In 2018, Vietnam’s textile and garment exports grew by 16 per cent. The free trade agreement with the European Union is expected to yield huge benefits. The EU is the second biggest market for Vietnamese textile and garment products. Textiles and garments shipped to the EU are currently subject to export tariffs of 9.6 per cent, but when the free trade agreement takes effect, the rate will be gradually reduced to zero in seven years. If Vietnamese firms meet origin requirements, the agreement will open enormous opportunities for exports. To be exempt from tariffs, apparel products must satisfy two conditions: the fabric used to make apparel must be from Vietnam or the EU, and the production process must be carried out in Vietnam or the EU. However, apparel products can also benefit from preferential tariffs under this deal if the material fabric comes from the countries that have FTAs with both the EU and Vietnam, such as the Republic of Korea.

However, Vietnamese firms still face several challenges as most of them have engaged in only cutting and sewing so far, and not producing fabric or yarn. Additionally, most production materials still come from China, which doesn’t have a trade deal with the EU.