Dive Brief:
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Apparel and other manufacturing for U.S. companies is nothing new in Vietnam, but the Transpacific Partnership (TPP) trade agreement, if it goes through, could foster even more manufacturing growth there as tariffs would gradually get zeroed out, the Wall Street Journal reports.
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Apparel manufacturing is already growing there as more factories opt for a workforce that is younger and can be paid half of what companies now find in China.
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The Vietnamese government says the trade agreement could add $33.5 billion to its economy over 10 years, and that apparel exports could grow 46% to $165 billion during that time.
Dive Insight:
“Made in Vietnam” is already commonplace in tags of clothing and footwear, but it could become ubiquitous if the TPP is ratified by the participating countries.
Not only does Vietnam offer a younger, cheaper workforce than China, but, without China as part of the pact, the TPP would give Vietnam that much more of an edge.
Of course, if China’s economy continues to stall—its whopping 6.9% Q3 growth is actually a major slowdown—and wages are diminished as manufacturing shifts to places like Vietnam, retailers could find themselves with another problem: a retail funk.
After all, China’s growing, somewhat wealthy urban middle class has been a healthy consumer base for many brands.
“What took 30 years in China is taking 10 years in Vietnam to happen,” Frank Smigelski, VP at clothing label-maker Avery Dennison Corp., told the Wall Street Journal. “More and more companies are making bets on Vietnam.”