U.S. Clothing Imports from Vietnam: Trade Policies and Performance
U.S. Clothing Imports from Vietnam:
Trade Policies and Performance
Updated June 27, 2008
Michael F. Martin
Analyst in Asian Trade and Finance
Foreign Affairs, Defense, and Trade Division
U.S. Clothing Imports from Vietnam:
Trade Policies and Performance
U.S. clothing imports from Vietnam grew from virtually nothing in 2000 to $4.3
billion in 2007. Vietnam was the third largest source of clothing imports for the
United States in 2006, behind (in order) China and Mexico.
Much of that growth was the result of the gradual liberalization of U.S. trade
policy towards Vietnam. Although the United States terminated its trade embargo
on Vietnam in 1994, trade initially remained low because Vietnam did not have
“normal trade relations” (NTR) status. The signing of a bilateral trade agreement in
July 2000 allowed President Clinton to grant Vietnam temporary NTR status
(effective December 2001), leading to a sharp increase in U.S. imports from
Vietnam, including clothing. The rise in Vietnamese clothing imports led to the
United States to push Vietnam into a bilateral textile agreement in 2003 that set
quantity quotas on the import of selected clothing items. The bilateral textile
agreement remained in effect until the United States granted Vietnam permanent
NTR status on December 20, 2006, as part of its accession into the World Trade
The liberalization of U.S. trade policy towards Vietnam raised concerns about
possible dumping by Vietnamese clothing exporters. Some Members of Congress
and U.S. clothing and textile companies argued that a surge in Vietnamese imports
may harm the U.S. clothing and textile industry. In part to secure Senate passage of
permanent NTR status for Vietnam, the Bush Administration agreed to establish a
“monitoring program” for selected clothing imports from Vietnam. From its
inception, there have been questions about the legality and effectiveness of the
On October 26, 2007, the Department of Commerce (DOC) announced the
completion of its first six-month review of the monitoring data, finding that there was
insufficient evidence to warrant the self-initiation of an antidumping investigation.
On May 6, 2008, the DOC announced its second six-month review of the monitoring
data had come to the same conclusion.
There are a range of actions that Congress might take with regard to U.S. trade
policy towards Vietnam. Congress could take no action. Alternatively, Congress
could revisit the question of the DOC’s legal authority to establish the monitoring
program, as well as examine the issue of the compatibility of the monitoring program
with existing WTO agreements and commitments. Congress could investigate
Vietnam’s compliance with its promise to terminate all WTO-prohibited subsidies.
Congress could also enact legislation designed to counteract perceived unfair
Vietnamese trade practices. Congress could examine the design and conduct of the
monitoring program to ascertain if it provides a reasonable basis for determining the
need for an antidumping investigation and/or examine claims that the monitoring
program has adversely affected trade with and investments in Vietnam. This report
will be updated as circumstances warrant.
In troduction ......................................................1
Summary of U.S.-Vietnamese Clothing Trade...........................4
The Vietnam-U.S. Textile Agreement: 2003-2006....................6
Vietnam’s WTO Accession and Permanent NTR Status................9
Monitoring Program: 2007-2009 ................................11
Congressional Comments on the Proposed Monitoring Program....12
Criticism from U.S. and Korean Business Communities..........13
Support from the U.S. Business Community....................15
Comments from the Vietnamese Government and Companies......17
Commerce Decision to Proceed with the Monitoring Program......19
Commerce Department’s Reviews....................................19
Results of the First Six-Month Review............................20
Results of the Second Six-Month Review..........................21
The Structure of Vietnam’s Clothing Industry...........................23
Issues of Ownership...........................................23
Types of Ownership Arrangements...........................24
Role of Vinatex..........................................25
Level of Subsidization.........................................26
Below Market Wages......................................28
Growth in Vietnam’s Clothing Exports................................31
Vietnam’s Role in the U.S. Clothing Market............................34
Overall Market Share..........................................34
Top Clothing Imports..........................................35
Recent Trends in U.S. Clothing Production.............................36
Implications for Congress..........................................37
List of Figures
Figure 1. U.S. Imports from Vietnam, 1990-2007........................5
Figure 2. U.S. Clothing Imports from Top Suppliers, 2001-2006...........34
Figure 3. Gross Output of U.S. Clothing Industry and U.S. Imports of Clothing
from Vietnam, 1995-2005......................................37
Table 1. Year-on-Year Increase in Monitored Clothing Imports from Vietnam..3
Table 2. Quota Utilization Rate for Clothing Imported from
Table 3. Types of Vietnamese Clothing Establishments, 1998..............23
Table 4. Distribution of Real Output of Vietnam’s Clothing Industry,
Base Year 1994..............................................24
Table 5. The Clothing Commodity Chain..............................30
Table 6. Vietnam’s Textile and Clothing Exports as a Share of Total Exports..32
Table 7. Vietnam’s Major Clothing Export Markets......................33
Table 8. Leading U.S. Clothing Imports from Vietnam by Share of Total
Imports by Category, 2006......................................35
U.S. Clothing Imports from Vietnam:
Trade Policies and Performance
In the relatively short period of time since the United States resumed “normal
trade relations” (NTR) with Vietnam in 2001, there have been several controversies
regarding the importation of clothing from Vietnam into the United States.1 The
controversies surrounding U.S. clothing imports from Vietnam include allegations
of dumping, illegal transshipments, violations of the World Trade Organization
(WTO) agreements, and a controversial import monitoring program. In addition,
U.S. trade policy governing the import of Vietnamese clothing has changed course
several times, leading to claims of significant market disruption and regulatory
uncertainty. These claims are bolstered by the volatility of U.S. import data for
Vietnamese clothing over the last seven years.
There have been several shifts in U.S. trade policy with Vietnam since it was
first granted NTR status in 2001 that have possibly affected U.S. clothing imports
from Vietnam. A bilateral trade agreement concluded on July 13, 2000, significantly
lowered tariff rates on clothing imported from Vietnam. A bilateral textile agreement
that ran from May 1, 2003, until January 11, 2007, imposed quantity quotas on the
import of certain categories of clothing imported from Vietnam. Also, as part of its
accession into the WTO, Vietnam entered into an agreement with the United States
that, among other provisions, requires that Vietnam terminate various non-WTO
compliant subsidy programs for its clothing and textiles industries. Finally, on
December 8, 2006, Congress passed legislation granting Vietnam permanent NTR
status as of December 29, 2006.
Much of the recent contention about Vietnamese clothing exports to the United
States has focused on the U.S. Department of Commerce’s (DOC) implementation
of an “import monitoring program” for selected categories of Vietnamese clothing
on the day Vietnam joined the WTO — January 11, 2007. The announced import
monitoring program began on the same day Vietnam joined the WTO and is to expire
with the end of the Bush Administration (taken to be January 19, 2008, by the2
DOC). Under the program, the DOC will collect monthly data on the quantity and
unit values of five categories of clothing imported from Vietnam — shirts, sweaters,
swimwear, trousers, and underwear — to determine if there is sufficient evidence to
warrant the self-initiation of an anti-dumping investigation.
1 For purposes of this report, clothing will include products imported under chapters 61 and
62 of the U.S. Harmonized Tariff Schedule (HTS). As such, it excludes textiles, headgear
2 “Textile and Apparel Products from Vietnam: Import Monitoring Program; Request for
Comments,” International Trade Administration, U.S. Department of Commerce, Federal
Register, Volume 71, Number 232, December 4, 2006.
While acknowledging that the program would have “an impact on a broad array
of parties,”3 the DOC maintained that the monitoring of some Vietnamese clothing
imports “is not meant to inhibit legitimate trade.”4 Supporters of the program —
principally U.S. textile manufacturers — maintain that the monitoring is necessary
because the Vietnamese government is “illegally” subsidizing its clothing industry
and that Vietnamese exporters are dumping their products in the United States.5
According to the program’s backers, the data being collected by the monitoring
program will provide the necessary evidence to initiate an anti-dumping action
against Vietnamese clothing exports. Opponents of the program — a mixture of
clothing manufacturers, retailers and importers — assert that the collection of the
data violates various provisions of the WTO agreement, runs counter to past anti-
dumping practices, and has already had a negative effect on Vietnam’s exports to the
Interest in the monitoring program was heightened by expectations of the
DOC’s first formal review of the Vietnamese clothing imports being monitored.
According to the Federal Register announcement of the program, the DOC “intends
to conduct its formal evaluations of the information gathered under the monitoring
program on a biannual basis.”6 The DOC has also indicated that the categories of
products covered by the monitoring program (shirts, sweaters, swimwear, trousers,
and underwear) are not “static,” and may be changed “in response to input received
from interested parties, changes in the trade, or as the Department [of Commerce]
broadens its understanding of the composition and structure of the domestic textile
and apparel industry.”
Trade statistics for the first six months of 2007 provided some support to both
supporters and opponents of the monitoring program (see Table 1). U.S. imports of
sweaters made in Vietnam from January to June 2007 increased by over 85% when
compared to the same period last year. Meanwhile, the volume of shirts and trousers
imported from Vietnam — the two largest imported categories being monitored in
the DOC program — during the first six months of 2007 rose by 28.1% and 25.8%
respectively, when compared to the first half of 2006. However, the amount of
swimwear imported by the United States from Vietnam from January to June 2007
was virtually unchanged from a year ago, and the amount of underwear imported
declined by over 20% when compared to last year.
3 Opening remarks by David M. Spooner, Assistant Secretary for Import Administration,
U.S. Department of Commerce at a public hearing on the Vietnam Textile and Apparel
Import Monitoring Program held on April 24, 2007, in Washington, DC.
4 “Textile and Apparel Products from Vietnam: Import Monitoring Program; Request for
Comments,” International Trade Administration, U.S. Department of Commerce, Federal
Register, Volume 72, Number 14, January 23, 2007.
5 The United States generally responds to subsidies that violate WTO agreements by the
imposition of countervailing duties, not anti-dumping measures. Anti-dumping measures are
utilized when imported products are being sold in the United States at below fair market
value and cause demonstrable harm to U.S. manufacturers of similar products.
6 “Textile and Apparel Products from Vietnam: Import Monitoring Program; Request for
Comments,” International Trade Administration, U.S. Department of Commerce, Federal
Register, Volume 72, Number 14, January 23, 2007.
Table 1. Year-on-Year Increase in Monitored Clothing Imports
ClothingJanuary - June 2006January - June 2007Percentage
Shirts 13,669,138 17,506,785 28.1%
Sweaters 14,803 27,399 85.1%
Swimwear 660,628 661,362 0.1%
T r ousers 7,551,943 9,501,229 25.8%
Underwear 1,208,117 962,012 -20.4%
Source: Office of Textiles and Apparel, International Trade Administration, U.S. Department of
C o mme r c e .
However, evaluating the growth in clothing imports from Vietnam using year-
on-year data may be potentially misleading for various reasons. First, under the
terms of the U.S.-Vietnam bilateral textile agreement, the United States was
permitted to set quotas on the volume of clothing imported from Vietnam in the years
2003 to 2006. As a result, the import figures for the last four years may have been
kept artificially low, and the ensuing growth in 2007 artificially enhanced. Second,
the international trade in clothing is comparatively seasonal, so comparisons based
on data from only part of a year may be biased. Third, because there is an
approximately six month lead time in the contracting of clothing, the trade volumes
for January to June 2007 supposedly reflect arrangements made prior to the
announcement of the monitoring program, and therefore will not reflect the alleged
negative impact the monitoring program has had on Vietnam’s clothing exports to
the United States.
