Garment sector benefits from FTAs with S.Korea, Japan

Domestic garment exporters are reaping the initial fruit from the region’s free trade agreements (FTA) with South Korea and Japan, said an industry source.

Le Van Dao, vice chairman of the Vietnam Textile and Apparel Association (VITAS), said recently that the garment industry had benefited from the ASEAN free trade pact with South Korea and Japan. However, he noted, the FTAs between ASEAN and other partners like China, New Zealand and Australia have offered little advantage for local apparel makers.

For the FTA with South Korea, the rule of origin is based on the production process rather than the content of apparel products.

According to Vietnam’s Customs, Vietnam’s textile and garment exports to South Korea last year increased by more than 78% to US$432 million. The same year saw Vietnam’s garment shipments to Japan surging about 14%.

Tran Quoc Khanh, deputy minister of industry and trade, said 80% of the nation’s exports to Korea in 2009 enjoyed preferential tariffs from the ASEAN-Korea FTA. Meanwhile, about 28%, 22% and 12% of Vietnam’s exports to Japan, China and ASEAN respectively benefited from the related FTAs.

Statistics from the Vietnamese customs show South Korea last year surpassed Japan to become the second biggest exporter of commodities to Vietnam, behind China. The value of South Korea’s products shipped to Vietnam accounted for 11.5% of the total import value of the ASEAN country.

In 2010, two-way trade between Vietnam and Korea rose 42% year-on-year to US$12.85 billion, with Korea importing US$3 billion worth of products from Vietnam, and exporting US$9.76 billion worth to the country. It means Vietnam still has a trade deficit with South Korea.

South Korea’s products imported by Vietnam are mainly clothing, materials for footwear production, equipment and machinery, steel, equipment components and parts. Last year, Vietnam imported US$1.2 billion worth of iron and steel, US$1.1 billion of clothing, and US$1.1 billion of equipment, component and parts from South Korea.

Tags: Vietnam Garment sector