The delegation of European Commission (DEC) has told a press briefing in Hanoi that the European Union will remove Vietnam’s footwear sector from its Generalized System of Preferences for exports to the bloc from January 1, 2009 after deciding that the industry has become one of the most competitive in the world.
GSP was set up in 1971, providing developing countries with unilateral tariff preferences and a duty free quota regime.
According to the DEC in Vietnam, if GSP-covered import from one country represent 15 per cent of all imports into the E.U. from all GSP beneficiaries, that country’s sector is competitive enough not to need preferential treatment.
In order to encourage diversification and not penalize over-dependence, the E.U. foresees that sectors that meet the 15 per cent threshold shall continue enjoying GSP benefits if they constitute at least 50 per cent of all GSP imports originating from the country in question.
Vietnam’s GSP-covered exports of shoes represent an average of 19 per cent of all E.U. GSP shoe imports during 2004-2006. Furthermore, GSP-covered footwear represents an average of 49.1 per cent of Vietnam’s GSP-covered exports, said DEC Ambassador to Vietnam Sean Doyle.
Doyle added Vietnam’s footwear is one of the most competitive globally and the nation is no longer over-dependent on footwear exports. As a result, Vietnam’s footwear is to be graduated out of GSP for this sector only.
The Vietnamese footwear industry shows signs of strength with some 20 per cent of shoes exported to the E.U. not even claiming GSP benefits. This suggests that a growing number of shoe exporters are able to sell at competitive prices in the E.U. market without any privileges but rather leveraging on other vectors such as quality and branding, he said.
The number of laborers in Vietnam’s footwear industry has doubled over the past three years. This means that the industry is strongly developing. There is no reason that the industry will continue benefiting from GSP.
He said the E.U. remains willing to offer Vietnam a generous, long-term tariff regime for all sectors, including footwear, in the framework of the EU-ASEAN free trade agreement talks.
The E.C. said it would continue supporting Vietnam’s efforts to increase international trade competitiveness and trade performance via official development assistance.
Meanwhile, Dinh Van Hoi, deputy director of the Europe Department of the Trade and Industry Ministry, said it is very difficult to change the EU’s ruling on the treatment and some Vietnamese footwear businesses will have a hard time ahead.
A Vietnam trade official said the GSP would be changed to Most Favored Nations status, meaning the tariffs would be raised to about 5 to 10 per cent from 3 to 5 per cent.
Leading sports shoe makers Adidas and Nike, which both have factories in Vietnam, have opposed the E.U. move, saying it would damage the industry on top of anti-dumping duties imposed on leather shoes from Vietnam and China in 2006.
At present, Vietnam’s footwear industry, the country’s third largest forex earner behind crude oil and garment, employing half a million workers, 80 per cent of them are women.
Ninety percent of its footwear production is exported, with the E.U. the largest market – it earned EUR1.7 billion in export turnover in 2007. (Vietnam Investment Review, Investment)
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