On October 26, 2007, the DOC issued a press release stating that it had
concluded its first review of Vietnamese clothing imports and determined that,
“There is insufficient evidence to warrant self-initiating an anti-dumping
investigation.”7 According to the press release, there were no imports from Vietnam
for 317 of the 486 clothing items being monitored, and unit prices had increased for
many of the items where there had been imports from Vietnam. Comparisons of
imports from Vietnam to imports from other nations also failed to provide sufficient
evidence to warrant self-initiating an anti-dumping investigation. Assistant Secretary
for Import Administration David Spooner said that, despite the lack of evidence of
dumping, “The Department will continue to monitor apparel imports from Vietnam
until the end of the Administration and work with all stakeholders to ensure an open
and transparent monitoring process.”8
7 “Commerce Completes First Review of Vietnam Import Data,” press release, U.S.
Department of Commerce, October 26, 2007.
On May 6, 2008, the DOC completed its second six-month review of the
monitoring data, and once again decided that “there is insufficient evidence to
warrant self-initiating an antidumping investigation.”9 According to the DOC, there
were no clothing imports from Vietnam for 208 of the “nearly 500 ten-digit
Harmonized Tariff System (HTS) lines” covered by the monitoring program.10 As
was done in the first review, the DOC compared trends in unit values and import
levels to other nations supplying these products to the United States, and concluded
that the data did not support an antidumping investigation. The DOC also announced
that a third six-month review was to be done in September 2008.
While there was no requirement that the DOC take any action following the
evaluations of the trade data, the program’s continuation arguably will keep the
monitoring program an issue of concern for the U.S. clothing manufacturers, the U.S.
textile industry, major clothing importers, and large retail outlets in the United States.
Among the possible Administration actions that could have been taken were the self-
initiation of an anti-dumping investigation on select clothing imports from Vietnam,
the opening of negotiations for a new bilateral textile agreement, and/or the
termination of the monitoring program. For the next six months, it appears that the
Administration has decided to take none of these options, but it is to continue to
monitor clothing imports from Vietnam.
Summary of U.S.-Vietnamese Clothing Trade
The recent conduct of clothing trade between the United States and Vietnam has
been relatively short in duration, but varied in practice. After President Clinton
terminated a U.S. trade embargo against Vietnam on February 3, 1994, trade between
the United States and Vietnam grew rather slowly, in part because of the non-
preferential treatment Vietnam received under U.S. trade laws. Vietnam was not a
member of the World Trade Organization (WTO) so it was not eligible for “normal
trade relations” (NTR) status via that mechanism.11 Also, under U.S. law, Vietnam
could only be granted permanent NTR status by the passage of legislation, or granted
temporary NTR status by the conclusion of a bilateral trade agreement and
compliance with the “freedom of emigration” requirements of the Jackson-Vanik
am endm ent . 12
Lacking NTR status, Vietnam’s exports to the United States were subject to
higher tariff rates than products from almost all other nations. For clothing imports,
products from Vietnam faced tariff rates two to nine times higher than goods
9 “Commerce Completes Second Review of Vietnam Import Data,” press release, U.S.
Department of Commerce, May 6, 2008.
11 Under the terms of WTO membership, any WTO member must grant NTR status to all
other WTO members.
12 For more information on NTR status for non-market economies, see CRS Report
RS22398, The Jackson-Vanik Amendment and Candidate Countries for WTO Accession:
Issues for Congress, by William H. Cooper.
imported from countries with NTR status.13 As a result, while U.S. imports from
Vietnam steadily increased from virtually nothing in 1993 to just over $1 billion in
2001, U.S. clothing imports from Vietnam rose from zero to $48 million over the
same period (see Figure 1).
The U.S.-Vietnam Bilateral Trade Agreement
After nearly five years of negotiations, the United States and Vietnam concluded
a bilateral trade agreement on July 13, 2000 — the first of two steps for Vietnam to14
receive temporary NTR status. President Clinton exercised the authority granted
to him under the Trade Act of 1974 (P.L. 93-618) to waive the Jackson-Vanik
amendment. Enabling legislation in the U.S. Congress and Vietnam’s National
Assembly were subsequently passed, formally extending temporary “normal trade
relations” (NTR) status to Vietnam as of December 10, 2001.
Figure 1. U.S. Imports from Vietnam, 1990-2007
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20
Source: World Trade Atlas
13 For a more detailed discussion of the different tariff rates for NTR and non-NTR imported
clothing products, see CRS Report RL31470, The Vietnam-U.S. Textile Agreement, by Mark
Manyin and Amanda Douglas.
14 For more information on the negotiations and terms of the Vietnam-U.S. Bilateral Trade
Agreement, see CRS Report RL30416, The Vietnam-U.S. Bilateral Trade Agreement, by
Mark E. Manyin.
Having secured temporary NTR status, Vietnam’s exports to the United States
accelerated, rising from just over $1 billion in 2001 to $4.6 billion in 2003 (see
Figure 1). One of the main beneficiaries of Vietnam’s temporary NTR status was
its clothing industry, which saw its exports to the United States jump from $48
million in 2001 to $876 million in 2002 and $2.3 billion in 2003. By 2003, clothing
was 51.3% of Vietnam’s total exports to the United States.
Although the temporary NTR status stimulated imports from Vietnam, its
impact was mitigated by its impermanent nature. Under U.S. law, the President had
to reconfirm the waiver of the Jackson-Vanik amendment every year, and Congress
had the authority to override the President’s reconfirmation via a joint resolution
passed by both the House and the Senate. From 1998 to 2002, such a joint resolution
failed in the House. No resolutions were introduced between 2003 and 2005.
For the international clothing market, the theoretical risk of Vietnam losing
temporary NTR status created two potential barriers to trade. First, major retailers
and importers supposedly shied away from purchasing clothing manufactured in
Vietnam as the date for the waiver renewal neared or when a joint resolution for
disapproval was introduced in Congress. Second, given the long-term uncertainty of
Vietnam’s NTR status, both domestic and foreign investors in Vietnam’s clothing
and textiles industry allegedly curtailed or postponed potential investment projects,
restricting the nation’s clothing and textile production capacity.
During the congressional debate over the bilateral trade agreement with
Vietnam, many Members of Congress urged President Bush to negotiate a separate
bilateral textile agreement with Vietnam. Because Vietnam was not a WTO member
at the time, its clothing exports were not covered by the Agreement on Textiles and
Clothing (ATC) and therefore there were no quotas on Vietnam’s clothing exports15
to the United States. Several Members of Congress, and in particular Members
with significant clothing and textile manufacturing in their districts or states, voiced
concern that a “surge” in Vietnamese clothing exports to the United States could
cause damage to U.S. clothing and textile companies and workers. In their opinion,
it was important that the United States conclude a bilateral textile agreement with
Vietnam that ensured fair competition and/or restricted the growth of Vietnamese
clothing exports to the United States.
The Vietnam-U.S. Textile Agreement: 2003-2006
Negotiations of a separate bilateral textile agreement began soon after the
bilateral trade agreement went into effect. On April 25, 2003, the two nations agreed
to the terms of a bilateral textile agreement that placed quantity quotas on 38
categories of clothing imports from Vietnam starting on May 1, 2003, until
December 31, 2004. The quotas would automatically roll over in subsequent years
— with the inclusion of annual quantity increases of 2% for wool products and 7%
for all other products — unless the two nations terminated or renegotiated the
agreement by December 1. In addition, both nations pledged to “investigate and
15 For more information on the WTO’s ATC, see CRS Report RL34106, U.S. Clothing and
Textile Trade with China and the World: Trends Since the End of Quotas, by Michael F.
punish” circumvention of U.S. import quotas, a provision added to the agreement in
part due to a U.S. Custom Service allegation that some Chinese clothing products had
illegally entered the United States by being mislabeled as products of Vietnam. The
agreement also lowered Vietnam’s tariffs on U.S. clothing and textiles exports to 7%
for yarn, 12% for fabric, and 20% for clothing.
Following the implementation of the bilateral textile agreement, Vietnam’s total
exports to the United States continued their rapid climb, but the growth in clothing
exports slowed dramatically (see Figure 1). Total U.S. imports from Vietnam rose
from $4.6 billion in 2003 to $5.3 billion in 2004, $6.6 billion in 2005, and $8.6
billion in 2006. Meanwhile, U.S. clothing imports from Vietnam crept up from $2.3
billion in 2003 to $2.5 billion in 2004, $2.7 billion in 2005, and $3.2 billion in 2006.
The share of clothing in Vietnam’s total exports to the United States declined from
The imposition of import quotas on Vietnamese clothing also altered the
composition of Vietnam’s clothing exports to the United States. In 2003, 78.1% of
Vietnam’s clothing exports to the United States were in categories subject to quotas.
However, over the next three years, the value of Vietnam’s clothing exports subject
to quotas increased by 17.8% while clothing exports not subject to exports grew by
104.5%. As a result, Vietnamese clothing exports subject to quotas contributed
Table 2. Quota Utilization Rate for Clothing Imported from
Product TypeCategory #2003200420052006Average
Men & Boys and Women338/33991.299.486.491.892.2
and Girls Knit Cotton
Men & Boys Coats and334/335100.088.286.292.191.6
Women & Girls Cotton
Men & Boys and Women647/64899.882.388.992.590.9
& Girls Man-made Fiber
Men & Boys and Women638/639 96.873.189.593.088.1
& Girls Man-made Fiber
Men & Boys and Women347/34898.984.377.591.388.0
and Girls Cotton Trousers
Men & Boys Non-knit340/64079.989.288.491.987.4
Cotton and Man-made
Cotton and Man-made342/642100.077.278.080.684.0
Product TypeCategory #2003200420052006Average
Women & Girls Non-knit341/64188.465.593.488.283.9
Cotton and Man-made
Cotton & Man-made352/65299.868.861.296.481.6
Other Cotton and Man-359-S/a56.685.485.686.378.5
made Fiber Apparel659-S
Cotton and Man-made351/65199.643.265.878.571.8
Fiber Nightwear and
Men & Boys and Women645/646100.042.357.986.471.7
& Girls Man-made Fiber
Women & Girls Wool43582.9126.96.36.1999.9
Cotton & Man-made20078.649.659.279.766.8
Other Synthetic Filament62082.430.467.979.465.0
Men & Boys Wool Coats43469.022.264.396.963.1
Combed Cotton Yarn30194.063.917.975.562.8
Men & Boys Wool44788.314.447.785.559.0
Women & Girls Wool44884.529.729.473.054.2
Other Cotton and Man-359-C/a76.421.118.357.143.2
made Fiber Apparel659-C
Men & Boys Suit-type33328.24.434.373.235.0
Women & Girls Non-knit4400.02.983.414.125.1
Source: Office of Textiles and Apparel (OTEXA), International Trade Administration, U.S.
Department of Commerce.
a. Quota covered only selected items in category
Only part of the sharp decrease in the growth of Vietnam’s clothing exports to
the United States can be attributed to the actual cap on imports created by the
quantity quotas. Table 2 reveals that the quantity quotas were potentially binding on
about a dozen of the 38 categories subject to import restrictions. For another dozen
categories, Vietnam used between half and three-quarters of the available quota. For
six categories, an average of less than half of the quota was used over the four years
the import restrictions were in place. On three occasions, and only in 2003, did U.S.
imports fully use the available quota for a category of Vietnamese clothing imports.
The less than full utilization of import quotas does not necessarily mean that the
import constraints had no impact on trade. According to industry sources,16 major
retailers and importers may shift where they source products in response to the
implementation of quotas. According to these market experts, importers do not want
to risk exceeding the import cap and be unable to import the products they desire, and
therefore turn to an alternative location to obtain the products. As a result, the
creation of an import quota on Vietnamese clothing may have diverted trade to other
nations even in cases where there was still available import capacity.
Vietnam’s WTO Accession and Permanent NTR Status
Congressional interest in U.S. clothing imports from Vietnam reemerged during
the negotiations over the terms of Vietnam’s WTO accession.17 U.S. textiles and
clothing manufacturers sought to extend the import quotas on Vietnamese clothing
products as part of Vietnam’s accession agreement, or to include in the agreement
safeguard measures similar to those included in China’s WTO accession agreement.18
However, neither provision was included in Vietnam’s WTO accession agreement.
