US and Vietnamese negotiators are expected again meeting by the end of the month or the beginning of April 2003 in order to discuss future US textile quotas.

According to various sources, US top textile negotiator David Spooner proposed relatively low limits during the first round of negotiations which was held in Hanoi by the end of February.

The selected period for calculating US limits includes one or several months before US tariffs were sharply reduced therefore boosting shipments from Vietnam, four US trade associations last week revealed.

It also excludes US import data after November 2002 although shipments from Vietnam continued booming since December through the beginning of the year.

Sixth largest supplier

In January, Vietnam was already sixth largest apparel supplier in volume terms on the US market before Indonesia, India, the Philippines or El Salvador.

Thanks to the boom in shipments to the US, total apparel exports were up 36% last year to US$2.75 billion. They rose 69% in January at US$250 million.

If sales are surging, profits are falling after polyester prices sharply rose in the past two months.

If effectively implemented, US offer would result in dramatically lowering future imports from Vietnam. "The 2002 trade is not indicative of the orders already placed in Vietnam for 2003," US importers argued in a letter sent to US top trade negotiators.
The surge in apparel imports from Vietnam does not harm US textile and apparel producers, the four associations added. For its part, US textile industry urged the Bush administration in rapidly imposing quotas.

According to importers, however, shipments are diverted from other Asian countries to the benefit of Vietnam. As a result, the US administration would try protecting interests of those low-cost countries currently threatened by surging competition from China and Vietnam.

Waiting for Vietnam's proposal

Washington is actually waiting for a counter-proposal from Hanoi in order to reach a compromise. Vietnamese negotiators obviously try delaying the end of negotiations in order to save time and to force the United States in accepting higher quotas.

They also would like avoiding US limits on highly sensitive categories such as cotton trousers (including jeans) or cotton knit shirts (including T-shirts).

Since Vietnam is not a WTO member, Washington is allowed imposing limits on all categories, including products which were already "integrated" under the WTO's Agreement on Textiles and Clothing.

Vietnam would therefore be imposed quotas on bras or knitted fabrics, for instance, while shipments from China are already free of any US limits.

More important, US quotas could still be imposed on shipments from Vietnam after 2004 while US limits will be removed on imports from all WTO members.

Slow WTO accession process

Hanoi is currently negotiating Vietnam's accession to the WTO but the process is known as very slow and could take some additional years.

In the short term, Vietnamese negotiators could offer concessions in exchange for higher US limits, however. They could accept reducing import tariffs on various products and easing foreign investments in various sectors.

A similar agreement was concluded with the European Union on 15 February. In exchange for an averaged 25% rise in EU's quotas, effective from May, Vietnam accepted reducing import tariffs on textiles and clothing and facilitating imports and investment for a large series of other products.