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Japan’s textile firms expect boost from TPP removal of tariffs

  • 2015-08-27 15:00:00
  • , Asahi
  • Translation

(Asahi: August 27, 2015 – p. 8)

 

 Japan and the U.S. are working to eliminate tariffs on textile products in negotiations over the Trans-Pacific Partnership trade agreement. Once the 12-country deal is finalized and comes into force, Vietnam will be able to broaden its footprint as a main textile producer and exporter. Meanwhile, exports from China and other non-TPP members will lose competitiveness, which may impact business strategies of Japanese textile companies.

 

 The U.S. currently imposes higher tariffs on textile related imports to protect the domestic industry. Duties on clothing range from 6.1% to 32%, while rates on thread and fabric come to 3.7% to 25%. It is moving to remove those over a certain period. Japan is also looking to eliminate its 1.9% to 10.9% tariff on textile products.

 

 Vietnam has capitalized on its cheap labor to broaden its footprint as a main export base of textile products, urging the U.S. and other TPP members to remove tariffs on textile products. But it sources most of thread, a fabric material, from China. To prevent a surge in cheap imports, the U.S. was demanding that the “rules of origin” be tightened and export countries produce thread domestically. According to Japanese sources involved in TPP negotiations, the two countries have agreed that export countries in principle handle thread-to-finish products domestically.

 

 As of October 2014, Vietnam is home to 21 Japanese affiliated textile and apparel companies, according to data from Tokyo Keizai. If the TPP goes into effect, they will have a competitive edge in shipping products to the U.S. “Japanese companies have knowhow in producing thread so they can broaden their business opportunities,” said a government official.

 

 Textile firms based in Japan are also looking to benefit from the conclusion of the TPP deal. Sotoh Corp., a venerable wool textile firm in Aichi Prefecture, in September began producing and processing wool fabric in partnership with a local textile maker in Ho Chi Minh.

 

 The firm had been lured into making a foray into Vietnam by the low costs there, but at the same time had feared whether it could recoup an investment of 600 million yen. It decided to open shop there, backed by Japan’s participation in TPP talks. “If the U.S. eliminates tariffs as part of the TPP deal, our Vietnamese plant will be able to broaden its markets,” said Yasuhiko Ueda, managing director at Sotoh. “We will also be able to acquire a competitive edge against China in price.”

 

 Sotoh expects that once production goes into gear, it may win back business deals that were snatched by Chinese firms due to their low costs. It is currently using China-made thread, but it eyes switching to Vietnamese thread in the future.

 

 Trading house Itochu also partnered with a Chines textile firm last summer for joint production of shirts at a plant outside Hanoi. The facility handles thread-to-finish products for shipment. It is preparing to double output capacity in October to turn out 1.5 million shirts a month as early as next year.

 

 “We want to take advantage of the TPP to export products from Vietnam at competitive prices,” said the president of a local subsidiary of Itochu in Vietnam.

 

 But the TPP negotiations failed to reach an agreement in late July. Itochu and Sotoh are preparing to produce business suits for the U.S. market, but “our plan has ground to a standstill due to a delay in finalizing the TPP talks,” said a senior official at Sotoh. (Abridged)

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