What was included in the agreement were requirements that Vietnam terminate
various non-WTO compliant subsidy programs supporting its domestic clothing and
textile industry and allegedly benefitting its exports of clothing. The agreement
includes an enforcement mechanism during the first 12 months after Vietnam’s
accession that would permit the United States — or any other WTO member — to
impose import quotas if, after consultation and third-party arbitration, it was
determined that Vietnam had not terminated its non-WTO compliant subsidies.
Although Congress had no direct role in Vietnam’s accession to the WTO,
congressional approval was necessary to extend to Vietnam permanent NTR status.
As a member of the WTO, the United States was required to extend permanent NTR
status to Vietnam once it became a member.
Opposition to extending permanent NTR status to Vietnam focused on a number
of different issues, including alleged human rights abuses, claims of discrimination
against foreign-owned companies operating in Vietnam, and charges of inadequate
16 Information from telephone interviews with industry sources who wish to remain
17 For a general discussion of Vietnam’s WTO accession, see CRS Report RL33490,
Vietnam PNTR Status and the WTO Accession: Issues and Implications for the United
States, by Mark E. Manyin, William H. Cooper, and Bernard A. Gelb.
18 For a description of the Chinese safeguard measures, see CRS Report RL34106, U.S.
Clothing and Textile Trade with China and the World: Trends Since the End of Quotas, by
Michael F. Martin.
intellectual property rights protection. In addition, Senator Elizabeth Dole and
Senator Lindsey Graham objected to the lack of safeguard measures in the WTO
accession agreement to protect the U.S. clothing and textile industry from a potential
surge in imports from Vietnam. They reportedly decided to place a “hold” on the bill
before the Senate to grant Vietnam permanent NTR status.19
In a joint letter to U.S. Trade Representative (USTR) Susan Schwab, Senators
Dole and Graham explained their “concerns regarding Vietnam’s WTO accession
terms and the recently concluded U.S.-Vietnam bilateral agreement.”20 The two
Senators wrote, “We believe that unless the government takes specific steps to ensure
that the U.S. textile industry can be defended against a communist country that
heavily subsidizes its textile and apparel sector, this agreement is likely to cause
large-scale job losses in both of our states.” In the letter, Senators Dole and Graham
specifically express concern about Vietnam’s ability “to artificially lower prices
through its state sponsored system,” and state that it would be “unreasonable to ask
U.S. workers to compete with products manufactured under a state-run economy
without at least providing an adequate mechanism for the industry to defend itself.”
On September 28, 2006, USTR Schwab and U.S. Commerce Secretary Carlos
Gutierrez sent a letter to Senator Dole and Senator Graham pledging to initiate a
monitoring program for Vietnamese selected clothing imports immediately upon
Vietnam’s WTO accession. In addition, USTR Schwab and Secretary Gutierrez
stated in the letter, “If this monitoring process indicates that dumping exists and the
domestic industry fully cooperates in supplying data available to the domestic
industry indicating the existence of material injury caused by such imports, the
Department [of Commerce] will self-initiate anti-dumping investigations with respect
to the relevant products.”21 Based on this commitment, media sources report, Senator
Dole and Senator Graham removed their hold on the permanent NTR for Vietnam
Although the pledged monitoring program removed one barrier to Vietnam’s
permanent NTR status, other issues delayed final passage of pending legislation. On
December 8, 2006, the House of Representatives passed H.R. 6406, a larger bill
containing provisions granting Vietnam permanent NTR status by a vote of 212-184.
H.R. 6406 was then coupled with H.R. 6111 (a tax extension bill) and sent to the
Senate, where it passed by a vote of 79-9. On December 20, 2006, President Bush
signed the bill into law (P.L. 109-432) and, as provided under the law, the United
States formally extended permanent NTR status to Vietnam on December 29, 2006
— less than two weeks before Vietnam officially became the 150th member of the
19 “Vietnam Measure Facing Difficult Path,” Congress Daily, August 4, 2006.
20 Letter from Senator Elizabeth Dole and Senator Lindsey O. Graham to USTR Schwab,
September 18, 2006. Copy of the letter available online at the web page of the American
Chamber of Commerce in Vietnam, Ho Chi Minh City Chapter —
[ h t t p : / / www.a mc h a mvi e t na m. c o m/ ] .
21 Letter from USTR Susan Schwab and U.S. Commerce Secretary Carlos Gutierrez to
Senator Elizabeth Dole and Senator Lindsey Graham, September 28, 2006. Copy of the
letter available online at the web page of the American Chamber of Commerce in Vietnam,
Ho Chi Minh City Chapter — [http://www.amchamvietnam.com/].
Monitoring Program: 2007-2009
With the passage of P.L. 109-432 and Vietnam’s membership in the WTO, U.S.
trade relations with Vietnam entered into a new phase of formally agreed free trade.
As part of its agreement with Vietnam, the United States discontinued the quantity
restrictions on clothing imports from Vietnam that had been in effect since May
2003. Also, clothing imports from Vietnam were now permanently eligible for the
lower NTR tariff rates, ending the annual temporary NTR renewal process. For its
part, Vietnam had pledged to cease any non-WTO compliant subsidies to its clothing
and textile industries or face the possible reimposition of import quotas by the United
States or any other WTO member.
The only non-market action by the United States available to influence the
import of clothing from Vietnam was the promised monitoring program mentioned
in the letter by USTR Schwab and Secretary Gutierrez. On December 4, 2006, the
Import Administration of the U.S. Department of Commerce’s International Trade
Administration (ITA) published a request for public comment in the Federal Register
which laid out the basic outline of the proposed monitoring program.
According to the Federal Register announcement, the monitoring program
would begin upon Vietnam’s accession to the WTO and will expire at the end of the
current administration (taken by DOC to be January 19, 2009). The initial of list of
products to be monitored — trousers, shirts, underwear, swimwear, and sweaters —
had been “identified as being of special sensitivity.”22 The monitoring program
would collect data on the quantity, value, and unit price of goods imported from
Vietnam in the selected categories. Comments on the monitoring program —
including comments on the product coverage, the creation of “production templates,”
and information on the U.S. textile and apparel industry — were to be submitted to
the Import Administration by December 27, 2006. The announcement also indicated
that there would be a public hearing on the program, which was subsequently
scheduled for April 24, 2007, in Washington, DC.
However, in a second request for public comment published in the Federal
Register on January 23, 2007, the Import Administration stated that “the Department
[of Commerce] recognizes that these five product categories are too broad for
effective monitoring.”23 So, it indicated it would “focus on those traditional three-
digit textile and apparel categories of greatest significance based on trade trends,
composition of the U.S. industry and input from parties, as appropriate.”24 The
announcement also stated that the product coverage “is not intended by the
Department [of Commerce] necessarily to be static,” and that changes in product
coverage may occur in response to changes in trade, input from interested parties, or
“as the Department [of Commerce] broadens its understanding of the composition
and structure of the domestic textile and apparel industry.”25 The Department also
22 Federal Register, December 4, 2006, page 70365.
23 Federal Register, January 23, 2007, page 2861.
indicated that the monitoring program “is not meant to inhibit legitimate trade.”26
The deadline for comments for this second request was January 31, 2007.
Both announcements also stated that there would be biannual evaluations of the
data collected by the monitoring program “to determine whether sufficient evidence
exists to initiate an anti-dumping investigation consistent with U.S. law and our
international obligations under the WTO.”27 No set dates were given for the biannual
Congressional Comments on the Proposed Monitoring Program.
From its inception, the monitoring program has been the subject of some controversy
within Congress. While Senator Dole and Senator Graham supported the program,
other members of Congress questioned its legality and economic merits. In a May
2, 2007 letter to Secretary Gutierrez, six members of the House Ways and Means
Committee — Representatives Earl Blumenauer, Jim Ramstad, Mike Thompson, Jim
McDermott, Joseph Crowley, and Ron Kind — stated they were “deeply concerned
that the disruption in trade caused by the import monitoring program is cutting away
at many of the benefits of granting PNTR to Vietnam” and that “these negative28
impacts come at no benefit to U.S. apparel producers.” In addition, the
Representatives wrote “the Department of Commerce must demonstrate the specific29
statutory authority for this unprecedented type of program.” They also expressed
concern that the program may violate “a number of agreements under the World
Having questioned the legitimacy and economic benefits of the monitoring
program, the Representatives suggested that the scope of the monitoring program
“should be limited to those apparel products, defined at the ten-digit HTS level,
produced in a commercially viable fashion in the United States, for which producers
of those products have asked for monitoring, and for which there is evidence of
material injury to those producers being caused by imports from Vietnam.”30
Senators Dianne Feinstein and Gordon Smith also expressed their concerns31
about the monitoring programs in separate letters to Secretary Gutierrez. In her
letter of December 26, 2006, Senator Feinstein wrote, “I request that the Department
[of Commerce] submit any proposed program to public comment through a Notice
of Proposed Rulemaking; [and] demonstrate in such notice how the proposed
program is consistent with applicable statutory requirements and international
obligations of the United States....” In his letter of January 31, 2007, Senator Smith
27 Federal Register, December 6, 2006, page 70365.
28 Letter to Secretary Gutierrez from members of the House Ways and Means Committee,
May 2, 2007. Copy of the letter available online at the web page of the American Chamber
of Commerce in Vietnam, Ho Chi Minh City Chapter —
[ h t t p : / / www.a mc h a mvi e t na m. c o m/ ] .
31 Copies of the Senators’ letters are available online under the “requests for public
comment” at [http://ia.ita.doc.gov/download/vietnam-textile-monitoring/vtm-index.html].
echoed Senator Feinstein’s comments, writing, “it is important for the Department
[of Commerce] to outline in detail the statutory authority it believes it has to
implement the announced monitoring program and to self-initiate anti-dumping
measures under these circumstances.” Senator Smith also suggested that the proposed
program should undergo the usual “Notice of Proposed Rulemaking” process.32
Criticism from U.S. and Korean Business Communities. Opposition
to the monitoring program also came from various segments of the U.S. business
community. A coalition of eight trade associations and 29 separate U.S. companies
sent a letter to Secretary Gutierrez and USTR Schwab on October 11, 2006
expressing their “extreme disappointment at the agreement the Administration
negotiated with Senators Elizabeth Dole and Lindsey Graham.”33 According to the
letter, “implementing this ill-considered and damaging agreement places at risk the
ability for us and all other U.S. companies to continue current business and generate
new business in Vietnam.” The letter also voices their displeasure at the lack of
consultation with interested U.S. companies, leading Members of Congress, and the
Vietnamese government during the time the Bush Administration was discussing the
matter with Senators Dole and Graham.
Overall, most of the responses to the Import Administration’s requests for public34
comments were generally critical of the monitoring program. In addition to the
concerns raised by Members of Congress about the statutory authority for the
monitoring program, its consistency with existing international obligations, and the
lack of a period of public commentary for a proposed rulemaking,35 another major
criticism of the program was the apparent lack of a U.S. clothing manufacturing
industry that might be materially injured by the Vietnamese imports.
In its written comments to the Import Administration, the U.S. Association of
Importers of Textiles and Apparel (USA-ITA) urged the Department of Commerce
drop the monitoring program because no U.S. apparel manufacturers supported it.
In his testimony at the public hearing about the monitoring program, Chairman of the
International Textile Group, Wilbur L. Ross, Jr. questioned whom the monitoring
program was meant to protect: “To the best of my knowledge, there are no American
apparel producers whose output is truly characterized as competitive to Vietnam’s
32 For an explanation of the federal rulemaking process, see CRS Report RL32240, The
Federal Rulemaking Process: An Overview, by Curtis W. Copeland.
33 Letter to Secretary Gutierrez and USTR Schwab, October 11, 2006. Copy of the letter
available online at the web page of the American Chamber of Commerce in Vietnam, Ho
Chi Minh City Chapter — [http://www.amchamvietnam.com/].
