EU - Vietnam FTA a challenge for garment sector
Vietnam’s garment sector will face a host of challenges from the EU - Vietnam Free Trade Agreement, with the greatest being a shortage of raw material supplies.
Despite much effort having been made, 90 percent of the sector’s imported materials are from markets not covered by the agreement. This means that locally-made garments will not be entitled to tax incentives relating to material origin.
Figures show that despite its high export value, the local garment sector merely completes simple stages such as processing. The high requirements of the EVFTA’s “rules of origin” therefore present a major challenge.
Once the EVFTA comes into effect, the existing average tax rate of 12 percent will be reduced to zero over a period of three to seven years for garment and textile products.
To benefit from the tax reductions, Vietnamese textiles and garment producers must strictly obey “rules of origin”, meaning that raw materials must be sourced from Vietnam or the EU and the cutting and sewing processes must take place in either. VNA