Vietnam’s textile exports to countries that are part of Trans-Pacific Partnership (TPP) were almost 70 per cent of the total export value and is predicted to grow substantially once the agreement is signed. This is just in the first half of 2015. However, since 60 to 90 per cent of materials for textiles made in Vietnam are imported from countries that are not members of the TPP, the issue of rules of origin is a hurdle.

Among the TPP markets, the US is Vietnam’s largest, according to the Vietnam Textile and Apparel Association (Vitas). This comprised of 42 per cent of total textile exports in July, estimated at $5.18 billion, which had increased by 11.01 per cent compared to July last year.

Vietnam’s textile exporters, however have not paid much heed to the strict requirements on the origin of materials by TPP. It is the third-largest exporter to the US, however, a vast share of its raw materials are imported, mostly from China. Vietnam needs to use more of its own inputs to increase added value, as it will not be able to import materials from China. If it wants to benefit from the preferential tariffs provided under the TPP, this is what Vietnam would have to do when it joins the TPP.

The ‘yarn forward’ rule, according to Dang Phuong Dung, Vice Chairman and General Secretary of Vitas, would pose a major hurdle for Vietnam. As per the rule, all material used in production needs to be produced in countries that participate in the TPP. This rule would be an obstacle, as there were weaknesses in material supplies such as fabric and dyeing, which are dependent upon imports.