34 A complete set of the comments submitted to the Import Administration is available
online at [http://ia.ita.doc.gov/download/vietnam-textile-monitoring/vtm-index.html].
35 A group of 6 trade associations and 15 individual companies filed a joint comment on
December 27, 2006 that included a relatively detailed critique of the proposed monitoring
program on all three of these issues. A copy of their submitted comments is available at
[http://ia.ita.doc.gov/downlo a d / vi etnam-textile-monitoring/cmt s-20061227/vi etnam-textil
e-monitoring-i ndex.html ].
exports to this country.”36 The lack of competitive U.S. clothing manufacturers was
reiterated by Stephanie Lester, Vice President for International Trade at the Retail
Industry Leaders Association (RILA). According to Ms. Lester, “most of the products
that RILA members purchase from Vietnam could not be supplied by domestic [U.S.]
The monitoring program was also challenged on its potential negative effects
on U.S. companies considering sourcing clothing from Vietnam. In his oral testimony
at the public hearing on April 24, 2007, Gary Ross of the USA-ITA said:
The monitoring program has very real consequences. By targeting broad
categories of products made in Vietnam, it forces USA-ITA member companies
to reconsider Vietnam as a sourcing option. At the very least, importers and
retailers are looking at the calendar and mapping out worst-case scenarios,
deciding what the earliest possible point in time is when Vietnamese products
brought into the U.S. market could be subject to an additional bonding38
requirement or dumping duty.
In its written comments on the proposed program, the National Retail Federation
In response to the greater unpredictability and risk to their sourcing operations
created as a result of the commitment [to implement the monitoring program], a
number of NRF members have decided to limit their exposure to Vietnam, either
by substantially cutting their orders in the second half of 2007, or to terminate39
The NRF goes on to state that its members have indicated that the cancelled orders
will “move to other Asian countries, not the United States or other Western
Several of the commentators pointed to the biannual review mechanism as
heightening the market uncertainty created by the program. In the words of the
American Apparel and Footwear Association (AAFA), “A decision every six months
about potential anti-dumping cases can be very unsettling and will no doubt have a40
chilling effect on trade.”
36 Testimony of Wilbur L. Ross, Jr., Chairman, International Textile Group, at the Textile
and Apparel Products from Vietnam Import Monitoring Program Public Hearing, April 24,
37 Testimony of Stephanie Lester, Vice President for International Trade, Retail Industry
Leaders Association, at the Textile and Apparel Products from Vietnam Import Monitoring
Program Public Hearing, April 24, 2007.
38 Ross, op. cit.
39 Written comments by the National Retail Federation, submitted to the Import
Administration on December 27, 2006.
40 Written comments by the American Apparel and Footwear Association, submitted to the
Import Administration on December 27, 2006.
A third common comment from U.S. businesses critical of the proposed
monitoring program was the potential burden it would place on U.S. companies
importing clothing from Vietnam. In its written comments, the AAFA stated, “We
are concerned that the program could result in significant new paperwork or import
entry requirements, which would create an unfair burden on U.S. apparel
A fourth general category of criticism focused on the seemingly vague and fluid
methodology being used in the monitoring program. Several commentators indicated
that it was unclear how the data being collected could be used to evaluate the alleged
presence of dumping.42 Some argued that the three-digit categories of imports being
monitored were too broad for use in anti-dumping investigations.43 Others pointed
out that U.S. manufacturing data was apparently not available using the same
categories as the import data being monitoring, making impact assessment difficult.44
Virtually all of these commentators maintained that the Import Administration
needed to clarify their methodology prior to implementing the program and to make
the methodology more transparent.
In addition to critical comments from U.S. businesses, the Import
Administration also received joint submissions from two Korean trade associations
— the Korea International Trade Association (KITA) and the Korean Apparel
Industry Association (KAIA).45 The criticism contained in the two submissions made
by KITA and KAIA were consistent with the categories described above, with one
additional concern. KITA and KAIA maintain that the monitoring program would
deny benefits to other WTO members by undermining the value of investments made
by other WTO members in Vietnam’s clothing industry.
Support from the U.S. Business Community. Although most of the
comments received by the Import Administration were critical of the proposed
monitoring program, there were some that supported its implementation. The
supportive comments generally focused on four issues: (1) The potential threat of a
surge in Vietnamese clothing imports causing harm to U.S. clothing and textile
manufacturers; (2) the dominance of state-owned manufacturers in Vietnam’s
clothing industry; (3) the alleged subsidies received by the Vietnamese clothing
industry from its government; and (4) the ability to easily shift production from one
42 For example, in its comments submitted on behalf of Hanesbrands, Inc. on January 31,
2007, Sandler, Travis and Rosenberg, P.A. wrote, “[P]roduct categories used for collecting
data, the traditional three-digit textile category and the 10-digit Harmonized Tariff System
(HTS) code, are too broad to permit accurate analysis.”
43 For example, the Retail Industry Leaders Association (RILA) wrote in their comments of
December 27, 2007, “While the three-digit category system ... may be familiar lexicon to
the industry, these categories are overly broad and could not be used for purposes of either
an anti-dumping investigation or Commerce’s proposed monitoring program.”
44 Comments submitted by Sandler, Travis and Rosenberg, P.A. on behalf of Hanesbrands,
Inc. on January 31, 2007.
45 The law firm of Vinson and Elkins submitted comments on behalf of KITA and KAIA on
December 27, 2006, and January 31, 2007.
clothing category to another, which makes it vital to monitor a broad range of
clothing products. For most of the supporters of the monitoring program, the
perceived risk inherent in these four issues was sufficiently grave that it was vital for
the monitoring program to begin as soon as possible.
In the words of the National Council of Textile Organizations (NCTO), “The
concerns of the U.S. textile industry about surges of imports from Vietnam are based
on recent experience, not mere speculations.”46 According to the NCTO, imports
from Vietnam rose by 220% between 2002 and 2006. The American Manufacturing
Trade Action Coalition (AMTAC)47 writes in its January 31, 2007 comments, “Since
Vietnam was given ‘normal trade relations’ access to the U.S. textile and apparel
market on December 10, 2001, its exports have increased by 6,849% and now total
$3.4 billion.”48 The implication is that Vietnam’s past rapid increase in clothing
exports to the United States indicates an ability to rapidly increase exports in the
The supporters of the monitoring program maintain that this rapid growth in
exports to the United States is in part due to the dominance of state-owned factories
in the Vietnamese clothing industry. AMTAC states in its January 31, 2007
comments, “Aside from China, Vietnam is the only other country with a large, state-
owned textile and apparel sector. Vinatex, fully owned by the Vietnamese
government, is the 10th largest garment producer in the world.”49
The alleged dominance of state-owned factories in Vietnam’s clothing industry
becomes important when examining the third issue raised by supporters of the
monitoring program. The supporters claim that state-owned factories receive
significant indirect and direct subsidies from the Vietnamese government, thereby
allowing them to export clothing at prices below “fair market value.” In the words
of the NCTO, “Vietnam is one of two countries (the other being China) which has
a large state-owned, state-subsidized textile and apparel sector. Governments in both
countries have poured billions of dollars in subsidies into their respective sectors
with the apparent goal being dominance of global apparel supply chains.”50
According to AMTAC, the subsidies — which were revealed by Vietnam during its
WTO negotiations — take the form of preferential interest rates, wage controls, rent
holidays, export subsidies, preferential tax rates, and direct investments by the
The fourth issue raised by supporters of the monitoring program has to do with
the production conditions of Vietnam’s clothing industry. According to some of the
46 Comments submitted by the NCTO on January 31, 2007.
47 According to AMTAC’s webpage [http://www.amtacdc.org], its mission is “to preserve
and create American manufacturing jobs through the establishment of trade policy and other
measures necessary for the U.S. manufacturing sector to stabilize and grow.”
48 Comments submitted by AMTAC on January 31, 2007.
50 Comments submitted by the NCTO on December 27, 2006.
51 AMTAC, op. cit.
commentators, Vietnam’s clothing manufacturing is relatively labor-intensive
production using semi-skilled workers. As a result, these commentators maintain it
is relatively easy for factories to shift production from one clothing product to
another, and so it is vital that the monitoring program covers a wide range of apparel.
In the words of the NCTO:
Apparel manufacturing is, in important ways, a simple process. A sewing
machine operator can produce dozens of different types of garments from a
single machine. To a significant extent, the operator does not become skilled in
producing a specific type of garment.... Thus, a typical sewing plant can, and
does, have the ability to assemble a woman’s dress, a man’s cotton pant, a child’s
sweatshirt and so on and so forth.... The reality of the production process
therefore calls for monitoring on a broader rather than on a more specialized52
Comments from the Vietnamese Government and Companies. The
response of the Vietnamese government and Vietnamese clothing manufacturers to
the proposed monitoring program was muted in tone, but critical in content. In its
submitted comments and testimony, Vietnam’s Ministry of Trade focused on the
program’s possible violation of U.S. WTO obligations and the negative effect on
legitimate trade. The Vietnam Textile and Apparel Association (VITAS) reiterated
many of the criticisms raised by U.S. businesses, but also challenged
characterizations of Vietnam’s clothing industry as being state-owned and heavily
In its December 22, 2006 letter to the U.S. Department of Commerce, Vietnam’s
Ministry of Trade focused on the program’s possible violation of existing U.S. WTO
obligations. After expressing “disappointment” about the Commerce Department’s
implied intent to initiate anti-dumping investigations against Vietnamese clothing
exports, the letter asserted, “This program is a violation of Article 23 of the GATT
WTO member.” The letter continued by stating, “Furthermore, this Program is also
inconsistent with the Bilateral Agreement between Vietnam and the United States on54
Vietnam’s accession to the WTO signed on 31 May 2006.”
The Trade Ministry’s second letter to the Commerce Department shifts its focus
to the negative impact it argues the monitoring program has had and will have on
legitimate trade between Vietnam and the United States:
Although the additional information in the second-round proposal mentions the
fact that this Program does not aim at restraining legal trade, in fact it has created
negative impacts — causing worries and unstable mentality for U.S. importers
placing orders in Vietnam right from the very first month of 2007, and making
it impossible for Vietnam textile and apparel manufacturers to pro-actively plan
52 NCTO, op. cit.
53 Letter for the Ministry of Trade, The Socialist Republic of Vietnam to the Department of
Commerce of the United States, December 22, 2006. Available online from the web page
of Inside Trade at [http://www.insidetrade.com/secure/pdf10/wto2007_0001s.pdf].
their production, and above all, creating instabilities for workers in Vietnam’s55
textile and apparel industries.
Then, during its testimony at the April 24, 2007 hearings on the monitoring
program, the spokesperson for the Trade Ministry said, “Vietnam’s Ministry of Trade
must continue to reaffirm our clear and consistent view to strongly protest the
‘Monitoring Program on Textile and Apparel Import from Vietnam.’”56 The
representative continued, “It is clear that this program is discriminatory, contrary to
the most important principle and the pillar of the WTO — GATT Article 1.” The
Trade Ministry’s testimony also claimed that monitoring program violates Article 23
of the GATT by nullifying the benefits of WTO membership, and Article 18.1, which
governs anti-dumping actions between WTO members. The testimony also reasserted
that the monitoring program was reducing legitimate trade between the two nations,
and thereby “having a severe [e]ffect on jobs and employment in Vietnam.”
