Vietnam is likely to overtake Bangladesh in the global apparel export market share once the Trans Pacific Partnership (TPP) takes shape. TPP is likely to benefit Vietnam’s apparel industry while hurting South Asian competitors like Bangladesh and Sri Lanka. Vietnam’s market share in apparel could rise to about 11 per cent up from 4 per cent as of now. 

The TPP free trade grouping consists of Vietnam, along with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and the US. The agreement may come into force this year. But a wave of foreign investment in Vietnam’s textile industry has already begun. Flexible rules of origin requirements would likely result in gains for Korea and Japan, the primary suppliers of textiles to Vietnam’s apparel industry. China and Hong Kong would likely see little impact, as they are big suppliers to Vietnam, Bangladesh and Sri Lanka. 

In contrast, Asian suppliers such as India, Pakistan and Thailand, as well as some European countries, would be losers, as they are preferred suppliers to Bangladesh and Sri Lanka. Negotiations between the US and Vietnam are underway on the terms of trade agreement on apparels. The US is understood to favor yarn forward rules, which implies that all stages of production, starting with yarn spinning, must take place within a TPP country.