Vietnam : Textile industry gets a breather on the US quotas

The beleaguered Vietnamese textile manufacturers received a reprieve from the US allowing them to exceed their export quotas for this year by borrowing from 2005 quotas, the Ministry of Trade said Wednesday. The decision was arrived at with the US Commerce Department that concluded in Washington last Thursday with the renewal of last year''s US-Vietnam bilateral textile agreement until December 31, 2005. Le Van Thang, deputy director of the trade ministry''s import-export department, said that this would enable companies to continue exporting clothing to the United States, its prime market. The Vietnam Textile and Garment Association stated that nearly 70% of its estimated 550 member companies had exhausted their 2004 export quotas. Thang estimated that the borrowed quotas would account for about 6-8% of the total quota for next year. The textile sector is Vietnam''s second biggest earner of foreign exchange after crude oil and is expected to bring in 3.8 billion dollars this year. The United States accounts for over 50% of Vietnamese clothing exports. Le Van Dao, deputy chairman of the Vietnam Textile and Garment Association, welcomed the provisions under the renewed agreement. "It is very good news for us because we now have more quota. If the US had not allowed us to borrow from the 2005 quotas then our textile and garment exports to the US would have suffered considerably," he said. Vietnam''s US-bound clothing exports totalled 2.48 billion dollars in 2003, a year-on-year increase of 161%, according to the US Commerce Department. In 2002 they soared a massive 1,800% to 952 million dollars from 49 million dollars in 2001, prompting a flood of complaints from the small garment manufacturing industry in the United States over cheap imports. Although the 2003 textile agreement was in response to their concerns, US manufacturers, ironically, were angered by what they considered excessively high quotas on 38 textile and apparel products from Vietnam. In May this year Washington reduced the Southeast Asian nation''s quotas by 2.5% for 2004 because of illegal trans-shipments from other foreign suppliers, such as China. The cutback was a major blow to Vietnam-based companies, who even before the announcement were struggling to maintain 2003 export levels. First five months this year saw US-bound clothing exports slip 6% year-on-year, according to US Commerce Department figures. The export restrictions to the United States are one of the driving forces behind Vietnam''s bid to join the World Trade Organisation next year. Until it accedes to the Geneva-based body it will be subject to quotas, whereas the quota system for WTO members will end next year.