The response of VITAS to the proposed monitoring program was more detailed,
diverse, and disapproving than that of the Trade Ministry. One important aspect of
its comments was challenge to the assertions that Vietnam’s textile and garment
industry was largely state-owned and heavily subsidized by the government. In its
December 20, 2006 letter VITAS stated, “The Vietnam textile and garment industry
consists of over 2,000 enterprises. Of these, only 50 are state-owned, while 1,400 are57
private and 450 are foreign direct investment (FDI) enterprises.” The letter also
contested claims that state-owned enterprises dominate Vietnam’s clothing exports
to the United States, stating “In 2005, only 25 state-owned textile and garment
enterprises exported their products to the United States, making up only 8.1% of total
export turnover of textiles and garments to the United States.” According to VITAS,
all of Vietnam’s state-owned clothing and textile enterprises will be privatized
(“equitized”) by sometime in 2008.
On the issue of subsidization, VITAS wrote that it “takes strong exception to the
unsupported — and unsupportable — allegation in the comments submitted by
AMTAC and [the] NCTO, contending that Vietnam ‘heavily subsidizes their
industry.’”58 Calling AMTAC’s reference to Vietnam’s WTO disclosure
“misleading,” VITAS maintained in its letters that the Vietnamese government has
fulfilled its WTO accession obligations to terminate prohibited subsidies to its textile
and apparel industries. In addition, VITAS pointed out that within its WTO accession
agreement, there already exists a formal mechanism to resolve claims that Vietnam
provides prohibited subsidies to its clothing and textile industry. If the United States
has evidence that Vietnam is providing its clothing and textile industry with
55 Letter for the Ministry of Trade, The Socialist Republic of Vietnam to the Department of
Commerce of the United States, January 29, 2007. Copy of the letter available online at the
web page of the American Chamber of Commerce in Vietnam, Ho Chi Minh City Chapter
-c mt -020107.pdf].
56 Statement of the Representative from the Ministry of Trade of Vietnam at the Hearing on
the Department of Commerce’s Monitoring Program on Textile and Apparel Import from
Vietnam, April 24, 2007.
57 Letter from VITAS to the U.S. Import Administration, December 20, 2006.
58 Letter from VITAS to the U.S. Import Administration, January 29, 2007.
prohibited subsidies, VITAS argued that the United States should use the existing
mechanism, rather than instituting a special monitoring program.
Commerce Decision to Proceed with the Monitoring Program. The
U.S. Department of Commerce decided to implement the program as scheduled on
January 19, 2007. The specific product coverage selected for the monitoring program
included the following categories, organized by product type and including category
!Trousers — Men and boys cotton trousers (347); women and girls
cotton trousers (348); men and boys wool trousers (447); women and
girls wool trousers (448); men and boys man-made fiber trousers
(647); women and girls man-made fiber trousers (648); and silk or
vegetable fiber trousers (847);
!Shirts — Men and boys cotton knit shirts (338); women and girls
cotton knit shirts (339); men and boys cotton non-knit shirts (340);
women and girls cotton non-knit shirts (341); wool knit shirts (438);
wool non-knit shirts (440); men and boys man-made fiber knit shirts
(638); women and girls man-made fiber knit shirts (639); men and
boys man-made fiber non-knit shirts (640); women and girls man-
made fiber non-knit shirts; silk or vegetable fiber knit shirts (838);
and silk or vegetable fiber non-knit shirts (840);
!Underwear — cotton underwear (352); man-made fiber underwear
(652); and silk or vegetable fiber underwear (852);
!Swimwear — selected items in categories 359 and 659; and
!Sweaters — cotton sweaters (345); men and boys wool sweaters
(445); women and girls wool sweaters (446); men and boys man-
made fiber sweaters (645); women and girls man-made fiber
sweaters (646); and non-cotton vegetable fiber sweaters (845).
The responsibility to administer the monitoring program was assigned to the Import
Administration of the U.S. Department of Commerce. However, the gathered data
is being released to the public by Department of Commerce’s Office of Textiles and
Apparel (OTEXA). Each month, OTEXA releases the quantity, unit value and total
value of each three-digit category being monitored on its web page —
[http://www.otexa.ita.doc.gov/vn.htm]. For each three-digit category, the web page
also provides the data at the 10-digit HTS code level.
Commerce Department’s Reviews
In both its initial and subsequent request for comments, the DOC indicated that
it intended to conduct biannual reviews of the import data gathered by the monitoring
program.59 These reviews would examine the trade data at the 10-digit HTS level to
see if there is sufficient evidence to self-initiate an anti-dumping investigation. The
completion of the first six-month review was announced on October 26, 2007; the
completion of the second six-month review was announced on May 6, 2008. Both
reviews determined that there was insufficient evidence to self-initiate an
antidumping investigation of clothing imports from Vietnam. Despite these findings,
the DOC also announced that it would continue to review the import monitoring
program. The third — and possibly final — six-month review is scheduled to begin
in September 2008. Below is a brief summary of findings of each of the six-month
reviews, and the response of interested parties in the United States and Vietnam to
the DOC’s announcements.
Results of the First Six-Month Review
On October 26, 2007, the DOC announced that a review of the first six months
of data for selected categories of clothing imported from Vietnam “found insufficient
evidence to warrant self-initiating an antidumping investigation.”60 According to
Assistant Secretary Spooner, “After a fair and objective analysis of the data,
Commerce found insufficient evidence of dumping from Vietnam.”61 However,
Assistant Secretary Spooner went on to say, “The Department will continue to
monitor apparel imports from Vietnam until the end of the Administration and work
with all stakeholders to ensure an open and transparent monitoring process.”
In response to requests from CRS, the DOC has declined to release the details
of their review, but it did provide some indications of its findings. According to the
DOC press release, of the 486 10-digit HTS lines monitored during the first six
months of the program, 317 lines had no imports from Vietnam. Of the 169 lines
where there were imports from Vietnam, “many” had rising unit values. Falling unit
values are often associated with evidence of dumping.
The press release also reported that DOC compared the unit values and import
levels for Vietnam to other clothing suppliers for the United States, including a
number of Asian suppliers (Bangladesh, Cambodia, India, Indonesia, Macau,
Malaysia, Pakistan, the Philippines, and Thailand) and the DR-CAFTA nations
(Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and
Nicaragua). Noticeably missing from the list of suppliers used for comparison were
Canada, China, Hong Kong, and Mexico — historical major suppliers of U.S.
clothing imports. However, the press release did not definitively state that the
comparison was limited only to the countries mentioned.
The DOC also indicated that it “will continue to monitor trade in these
categories [emphasis added] during the next six-month review that will begin in
March 2008, after receipt of the January 2008 data.” This implies, but does not
59 Federal Register, December 6, 2006, page 70365, and Federal Register, January 23,
60 “Commerce Completes First Review of Vietnam Import Data,” press release, U.S.
Department of Commerce, October 26, 2007.
explicitly state, that the monitoring program will continue to cover the same five
major categories of imports from Vietnam — shirts, sweaters, swimwear, trousers,
and underwear — and possibly the same 486 10-digit HTS lines. Attempts to clarify
this issue with DOC representatives were unsuccessful. The DOC will also continue
to post the collected import data on its Vietnam Textile and Apparel Import
Monitoring Program web page.62
The initial response to the DOC’s review was comparatively muted. Vietnamese
press coverage was limited to the scope of the press release, with no official
statement from a representative of the Vietnamese government.63 VITAS Chairman
Le Quoc An was reportedly not surprised by the review’s finding, but he indicated
that VITAS would continue to press the DOC to either terminate the monitoring
program or narrow the number of items being monitored.64
In the United States, only one of the various trade associations that testified at
the December 2006 and April 2007 hearings issued a statement in the week following
the DOC press release of October 26, 2007. The National Retail Federation (NRF)
“expressed satisfaction” with the DOC’s decision, stating that it “confirms American
retailers’ long-standing contention that there is no basis to launch antidumping
investigations against Vietnamese-made apparel.”65 NRF vice president Erik Autor
also stated that the decision “vindicates the retail industry’s argument that there was
no rationale for setting up the textile monitoring program in the first place, and
certainly no reason for continuing it.”66 None of the U.S. senators or representatives
that commented on the proposed monitoring program issued statements after the
announcement of the results of the DOC’s first biannual review.
Results of the Second Six-Month Review
On May 6, 2008, the DOC announced the results of its second six-month review
of the Vietnamese import monitoring program, which covered the period August
2007 to January 2008.67 For the second time, the DOC determined that “there is
insufficient evidence to warrant self-initiating an antidumping investigation.” The
DOC also stated that it intended to continue the monitoring program “to ensure that
apparel is not dumped into the U.S. market and threatening American manufacturing
63 Comment based on review of major online press outlets (including Thanhnien News and
Vietnam Economic Times) and various Vietnamese governmental web pages.
64 “DOC: No Evidence of Vietnam Dumping Apparel,” Vietnam Economy, October 30,
65 “NRF Welcomes Decision Not to Self-Initiate Antidumping Investigations Against
Apparel from Vietnam,” press release, National Retail Federation, October 30, 2007.
67 “Commerce Completes Second Review of Vietnam Import Data,” press release,
Department of Commerce, May 6, 2008. Quotations in this section are from this press
release unless otherwise noted.
As was the case with the first six-month review, the DOC did not release the
details of its review. However, it did report, “Our investigation reveals that prices of
Vietnamese apparel are in line with, and in most cases even exceed, other major
suppliers, including Central America.” Trends in import prices and quantities for the
selected clothing items were reportedly compared to data for Bangladesh, the
CAFTA-DR nations,68 Cambodia, India, Indonesia, Macau, Malaysia, Pakistan, and
the Philippines. According to the DOC, there were no imports of Vietnamese
clothing for 208 of the “nearly 500” items being monitored.
The response in Vietnam to the DOC’s announcement was more muted than
after the first six-month review. The Embassy of Vietnam in Washington reported
the results of the review, but made no comment on the DOC’s announcement.69
Coverage of the DOC announcement in Vietnam’s government-run news agency,
Thanh Nien News, similarly reported the review’s findings without any statement by
a Vietnamese official.70 The story did, however, include analysis by the American
Chamber of Commerce, that showed that Vietnam had the most rapid growth rate in
2007 among the top five clothing exporters to the United States.71 Thanh Nien News
also reported that Adam Sitkoff, the executive director of AmCham Vietnam in
Hanoi said, “I see nothing in the way of Vietnam continuing to climb up that list....
Vietnam is a very competitive place to manufacture a wide variety of products, so
export growth to the U.S. isn’t just tied to one sector.”72 VITAS reportedly again
asked the United States to terminate the monitoring program.73
There was virtually no response from the U.S. clothing and textile industry to
the DOC’s announcement of the findings of its second six-month review. Two of the
more prominent supporters of the monitoring program — NCTO and AMTAC — did
not issue statements following the DOC’s announcement.
Despite the relative calm following the release of the results of the second DOC
review, the debate over the impact of the monitoring program on Vietnamese
clothing exports to the United States remains active. According to Just-Style.com, a
major online clothing and textile industry news source which included the monitoring
program as one of its top eight clothing trade issues for 2008, “Import monitoring has
already been used successfully to control the growth of apparel shipments between
the U.S. and Vietnam over the past 12 months, and is likely to do so for at least
another year....”74 The industry source goes on to report that “[f]ears of an anti-
68 Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.
69 “US Confirms No Proof of Dumping in Vietnam’s Apparel Exports,” Embassy of
Vietnam, May 8, 2008, available online at [http://www.vietnamembassy-usa.org/news/
70 “US Acquits Vietnam for Apparel Dumping,” Thanh Nien News, May 8, 2008.
71 The other four leading exporters in 2007 were China, India, Indonesia, and Mexico.
72 “US Acquits Vietnam for Apparel Dumping,” Thanh Nien News, May 8, 2008.
73 “U.S. Administration Will Not Investigate Apparel Imports from Vietnam,” Emerging
Textiles.com, May 8, 2008.
