Competitive pressure is increasingly fierce
Vietnam is currently one of the few countries with a very large trade openness, with 17 free trade agreements (FTAs) in effect. Among them, there are new generation FTAs such as the Vietnam - EU Free Trade Agreement (EVFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Vietnam - UK Free Trade Agreement (UKVFTA) which are expected to be "gold mines" to help Vietnamese goods access large markets with significant tariff incentives. However, according to many experts, the textile and garment industry has not really taken advantage of the opportunities brought by FTAs.
Mr. Ngo Chung Khanh - Deputy Director of Multilateral Trade Policy Department (Ministry of Industry and Trade) said that Vietnam's textile and garment industry has not made good use of FTAs. "EVFTA has been implemented for 5 years, UKVFTA for 4 years, but the utilization rate is still very modest, this is a number worth thinking about," Mr. Khanh emphasized.
The international context is also changing rapidly. Markets that were previously difficult to negotiate such as the EU, UK, Canada... have now signed FTAs quickly to serve the goal of market diversification, which causes Vietnam to gradually lose its tariff advantage. "Vietnam's tariff opportunities are gradually disappearing as destination markets also open up to competitors," Mr. Khanh warned.
The representative of the Ministry of Industry and Trade is also quite worried because efforts to take advantage of incentives from FTAs are not as expected. He analyzed that not only exporting countries but also large importers such as the EU are trying to expand their markets to avoid risks. “Previously, they had difficulty negotiating FTAs with Malaysia, Thailand, and Indonesia, but now it will be completed in 1 year because of the need to diversify import markets. At that time, the competitive advantages in terms of taxes will gradually disappear, and appropriate solutions are needed,” Mr. Khanh recommended.
In modern FTAs, rules of origin are the key factor in determining whether or not to enjoy tariff preferences. Unfortunately, this is an inherent weakness of the Vietnamese textile and garment industry when most of the raw materials still depend on imports. Failure to achieve the localization rate makes businesses ineligible for incentives.
“The biggest problem is raw materials. Without raw materials, it is impossible to produce, and it is also impossible to meet the rules of origin,” Mr. Khanh analyzed.
Towards self-sufficiency in raw materials and accessories
Another reality is that many textile and garment enterprises are still not proactive in taking advantage of FTAs because they are used to easy conditions. “The market is always changing. 2022 is favorable, 2023 is difficult, 2024 is favorable again and then early 2025 is difficult. The problem lies in the fact that we are not prepared for sustainability,” Mr. Khanh emphasized. In particular, over-reliance on some key markets such as the US and EU puts businesses in a passive and vulnerable position when trade conditions change.
Faced with this situation, the fundamental solution, according to the representative of the Ministry of Industry and Trade, is to develop domestic production of raw materials to ensure rules of origin. This is a prerequisite if we want to effectively utilize new generation FTAs.
Along with production development, businesses also need to be ready to respond to new technical barriers. For example, the EU's Carbon Border Adjustment Mechanism. Although the textile, garment and footwear industries have not yet been directly affected, they cannot be subjective. “We must pay attention to international standards and adjust domestic policies accordingly to help Vietnamese enterprises not be eliminated from the game,” Mr. Khanh emphasized.
But how to pull the raw material production chain into Vietnam is really a difficult question. From many years of practical experience in calling for and promoting investment in raw materials in the Chinese market, a representative of the Vietnam Trade Office Branch in Guangzhou (China) pointed out that Chinese enterprises are not yet interested in investing in the production of textile and footwear raw materials in Vietnam.
The reason is that the supply chain from raw materials is not complete, Vietnam still depends on importing cotton, dyeing chemicals, etc. The lack of factories producing basic raw materials makes it difficult for Chinese enterprises to find local sources of supply in Vietnam. At the same time, there is a lack of highly skilled workers in the raw material production industry.
“To successfully attract investors to produce in Vietnam, in addition to preferential policies and favorable conditions, investment efficiency is a prerequisite. Through discussions with a number of Chinese enterprises, the decision to invest in Vietnam is not only due to the labor force but also because of the orders they find in Vietnam,” said a representative of the Vietnam Trade Office in Guangzhou.
He also expressed that these are also issues that management agencies need to study to create an environment to attract Chinese enterprises to come and invest in Vietnam.

Source: Vitic/ congthuong.vn