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Deputy Minister of Industry and Trade Do Thang Hai said since the US-Vietnam Bilateral Trade Agreement (BTA) came into effect, import and export turnover between Vietnam and the US has grown steadily at high level. Two-way trade turnover between the two countries increased from US$220 million in 1994 (when the US removed the economic embargo against Vietnam) to $1.4 billion in 2001 (before the BTA Trade Agreement came into effect) and reached $58.8 billion at the end of 2018. In the first six months of 2019, this figure reached $35.4 billion.
The strong shift of global supply chains recently has helped Vietnam increase its rank from 12th in 2018 to 9th in the first months of 2019. Vietnam has become the 27th largest market and 16th largest trading partner of the US.
Hai said import and export activities between Vietnam and the US have advantages thanks to the supplementary nature of the two economies. The US has high import demand for agricultural products that Vietnam has strengths in based on favourable natural economic conditionsa and labour advantages in sectors such as textiles, footwear, machinery and electronic equipment. Vietnam has high import demand for machinery, high-tech equipment, aviation equipment, telecommunications and agricultural products for manufacturing activities to meet the high growth and strong development of the economy.
Commenting on opportunities to export goods to the US market, Tran Toan Thang, Head of the World Economic Department, National Centre for Socio-Economic Information and Forecast under the Ministry of Planning and Investment said that, in the current period, Vietnamese enterprises have opportunities to exploit "trade loopholes" of Chinese goods in the US market due to the impact of the trade war. Specifically, Vietnamese enterprises can increase exports to the US in 12 groups of processed foods such as meat, crustaceans, vegetables and fruit etc. In addition, some textile products that have low tax rates and insignificant market share in the US market such as knitwear, embroidery and tufted fabrics are also having opportunities in this market.
Nguyen Chanh Phuong, Vice President, General Secretary of Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA) said the US accounts for more than 40 percent of the export market share of the whole wood industry. Vietnamese designs and products are at average level, so they are suitable for the US market (reasonable price and quality), while it is very difficult for Vietnamese wood enterprises to export to the European market.
Although there are many concerns about protectionist trends in the US market, Nguyen Hong Duong, Deputy Director of the European-American Market Department, said the US has always led in terms of market openness, competition, investment attraction and trade liberalisation. Currently, the average import tax rate of the US is 10 percent which is much lower than the import tax rate of Japan, China and the EU. The US is the leading export market of Vietnam with an export growth of 37 percent. However, with this growth rate, the trade deficit between the US and Vietnam is very high, putting considerable pressure on the Government and ministries and sectors.
Increasing imports and reducing trade deficit
According to Duong, to reduce the trade deficit with the US, we cannot reduce exports but must increase imports into this market to narrow the gap.
Regarding this issue, Deputy Minister of Industry and Trade Do Thang Hai said the ministry also encouraged enterprises to consider importing from the US machinery, equipment and high technology for production and export. Production and exports to the US by its technology and raw materials, associated with building a closed-loop supply chain will be a sustainable, fast and effective step for enterprises.
With average GDP growth of nearly 7 percent per year, a population of nearly 100 million, consumer demand is not governed by religious reasons and there is a preference for "Made in USA" products, Vietnam is forecasted to be a potential market for US companies engaged in sectors such as culture, health, education, telecommunications, aviation, finance, banking, retail distribution, agriculture, or in new sectors such as digital economy and renewable energy.
Vu Duc Giang, Chairman of Vietnam Textile and Apparel Association, said in 2019, the textile and garment industry set a target of export turnover of 39.5 - 40 billion USD, of which, the US market accounts for about 40 percent of total export turnover of the Textile industry. To reduce the trade deficit from the US market, the textile industry is importing cotton from the US for fabric production.
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Giang said the promotion of the US cotton consumption in Vietnam will not only create stability in fibre quality and a foundation for developing Vietnam's fiber production industry, but also promote Vietnam's textile and garment export to the US. Increasing the use of US cotton in the Vietnamese textile and apparel industry means that US consumers will use products with high cotton index and Vietnam's export products to the US will have higher cotton content. Therefore, strengthening cooperation between US cotton manufacturers and Vietnamese textile enterprises will bring long-term benefits for both sides.
“Currently, although Vietnam's cotton import ratio has reached over 50 percent of Vietnam's total cotton imports, the Vietnam Textile and Apparel Association still expect to import more the US cotton. To do this, the association has repeatedly proposed that the US Cotton Association should propose the US government to issue policies for US enterprises to invest in the cotton warehouse in Vietnam. If this can be done, the US cotton output sold in the Vietnamese market could increase double or triple fold, from which the US agriculture sector will develop more strongly and Vietnamese enterprises will have a more stable cotton supply with faster delivery,” Giang said
By Nguyen Hue/Ngoc Loan