74 “Eight Apparel Industry Issues to Watch in 2008,” Just-Style.com, January 18, 2008;
dumping investigation ... continue to hold a ‘false cloud over sourcing from
Vietnam,’ and mean ‘U.S. importers and retailers are reluctant to place too many
orders in Vietnam.’”75 Other market observers point to the rapid growth of Vietnam’s
clothing exports to the United States in 2007 — up 36%, according to the Vietnam’s
trade figures — as evidence that the monitoring program has had little effect on trade
The Structure of Vietnam’s Clothing Industry
There are sharp differences of opinion regarding the current structure of
Vietnam’s clothing industry. As was discussed above, some of the supporters of the
monitoring program maintain that Vietnam’s clothing industry is dominated by state-
owned and -operated enterprises that are heavily subsidized by the Vietnamese
government, gaining unfair advantage in the global market. Many opponents to the
monitoring program contend that Vietnam’s clothing industry consists of hundreds
of small, privately-owned and -operated companies that receive little help from the
central government when facing a
highly competitive global market.
Table 3. Types of Vietnamese
Issues of OwnershipClothing Establishments,
The ownership structure of
Vietnam’s clothing industry is aNumber of
complex mix of typically larger, state-Ownership TypeEstablishments
owned enterprises; smaller
collectively-owned or privateState-Owned 97
companies; and newer, foreign-owned* Centrally-Owned20
manufacturers. Layered over this mix
of ownership arrangements is a* Locally-Owned77
currently state-owned “holdingCooperatives39
company” called the Vietnam National
Textile and Garment Group, orPrivate39
Vinatex, that oversees the operation
and management of a number of state-Limited Liability
owned, joint stock and joint ventureCompanies176
enterprises in the clothing industry,Joint Stock
plus provides an array of technicalCompanies5
support services for Vietnam’s clothing
and textile sectors.Household
Types of OwnershipTOTAL68,429
Arrangements. Starting in 1986, theSource: General Statistics Office of Vietnam.
available online at [http://www.just-style.com/article.aspx?ID=99618].
76 “Vietnam Reaches List of Top 30 Exporters to the US,” Thanh Nien News, February 21,
Vietnamese government has been gradually restructuring its economy away from a
predominantly centrally planned system into a market-oriented one. As part of its
“Doi Moi” (renovations) process, the Vietnamese government has allowed the
development of privately-owned clothing manufacturers that compete with the
existing state-owned clothing companies. Over the last few years, the Vietnamese
government has started to partially divest itself of some of the state-owned clothing
companies in a process Vietnam calls “equitization.” Finally, the Vietnamese
government has also allowed direct foreign investment in clothing companies, either
wholly-owned or joint venture. As a result, there are several different ownership
arrangements in Vietnam’s clothing industry.
According to a national survey of its industries, Vietnam had a total 68,429
clothing manufacturing establishments as of June 30, 1998 (see Table 3). The vast
majority of those establishments — 99.5% — were “household establishments,”
families that were independently employed making clothes. Of the remaining 356
non-household clothing establishments, about one in four were state-owned
enterprises and about half were “limited companies.”
Since 1998, Vietnam has implemented a series of policy changes regarding the
ownership of manufacturing establishments. In October 2005, Vietnam’s National77
Assembly passed a new Enterprise Law that clarifies the distinction between
different types of ownership, as well as specifies which types of enterprises are open
to foreign equity participation. In addition, the Vietnamese government has also
begun the process of divesting itself of full-ownership of clothing manufacturers.
The purported goal is to transform the state-owned enterprises into joint shareholding
(or stock) companies in which the state holds a controlling interest. The divesting78
process, or “equitization,” is to be completed in the clothing industry by 2010.
Table 4. Distribution of Real Output of Vietnam’s Clothing
Industry, Base Year 1994
State-Owned 31.9 28.3 26.4 25.4 25.3 22.6 24.6
Privately-Owned 43.3 45.3 44.1 38.4 38.7 39.3 37.5
77 The law is referred to as “Enterprise Law (2005),” and is coded as “60/2005/QH11.” The
full text of the law is available online at [http://www.hepza.gov.vn/en/Document/Legal/].
78 In the “equitization” of companies, the Vietnamese government frequently retains a
majority share of the stocks and divides the minority share of the stocks between the
workers of the company and private investors, including foreign owners. The shares
allocated to private investors are typically auctioned off.
Foreign-Inve sted 24.8 26.4 29.5 36.2 36.0 38.1 37.9
Source: General Statistics Office of Vietnam.
However, the “equitization” of Vietnam’s state-owned clothing companies does
not insure that they will no longer be subject to government intervention in their
operations or “free” of state subsidies. Also, unless there is a corresponding change
in managerial behavior, the “equitization” of clothing companies does not
automatically mean the new joint shareholding companies will be profit-motivated,
responsive to market pressures, and free from political influence.
Although most of Vietnam’s clothing establishments are household operations,
the value of the nation’s clothing production is more evenly divided between the
state-owned enterprises, the domestic private sector, and foreign-invested companies
(see Table 4). Plus, as the process of “equitization” continues and more overseas
investors become partial owners of clothing manufacturing facilities in Vietnam,
there has been a notable shift in the structure of production away from locally-owned
state enterprises and household producers towards foreign-invested companies. The
decline of locally-owned state enterprises is most likely due to their transformation
into joint shareholding companies. The decline of household producers is probably
attributable to increased competition from the joint shareholding companies and/or
Role of Vinatex. While the shift in the ownership structure of Vietnam’s
clothing industry continues, the structure and purpose of Vinatex is undergoing a
concurrent transformation. Vinatex is currently a state-owned “general corporation”
that oversees the operations of a mixture of 7 state-owned clothing and textile
companies, 9 private clothing companies, 41 joint shareholding (stock) companies,
6 joint venture companies, and 7 clothing and textile research and educational
institutions.79 In the past, despite its official relations with the various clothing
manufacturers, Vinatex’s authority over the manufacturers was limited, especially
when it came to the distribution of profits. According to Le Quan An, chairman of
Vinatex, “Before our state companies acted independently. If they made a profit,
they kept it.”80
In 2006, the Vietnamese government developed a restructuring plan for Vinatex
— with the help of PricewaterhouseCoopers — that called for the “equitization” of
79 Figures based on Vinatex’s organizational chart, available online at Vinatex’s web page:
[ ht t p: / / www.vi na t e x.c om] .
80 “Dressed for International Success,” by Amy Kazmin, Financial Times, July 25, 2006,
Vinatex and its transformation into a “profit-oriented holding company.”81
According to Vietnam’s Ministry of Industry, Vinatex is to begin its “equitization”
in 2007 with the goal of completing its transformation into a joint stock holding
company by the end of 2008.82 As planned, the equitization will not reduce the value
of the government’s capital holding in Vinatex, but instead will issue new shares for
sale to private investors to attract new capital. Also, as a result of its already
completed restructuring, Vinatex now collects a portion of the profits of the joint
stock companies and joint ventures in which it is a shareholder. In the words of
Vinatex chairman An, “Now we act as a real owner.”83
The restructured Vinatex is to focus its efforts in five major areas.84 First, it will
“invest, produce, supply, distribute, import and export in the field of textile and
garment.” Second, it will set up joint ventures with domestic and foreign investors.
Third, Vinatex will “develop and expand” both domestic and overseas markets, “as
well as assign member companies to penetrate into potential markets.” Fourth, it will
conduct research and improve technological applications in Vietnam’s clothing and
textile industries. Fifth, Vinatex will provide technical training for the workers and
management in Vietnam’s clothing and textile industry.
The equitization and restructuring of Vinatex complicates the emerging
structure of Vietnam’s clothing industry. From an ownership perspective, a growing
portion of clothing production in Vietnam is taking place outside of state-owned
enterprises, and in theory, there will be no state-owned clothing factories in Vietnam
by 2010. However, the transformation of Vinatex into a holding company holding
shares in many of Vietnam’s largest clothing companies as well as a major
commercial bank raises questions about the real extent to which the Vietnamese
government is willing to release the clothing industry from state control.
Level of Subsidization
There are a number of direct and indirect ways by which Vietnam (or any
nation) could subsidize its clothing industry. Among the direct ways are: 1. financing
investments for the clothing industry; 2. offering incentive payments (such as tax
rebates) for the achievement of export or production targets; and 3. guaranteeing
government procurement contracts to domestic clothing manufacturers. Among the
indirect ways are: 1. offering below market loans or credit to Vietnamese clothing
companies; 2. lowering or eliminating tariffs on imported materials or equipment
used by the clothing industry; 3. providing materials and/or labor at below market
prices; and 4. erecting administrative barriers to foreign competition to Vietnam’s
clothing industry in its domestic consumer market.
82 “Ministry of Industry Allowed to Decide Setting Steering Committee for Vinatex’s
Equitisation,” press release of August 24, 2007, as reported and translated on Vinatex’s
83 Kazmin, op. cit.
84 Information for the following paragraph extracted from Vinatex’s webpage,
[ h t t p : / / www.vi na t e x.c om] .
Vietnam’s past practice of providing its clothing industry with a variety of direct
and indirect subsidies has been and continues to be of concern. As previously
indicated, some U.S. textile manufacturers point to Vietnam’s subsidization of its
clothing industry as evidence of unfair competitive practices and the need for
safeguard measures. Also, during the negotiation of Vietnam’s accession to the
WTO, the United States insisted on a commitment from Vietnam to cease its WTO-
prohibited subsidies for the clothing industry.85 Vietnam made such a commitment
and asserts that it has fully complied with those commitments.
Decision 55. People and organizations who think that the Vietnamese
government may still be subsidizing its clothing and textile industry often point to
the events surrounding “Decision 55.” On April 23, 2001, the Vietnamese
government released Decision 55/2001/QD-TTg , or “Decision 55,” which provided
for the investment between 2001 and 2005 of 35 trillion dong — or approximately
$2.2 billion — in various projects designed to assist Vietnam’s textile and clothing
industry. These projects included financial support for the cultivation of cotton, the
development of infrastructure for Vietnam’s textile industry, and credit preferences
for specific projects related to Vietnam’s clothing and textile industries. Decision 55
also called for the investment of 30 trillion dong (approximately $1.9 billion)
between 2006 and 2010.
As part of its WTO accession agreement, Vietnam pledged to end all WTO-
prohibited subsidies to its clothing and textile industry, and on May 30, 2006,
Decision 55 was revoked by Decision 126/2006/QD-TTg. According to Vietnamese
officials, the United States “might have misunderstood the spirit” of Decision 55, and
misconstrued it to provide for direct government financing of the projects.86 Instead,
much of the funding for the projects mentioned in Decision 55 were to be financed
by the private sector and foreign investors.87 According to Vinatex chairman Le
Quoc An, government assistance to Vietnam’s clothing industry between 2002 and
(DAF), totaling 1.9 trillion dong, or approximately $118 million. Following the
85 Under the WTO Agreement on Subsidies and Countervailing Measures defines two
categories of subsidies — prohibited subsidies and actionable subsidies. As the name
implies, the former are prohibited under the terms of the agreement because the subsidies
are specifically designed to distort international trade. The prohibited subsidies consist of
policies such as export targets or requirements to use domestic goods. Actionable subsidies
consist of government policies that another WTO member argues are having an adverse
effect on its interests. In the case of actionable subsidies, it is the responsibility of the
complaining WTO member to demonstrate the adverse effect, and it is the responsibility of
the subsidizing WTO member to either terminate the subsidy or eliminate the adverse effect,
if the adverse effect has been proven to exist.
86 “PM Repeals Textile Subsidy to Ease US Talks,” by Dong Hieu, VietnamNet, June 14,
revocation of Decision 55, the Vietnamese government has directed Vinatex to take
the lead in raising funds to support the expansion of Vietnam’s clothing industry.89
In response, Vinatex announced that “Vietnamese textile and garment
companies are prepared to forgo subsidies” and “stand on [their] own feet.”90
According to Le Quoc An, while the industry would face “serious difficulties”
without the subsidies, it would “mobilize money from local and foreign investors”
for investments in new facilities and technology.91 To that end, Vinatex announced
on July 19, 2007, that it was talking with a group of investors — including the
Vietnam International Bank, Vietnam Steel Corporation, and Hanoi Beer-Alcohol
and Beverage Corporation — about opening a commercial joint-stock bank to
provide financial services to Vietnam’s clothing and textile industries.92 The
proposed bank’s initial capital is to total 1 trillion dong, or approximately $63
million. In August 2007, Vinatex applied for a license from the State Bank of
Vietnam to establish the Industrial Development Bank (IDB).93 Vinatex is currently
awaiting approval to open the proposed bank.
