The US is keen on bringing to life the Trans-Pacific Partnership (TPP), the 12-nation free trade plan. The countries with which the US is negotiating the TPP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Of the countries currently in TPP negotiations, Vietnam is most supportive of the free trade plan. US-Vietnam trade has had an average annual growth of 20 per cent over the past three years.

As the US and Vietnam join hands in pushing the trade partnership, China’s export industries, the textile sector in particular, could be affected. In the TPP negotiations, the US insists on yarn forward principle applied to the textile trade, which requires that only fabric produced from yarn made by a TPP country will qualify for duty free status. In line with the yarn forward principle, the US might ask Vietnam to reduce textile imports from China.

The US is the second largest export market for Vietnamese garments and shoes. On the other hand, Vietnam is not a major producer of textiles, with only 20 per cent of the market supplied by domestic manufacturers. It imports an average of 4.7 billion dollars of textiles from China every year.