Closure of US and EU borders puts domestic exports at a disadvantage

The apparel industry is one of the most-hit sectors by the COVID-19 epidemic

At present, the US market accounts for roughly 50% of the total annual export value of garment and textile businesses based in Ho Chi Minh City, with the EU market making up between 15% and 18%.

Exports drop by 6% and 8%

The latest statistics indicate that during the first two months of the year textile and apparel exports to the US enjoyed a surge of 5.3% on-year to US$2.25 billion, making up approximately 48% of the country's total textile export value. This is best underlined by the export value of footwear of all kinds reaching US$985 million, an increase of 7.4%.

Currently, as one of the nation’s most important trading partners, the EU is the second largest export market in terms of volume of Vietnamese exports and imports, with the scale of business done with the trading bloc being relatively large.

Indeed, 2019 saw the volume of export goods by sea, air, and rail hit €20.5 billion, €14.5 billion, and €671 million, respectively. Meanwhile, imports by sea, air, and rail reached figures of €5,990 billion, €3.56 billion, and €9 million. Due to the volume of trade the country has with the US and the EU, the narrowing of almost two thirds of both markets following the suspension on importing goods is a major blow for local enterprises.

A Ministry of Industry and Trade representative forecasts that the nation’s exports to the EU during the year’s first and second quarters will be reduced by between 6% and 8% if the fallout from the epidemic continues into June. A number of key products such as computers, in addition to phones and their components, are expected to see sharp drops resulting in the difficulties that come from a shrinking of both supply and market demand.

Many experts have described the current situation as a "big shock" for many textile and garment exporting businesses, especially those that had previously enjoyed a large export turnover to the two vast markets.

The move to halt imports initiated by the US and EU will likely cause the total amount of fabric ready to be put on sale this summer be pushed back to next year, leading to the fabric rapidly losing value with a 40% of existing materials anticipated to be discarded or sold at a loss.

Keeping close tabs on ongoing epidemic situation

With regard to the closure of the EU border affecting the circulation of goods, Minister of Industry and Trade Tran Tuan Anh states that at present there have been no restrictions applied by EU or US authorities regarding the halt of textile and apparel imports from Vietnam. These steps are merely a result of decisions made by buyers in these markets caused by difficulties relating to the novel coronavirus (COVID-19) epidemic.

During a recent working session held between the Ministry of Industry and Trade (MoIT), the European Union (EU) Delegation to Vietnam, and the US Embassy, the EU Delegation noted that the closure of the EU's border amounts to a quarantine measure aimed at ensuring the health of their citizens. Goods and services to the EU will continue to circulate, with a particular emphasis being placed on essential goods such as food and medicine. This policy is not directly affecting the import and export of goods between Vietnam and the EU.

The US Embassy expressed that the US side will not take any measures that prevent Vietnamese goods from entering its market.

However, Ta Hoang Linh, Director of the European and American Market Department under the MoIT, said that a range of major retailers in Europe and the US have been forced to close as a result of the COVID-19 epidemic, therefore causing a negative impact on non-essential goods such as leather and footwear along with garments and textiles.

Summarising the present situation, Minister Tuan Anh underlined the need to plan for a variety of scenarios and give in-depth analysis to the ongoing situation as a means of coming up with more appropriate options aimed at coping with the long-term effects of the epidemic.

Following this, Minister Tuan Anh put forward the suggestion that Deputy Ministers work alongside the Banking Association in a bid to assess the challenging circumstances that small and medium-sized enterprises (SMEs) find themselves in.

Moreover, they should engage in the product supply chain in sectors such as garments and textiles, footwear, wood, electronics, and automobile manufacturing in an attempt to identify potential market difficulties in terms of credit and finance towards developing mechanisms and policies that can provide support for SMEs.

In the immediate future, domestic firms must closely monitor the epidemic situation in order to to map out appropriate production and business plans whilst simultaneously finding ways to boost exports to China, the Republic of Korea, and Japan, where there have been more positive signs that the virus is being brought under control, the minister noted.