Below Market Wages. One indirect means of subsidization of Vietnam’s
clothing industry frequently mentioned is the payment of below market wages to
clothing workers. The claim is that by keeping clothing workers’ wages down,
Vietnam’s clothing companies can either earn higher profits or lower their prices
below market prices. Higher profits would allow the clothing companies to expand
their operations and secure a larger share of the global clothing market, and below
market clothing prices would help Vietnamese companies out-compete other clothing
There is some circumstantial evidence to support the claim that Vietnam’s
clothing companies are paying their workers below market wages. Several studies
of Vietnam’s clothing and textile industry find that the average wage of clothing and
textile workers in Vietnam is less than the average wage for other Vietnamese94
manufacturing workers. However, it is argued that lower wages in the clothing and
textile industries are not unusual in other nations (including the United States)
89 “Government Ends Support for Textile and Garment Industry,” Thanh Nien News, June
90 “Vietnam Textile Industry Ready to Stand on Its Own Feet,” Thanh Nien News, June 13,
92 “Textile Company to Open Bank,” Thanh Nien News, July 19, 2007.
93 “Top Garment Maker Sews Up Diversified Portfolio,” Vietnam News, August 30, 2007.
94 Examples include Caroline Brassard, “Wage and Labour Regulations in Vietnam within
the Poverty Reduction Agenda,” revised draft, National University of Singapore, 2004; and
John Thornburn, Nguyen Thi Thanh Ha, and Nguyen Thi Hoa, “Globalisation and the
Textile Industry of Vietnam, Discussion Paper 10,” paper presented at U.K. Department for
International Development Workshop on Globalisation and Poverty, Hanoi, September 23
and 24, 2002.
because of the high level of global competition and the higher than average
employment of women in these industries.95
Wage data for the global clothing industry in 2008 reportedly indicates a general
rise in labor costs, in part due to the weakening of the U.S. dollar.96 According to the
study, Vietnam’s hourly wage rates are below those of China and much of Central
America, but above those of Bangladesh, Cambodia, and Pakistan. Other sources
indicate that Vietnam’s high rate of inflation — 19.4% year-on-year in March 2008
— is driving up the cost of labor and raw materials, and hurting Vietnam’s exports.97
The Vietnam General Labor Union reported over 300 worker strikes during the first
four months of 2008, generally over low wages and the effects of inflation.98
The State Bank of Vietnam (SBV) is apparently unsure how to respond to the
combined effects of inflation and the weakening U.S. dollar. Because most export
contracts are denominated in U.S. dollars, the dollar’s decline in value has cut into
Vietnamese manufacturers’ profit margins. At the same time, rising labor and raw
material costs are undermining profits from the opposite direction. If the SBV
devalues the Vietnamese dong, it may help exporters, but exacerbate domestic
inflation. If the SBV revalues the dong, it might reduce inflation, but might
potentially drive many exporters out of business. For the first six months of 2008, the
dong had depreciated in value by over 3% against the U.S. dollar.
Another important aspect of Vietnam’s clothing industry is the nature of its
participation in the competitive global clothing market. According to Professor Gary
Gereffi, the global clothing market is a prime example of buyer-driven commodity
chain, in which the “large retailers, marketers and branded manufacturers play the
pivotal roles in setting up decentralized production networks.”99 In the analysis of
Gereffi and others, buyer-driven commodity chains are characterized by highly
competitive, decentralized manufacturing, frequently involving multiple countries.
In addition, Gereffi and other scholars maintain that the retailers, marketers and
branded manufacturers secure control over the actual clothing manufacturers and the
95 See Khalid Nadvi and John Thoburn, “Challenges to Vietnamese Firms in the World
Garment and Textile Value Chain, and the Implications for Alleviating Poverty,”Journal of
the Asia Pacific Economy, Vol. 9, No. 2 (2004), pp. 249-267; and John Thoburn, Kirsten
Sutherland, and Nguyen Thi Hoa, “Globalization and Poverty: Impacts on Households of
Employment and Restructuring in the Textiles Industry of Vietnam,” Journal of the Asia
Pacific Economy, Vol. 12, No. 3 (2007), pp. 345-366.
96 “Apparel Manufacturing Labor Costs in 2008,” Emerging Textiles.com, May 23, 2008;
available online at [http://www.emergingtextiles.com/].
97 “Rising Inflation Hurting Vietnam’s Exports, Says JPMorgan Chase,” Thanh Nien News,
April 18, 2008.
98 “Impotent Labor Unions Don’t Help Workers: Officials,” Thanh Nien News, June 22,
99 Gary Gereffi, “Outsourcing and Changing Patterns of International Competition in the
Apparel Commodity Chain,” paper presented at the “Responding to Globalization: Societies,
Groups, and Individuals” Conference, Boulder, Colorado, April 4-7, 2002.
suppliers of materials and equipment used in producing clothing by controlling
product design and brand names. As a result, most of the profits in the clothing
industry flows to the retailers, marketers, and branded manufacturers.
This analysis is based on a commodity chain approach that examines the
production flow of clothing from raw materials to retail sale (see Table 5). In
general, the major retailers control both the design and the marketing of the final
clothing items. The wholesalers and exporters typically contract with the major
retailers to source the clothing items from a network of manufacturers, who in turn
subcontract the textile companies to provide the materials needed to produce the
clothes. The textile companies similarly purchase the raw materials they need from
suppliers of either natural or synthetic fibers. In general, this production chain is
initiated by the decision of the retailers to procure clothing. Vietnam’s clothing
industry is by and large restricted to the center of this commodity chain, competing
for contracts to produce some of the more competitive types of clothing such as
women’s clothing and cotton clothing. This market segment is often characterized100
by what some analysts call “triangle manufacturing.”
Table 5. The Clothing Commodity Chain
Suppliers Co mpa nies M a nufacturers Exporters
FibersSilk, HempYarn, FabricCutting,Labeling,
Source: Modified from Gary Gereffi, 2002 (see footnote 98).
Triangle Manufacturing. Triangle manufacturing typically involves three
key parties — a retailer, a sourcing company, and a manufacturer. The retailer
contracts the sourcing company to procure clothing according to very detailed
specifications. The sourcing company usually subcontracts the manufacturing of the
clothing items to a network of clothing manufacturers that it knows, trusts, and
monitors. The clothing manufacturers produce the clothing items and then ship the
products directly to the retailers. Once the clothing shipments are received and pass
inspection, the retailer pays the sourcing company, who then pays the manufacturers.
Within the confines of triangle manufacturing, there is also a pattern of
progression for the clothing manufacturers. At first, the manufacturers tend to
operate under a “cut-make-trim” (CMT) arrangement with the sourcing company,
where the manufacturer is provided all the materials for the production of the
clothing item and only assembles the final product. Later on, the manufacturer may
advance into an “original equipment manufacturing” (OEM) arrangement in which
the sourcing company or the major retailer provides the manufacturer with the
100 See Byoungho Jin, “Apparel Industry in East Asian New Industrialized Countries,”
Journal of Fashion Marketing and Management, Vol. 8, No. 2 (2004), pp. 230-244.
product design and it is up to the manufacturer to purchase the necessary materials
to make the clothing items. In some cases, clothing manufacturers have been able to
expand their activities further out in the commodity chain and undertake “original
brand-name manufacturing” in which they may design the clothes to be sold either
under their own brand name or under the brand name of a major retailer.
Because the sourcing company usually has a significant number of
manufacturers able to supply the clothing items, competition for the subcontracts
tends to be keen, and the manufacturers are often pushed to lower their prices and
speed up their production in order to win the contract. In Vietnam, the state-owned
companies and the foreign-invested companies are generally considered better able
to compete for “triangle manufacturing” contracts than the smaller, private
Vietnamese enterprises because they are larger in size and have easier access to
To improve the overall profitability of Vietnam’s clothing industry and reduce
its dependency on the major retailers and marketers, the Vietnamese government is
attempting to follow in the footsteps of Hong Kong, Singapore, South Korea and
Taiwan. The “four Asian dragons” were able to transform their manufacturing
sectors in response to highly competitive global market conditions in various ways.
In the clothing industry, Hong Kong, South Korea, and Taiwan not only diversified
their manufacturing throughout Asia (including China), but also have moved up and
down the clothing commodity chain into clothing design (up chain) and brand name
development (down chain). Under the Decision 55, the Vietnamese government
apparently had decided to focus its efforts on up chain development by increasing
investments into its domestic textile industry and its production of raw materials used
in the clothing industry. However, with the revocation of Decision 55, the focus
seems to have shifted to down chain development.
Growth in Vietnam’s Clothing Exports
Vietnam’s exports of clothing have experienced rapid growth over the last 12
years, but this expansion has largely been in line with the overall increase in
Vietnam’s total exports. What has changed is the mix of Vietnam’s major markets
for its clothing exports, with the rapid rise in the importance of the U.S. market over
the last few years.
Over the last decade, Vietnam’s textile and clothing exports have increased over
five-fold, according to its General Statistics Office (see Table 6). In 1997,
Vietnam’s exports of textiles and clothing were worth $1.5 billion, and contributed
14.1% of the nation’s total export earnings.101 In 2002, textile and clothing exports
reached $2.73 billion, and 17.9% of total export value. Since then, while the value
of textile and clothing exports have continued to rise, their share of total exports has
101 The General Statistics Office of Vietnam does not report textile and clothing exports
declined. In 2007, the total value of Vietnam’s textile and clothing exports was
$7.78 billion, but only 16.1% of total exports.
Table 6. Vietnam’s Textile and Clothing Exports as a Share of
(in U.S. $ billions)
YearTextile andClothing ExportsTotal ExportsShare of TotalExports
Source: General Statistics Office of Vietnam.
The U.S. decision to grant Vietnam normal trade relations (NTR) status in
December 2001 apparently led to a dramatic shift in the structure of Vietnam’s
clothing exports (see Table 7).102 In 2001, Vietnam’s leading export markets for its
clothing were Japan and the 27 members of the European Union, or EU-27.103
Vietnam’s combined clothing exports to Japan and the EU-27 amounted to over two-
thirds of its clothing exports in 2001. By contrast, Vietnam shipped 2.6% of its
clothing exports to the United States in 2001.
102 Data for 2006 and 2007 not currently available.
103 Among the EU-27 members, the top two markets were Germany and the United
Table 7. Vietnam’s Major Clothing Export Markets
(in U.S. $ millions and percent)
Value 2001 2002 2003 2004 2005
World 1,819.7 2,562.3 3,386.3 4,135.8 4,558.0
USA 46.4 995.3 1,946.4 2,432.5 2,579.9
J a pan 562.7 457.1 443.2 469.9 574.8
EU-2 7 652.8 591.3 554.0 718.4 860.8
USA 2.6% 38.8% 57.5% 58.8% 56.6%
J a pan 30.9% 17.8% 13.1% 12.0% 12.6%
EU-2 7 35.9% 23.1% 16.4% 17.4% 18.9%
Source: Global Trade Atlas.
However, after receiving NTR status, Vietnam’s clothing exports to the
United States jumped to nearly $1 billion in 2002, readily surpassing exports to both
Japan and the EU-27, which declined slightly from the previous year. As a result, the
United States became Vietnam’s largest clothing export market in 2002. The sharp
rise in clothing exports to the United States continued into 2003, when over half of
Vietnam’s clothing exports were sent to the United States, while exports to Japan and
the EU-27 continued to decline.
