Vietnam's fashion and apparel sector is navigating a pivotal, challenging shift, where the EU-Vietnam Free Trade Agreement (EVFTA) is now less about initial tariff cuts and more about driving a "green transition." Exports to the EU surged, reaching over $3.5 billion in the first 10 months of 2024, up 10.61% year-on-year, propelled by zero-tariff roadmaps. However, the true game-changer is the EU’s upcoming Sustainable and Circular Textile Strategy, demanding product transparency, durability, and recyclability by 2030.
The 'Fabric-Forward' rule and investment
The EVFTA's "fabric-forward" Rule of Origin (RoO), requiring fabric to be sourced from Vietnam, the EU, or partner countries like South Korea—remains a constraint, as Vietnam still imports substantial raw materials. This mandate is now fueling a critical need for upstream investment in local spinning and weaving, especially for eco-friendly materials. Manufacturers like May 10 Corporation, a historical national brand with an annual revenue of nearly $195 million in 2024, are responding by integrating digital transformation and green initiatives, targeting a 15,000–20,000 tonne annual CO₂ reduction.
Risk and opportunity in Green compliance
The most news-worthy angle is the pressure to adapt. The EU's demand for a Digital Product Passport and Extended Producer Responsibility (EPR) from 2026 means Vietnamese firms must invest in sustainability or risk market exclusion. This is a crucial opportunity: companies that pioneer circularity, adopt technologies like Cold-Pad-Batch (CPB) dyeing to cut emissions, and meet strict green standards will not only secure long-term EU contracts but also solidify a competitive edge over rivals without similar FTA access. The sector's financial outlook remains buoyant, targeting $47–48 billion in exports for 2025, but sustainable compliance is the non-negotiable price of admission.
