Golden Victory Vietnam Co., Ltd., a foreign-invested enterprise with a factory in the northern province of Nam Dinh, in November 2021 put a solar power system with a capacity of four million kWh per year into operation, with the desire to meet Nike’s criteria for greening production. Nike has committed to reducing greenhouse gas emissions by 65 per cent at its own locations and by 30 per cent across its supply chain by 2030.

“The number of orders from the US is very large, but only qualified businesses can meet the requirements of social responsibility and for other quality certificates,” said Phan Thi Thanh Xuan, general secretary of the Vietnam Leather, Footwear and Handbag Association (Lefaso).

As soon as Vietnam reopened production, leather and footwear enterprises “received many orders from the US market through the US -Vietnam Trade Council. Customers placed orders directly, moving away from other countries,” Xuan said.

Economic indicators and consumption are recovering strongly in the US, helping Vietnam maintain its position as the second-largest leather and footwear exporter to the market since 2012, after China. Footwear exports to the US in the first 10 months of 2021 reached $5.98 billion, accounting for 42 per cent of Vietnam’s export turnover in this group, up 18.2 per cent over the same period in 2020.

In 2020, Vietnam sold 453 million pairs of footwear to the US. Vietnam could sell more in 2022 when the average American consumes more than six pairs of shoes a year. But what worries Lefaso is that Vietnamese businesses “still have to work with large brands to appear in the market.”

Vietnam’s supply of leather and footwear to the US market comes mainly in the form of processing orders and importing them back to the US. According to Lefaso, high labour costs in the US are the main driver of this as companies there could not compete with imported goods. Currently, the US only has about 250-300 manufacturing companies with about 12,000 workers, but domestic production only meets a mere 1.5 per cent of consumer demand.

A study by the US-Vietnam Trade Council showed that a common feature of local manufacturers is that they act as outsourcing processors, as they are unable to design their own models. Thus, despite the efforts to promote their own products, local manufacturers had been unable to attract the attention of buyers.

Further, major brands such as Nike, Reebok, and Bata focus only on design development and sales, so they need to find production partners. This makes it suitable for domestic enterprises that can meet buyers’ orders, according to set design models, without having to rely on the source of raw materials.

American partners understand very well the strengths of the Vietnamese leather and footwear industry. They still import goods from Vietnam but often through foreign intermediary companies because they do not believe in the domestic enterprises’ ability to organise production and manage quality efficiently.

The US is the world’s largest footwear importer, accounting for 40 per cent of global footwear imports. Data from Lefaso recognised great competitive pressure for footwear exporters to the US, especially since Vietnam has not yet enjoyed preferential tax rates that are given to some developing countries. Vietnam also does not have a free trade agreement with the US.

Dao Trong Khoa, general director of T&M Forwarding Co., Ltd. also noted, “Trade with the US is facing many obstacles related to shipping and supply chain disruption. The long-distance and no direct shipping routes between the two countries render the costs from Vietnam to the US about 15-20 per cent higher than from China. It takes about 30-45 days for ships to travel from Vietnam to the West Coast of the US compared to 12-18 days from China,” Khoa explained.

The challenges are great, but leather and footwear could benefit from the positive achievements in the bilateral relationship when the trade turnover between the two countries reached $100 billion by the end of 2021.

Nguyen Thang Vuong from the European-American Markets Department under the Ministry of Industry and Trade said in November that President Joe Biden has a selective succession policy in applying pressure to partners in negotiations, thus “Vietnam needs to take careful steps forward.”

According to Vuong, there is a discrepancy between Vietnam and the US when it comes to the requirements and the ability to meet them. “In the process of negotiating agreements, the US always considers Vietnam a trading partner that is benefiting from global uncertainties. Therefore, it is necessary to carefully calculate and balance the trade of both countries,” Vuong said.

Source: VIR