The decline in exports to Japan and the EU-27 ended in 2004, with a slight
rebound in clothing sales to Japan and a larger rise in exports to the EU-27.
Meanwhile, growth in clothing exports to the United States were possibly curbed in
part due to the imposition of quotas by the United States. However, those protective
measures were not sufficient to stop the advance in the U.S. share of Vietnam’s
clothing exports. In 2004, nearly $6 of out of every $10 of clothing exports from
Vietnam went to the United States.
In 2005, Vietnamese clothing exports to the United States increased by just over
$147 million. However, exports to Japan and the EU-27 increased by a combined
total of more than $247 million. As a consequence, there was a small decline in the
U.S. share of Vietnam’s clothing exports in 2005, and a corresponding slight rise for
both Japan and EU-27.
Although 2006 and 2007 trade figures were not available for this report, there
are indications that the modest shift away from the United States and back towards
Japan and the EU-27 continued. Because of its concerns about the possible
continuation of protective measures by the United States as part of Vietnam’s WTO
accession agreement, the Vietnamese government has allegedly encouraged its
clothing companies to export to Japan and the EU-27.104 In addition, the continued
weakening of the U.S. dollar and the slowdown in the U.S. economy has made Japan
and the EU-27 a more attractive market.
104 Based on confidential interviews with sources involved in U.S.-Vietnamese clothing
Vietnam’s Role in the U.S. Clothing Market
Over the last five years, there has been a marked increase in U.S. clothing
imports from Vietnam. Despite repeated changes in U.S. trade policy towards
Vietnam — including the conferral of normal trade relations, the imposition of
import quotas for selected clothing items, and compliance with Vietnam’s WTO
accession — there has been steady growth in Vietnam’s clothing exports to the
United States, and, with it, a rise in Vietnam’s overall market share in the United
States. However, Vietnam remains a comparatively modest supplier of U.S. clothing
imports. Even in the market segments where Vietnam is among the top three
suppliers to the United States, its portion of import supply with few exceptions
remains below 10%.
Overall Market Share
The recent rapid growth in U.S. clothing imports from Vietnam should be
considered in the context of the overall growth of U.S. clothing imports and in
comparison with other major suppliers, such as China and Mexico. As shown in
Figure 2, the increase in U.S. clothing imports from Vietnam since 2001 is relatively
small when compared to the overall increase in U.S. clothing imports, as well as to
the rise in clothing imports from China. In 2006, the United States imported $73.4
billion of clothing, of which $19.9 billion were from China, $5.4 billion were from
Mexico, and $3.2 billion were from Vietnam. However, the rise in Vietnamese
clothing imports over the last five years does roughly correspond to the decline in
imports from Mexico.
Figure 2. U.S. Clothing Imports from Top Suppliers, 2001-2006
(in U.S. $ billions)
2001 2002 2003 2004 2005 2006 2007
TOTAL Ch in a Me xi c o Vie t n a m
Overall, Vietnam’s share of the U.S. clothing imports rose from 0.1% in 2001
to 5.7% in 2007. By contrast, China’s share increased from 11.0% to 31.7% over the
same six-year period. The second largest clothing supplier to the United States,
Mexico, saw its share decline from 13.7% to 6.1% between 2001 and 2007.
In 2001, Vietnam was not among the top 25 suppliers of clothing imports to the
United States. Following the passage of normal trade relations, Vietnam was the 20th
largest source of U.S. clothing imports in 2002. In 2003, Vietnam jumped to 5th in
the list of leading clothing suppliers for the United States. However, following the
imposition of import quotas, Vietnam’s ranking dropped to 7th in 2005, only to
rebound to 5th in 2006 and then 3rd in 2007 — behind (in order) China and Mexico.
Top Clothing Imports
While Vietnam may be only the 5th largest overall supplier of clothing imports
for the United States with a share of 4.3%, it is possible that it may be a dominant
supplier of select categories of clothing. However, an examination of U.S. import
data at the four-digit level of the HTS code does not find evidence of submarket
dominance by Vietnam. Even in the few categories where it is among the top three
sources for U.S. imports, Vietnam rarely provides more than 10% of the total
For Chapter 61 of the HTS code, which includes “articles of apparel and
clothing accessories, knitted or crocheted,” there were six subcategories at the four-
digit level in which Vietnam was one of the top three suppliers in 2006 (see Table
8). For Chapter 62, “articles of apparel and clothing accessories, not knitted or
crocheted,” there were five such subcategories.
Table 8. Leading U.S. Clothing Imports from Vietnam by Share
of Total Imports by Category, 2006
HS Description Val u e Import
Code(U.S. $ Millions)Share
Chapter 61 - Knitted or Crocheted Clothing
with plastic, rubber or for theatrical
Chapter 62 - Not-Knitted or Crocheted Clothing
HS Description Val u e Import
Code(U.S. $ Millions)Share
with plastic, rubber or for theatrical
Source: Global Trade Atlas
It is worth noting that only one of the 11 clothing submarkets in which Vietnam
was a major source of U.S. imports in 2006 — HS 6106 — significantly overlaps
with the clothing categories being monitored by the DOC’s monitoring program. For
most of the categories being monitored, Vietnam was generally not among the top 10
suppliers for the United States and/or Vietnam’s market share was below 3%. Two
exceptions in Chapter 61 were men’s and boys’ knitted or crocheted shirts, whereth
Vietnam ranked 5 and provided 6.2% of the imports; and men’s and boys’ knitted
or crocheted sweaters, where Vietnam ranked 7th and provided 3.9% of the imports.
Also, the main competitors to Vietnam in the U.S. clothing import market are
not generally the Dominican Republic-Central America Free Trade Agreement
(DR-CAFTA) nations, but China and other Asian nations. For the 11 submarkets
listed in Table 8, Guatemala, Honduras, and Mexico are the only American nations
that appear among the top five suppliers for the United States, and in only three of
those submarkets.105 This provides some support for the view that limiting clothing
imports from Vietnam would probably result in production being shifted to other
Asian sources, rather than to manufacturers in the United States or elsewhere in the
Recent Trends in U.S. Clothing Production
Recent trends in the gross output of the U.S. clothing industry provide an
ambiguous picture of the possible effect of the recent rise in clothing imports from
Vietnam (see Figure 3). Between 1997 to 2004, there was a general decline in the
value of U.S. clothing production that corresponded with the period of most rapid
growth in the clothing imports from Vietnam. In 2005, U.S. clothing production rose
slightly, at the same time that the growth in clothing imports from Vietnam slowed
down. Both of these trends were generally consistent with the argument that clothing
imports from Vietnam were displacing clothing manufactured in the United States.
105 Mexico and Guatemala for HS 6114, Mexico and Honduras for HS 6210, and Honduras
for HS 6216.
Figure 3. Gross Output of U.S. Clothing Industry and U.S. Imports of
Clothing from Vietnam, 1995-2005
.S. $ B
199 5 1 996 199 7 199 8 1 999 200 0 2 001 20 02 200 3 2 004 20 05
U.S. Clothing ProductionU.S. Clothing Imports from Vietnam
Source: Bureau of Economic Analysis, U.S. Department of Commerce; Global Trade Atlas.
However, there are aspects of the recent trade trends that raise doubts about a
causal link between the rise in clothing imports from Vietnam taken alone and the
decline in U.S. clothing production. First, the decline in U.S. production predates the
end of the U.S. trade embargo on Vietnam, indicating that other factors may be
involved. Second, the decline in U.S. production between 2000 and 2004 — over $30
billion — is nearly 13 times the size of the increase in clothing imports from Vietnam
during the same time period — another possible indication that other factors may be
responsible for the decline in U.S. clothing production. Third, both U.S. clothing
production and clothing imports from Vietnam rose in 2005, which is contrary to the
relationship expected if clothing imports from Vietnam were causing a decline in
U.S. production. Finally, because its has been a relatively short period of time since
Vietnam has been allowed to export clothing to the United States, it is difficult to
demonstrate any reliable trends or conduct time series analysis that will provide
statistically significant results.
Implications for Congress
The completion of the two reviews by the Department of Commerce of its
monitoring program provided little resolution or clarity to a number of questions
raised about the authority and the necessity of establishing such a monitoring
program. The DOC press releases appear to have been carefully worded to avoid a
flat denial that there was evidence of dumping by Vietnam, while simultaneously
providing possible grounds for the continuation of the monitoring of selected
Vietnamese clothing imports. In addition, there is sufficient ambiguity in the
language of the press releases to allow the DOC to amend or alter the categories of
Vietnamese clothing imports it monitors, if it chooses to do so.
One possible response for Congress is to take no action. Given that the DOC is
monitoring trade flows, and has so far determined that there is insufficient evidence
to initiate an anti-dumping investigation, it would appear that clothing imports from
Vietnam are generally in compliance with current U.S. laws and regulations.
If Congress were to consider taken some action on this issue, there are several
aspects of the current status of U.S.-Vietnamese trade relations for clothing that
might be examined. First, the Department of Commerce has not publicly responded
to requests from some Members of Congress, the Vietnamese government, and some
major U.S. clothing importers for the legal basis for establishing the monitoring
program. The Federal Register announcement of the creation of the monitoring
program did not include the usual federal law citation establishing the authority to
create the program. Congress could act to revisit the question of DOC’s legal
authority for establishing the monitoring program.
Second, there was concern by several Members of Congress that the current
U.S. trade policy towards Vietnam’s clothing imports may violate both the spirit and
the letter of the U.S. commitments to other WTO members. As such, Congress
might act to review the monitoring program to decide whether or not it violates
existing WTO agreements, exposing the United States to the risk of a formal
complaint from Vietnam.
Third, Congress could investigate Vietnam’s compliance with its promise to
terminate all WTO-prohibited subsidies to its clothing and textile industry. As
indicated by their submitted comments on the monitoring program, some U.S. textile
manufacturers are concerned that Vietnam is not living up to its promise, and
continues to use direct and indirect subsidies to support its clothing exports. Such
an investigation might also include research into Vietnam’s labor market to ascertain
if the Vietnamese government is suppressing the wages of clothing and textile
workers below fair market values.
Fourth, possibly based in part of the results the investigation mentioned above,
Congress could choose to pass legislation designed to counteract perceived unfair
trade practices by Vietnam in its export of clothing to the United States. The
proposed legislation might incorporate provisions that would make it easier to initiate
anti-dumping or countervailing duty investigations in cases involving non-market
economies, such as Vietnam.
Fifth, Congress may decide to consider the claims of major clothing retailers and
importers that the monitoring program has stunted trade with and investments in
Vietnam, thereby possibly causing them economic harm. The DOC review was
designed to examine trade data to determine whether or not there was sufficient
evidence to self-initiate an antidumping investigation against Vietnam. It did not
analyze the trade data to determine if the program had distorted trade during its first
six months of operation.
Sixth, Congress could also investigate the administration and operation of the
monitoring program to determine if it is correctly identifying the types of clothing in
which there might be possible dumping by Vietnam. Among the criteria typically
considered as being necessary conditions for proof of possible dumping are below
market prices and significant market share. In its review of clothing imports from
Vietnam, the DOC reported rising unit prices and implied that prices were
comparable to other clothing suppliers. As for market share, some experts assert that
unless a supplier provides more than 4% of the overall supply of a product, it cannot
cause sufficient harm to substantiate dumping claims. At present, there are very few
categories of clothing for which Vietnam achieves the market threshold level.
Finally, Congress might decide to authorize its own study of the monitoring
program data to see if there is any evidence of dumping and/or sufficient evidence
to warrant the continuation of the program. One criticism previously raised with the
DOC’s biannual review process was the problem of the seasonal nature of the global
clothing market. By assessing the monitoring program for a full year, Congress could
take into account the seasonal characteristics of the clothing market in evaluating the