mills and the newly-appointed Chairman of the Confederation of Indian Textile Industry, Naishadh Parikh, said that the pact suggests there is a potential risk of investment and employment moving to select TPP countries, especially Vietnam. However, he believes that until the full text is made public, it’s too early to say if Indian companies would shift base soon, as any such move depends on several other factors as well, including familiarity of the market.