Textile, garment exports to EU face new challenges

New pressure

Textiles and garments are key Vietnamese export products with impressive growth. Since late 2022, however, this sector has faced numerous challenges due to a decrease in importer demand, especially from the EU market.

At a recent Vietnam-EU Trade Forum jointly held by the Ministry of Industry and Trade and the Ho Chi Minh City People’s Committee in the framework of Vietnam International Sourcing 2023, a series of events aimed at connecting international supply chains, Vu Duc Giang, President of the Vietnam Textile and Apparel Association (VITAS), said that in 2023, Vietnamese textile and garment exporters face a lot of difficulties due to inflation and political instability leading to a decline in consumer spending in countries which are Vietnam’s major export markets, including the EU.

Textile and garment production is required to meet new criteria

According to Vu Duc Giang, in the first seven months of 2023, Vietnam exported US$2.3 billion worth of textiles and garments to the EU, down 9.6 percent compared with the same period last year. Exports dropped more strongly and reached merely US$330 million in August, a year-on-year decrease of 17 percent, and are forecast to keep plunging in September. Notably, orders from major brands such as Decathlon, Nike, and Adidas all decreased in the first eight months.

Explaining the decline in orders, Vu Duc Giang said that apart from inflation and political instability leading to a decline in consumer spending, Vietnamese textile and garment companies are also facing “green” requirements.

Specifically, the EU-Vietnam Free Trade Agreement (EVFTA)’s commitments on green consumption and recycling require domestic manufacturers to meet new criteria in production.

Dang Quoc Thang, Woven Process Director at Decathlon Vietnam, forecast that the situation will remain difficult throughout 2024. However, he believes difficulties will urge businesses to change and find new ways to go.

Green products attract orders

During the past two years, major brands in the world have required textile and garment suppliers to apply new criteria to production. Dang Quoc Thang said that Decathlon’s policy is refusing to buy products of factories using coal in production. Therefore, to join Decathlon’s supply chain, businesses should set a clear roadmap to phase out fossil fuels and stop using them after 2025. “We want to seek reliable manufacturers with high self-sufficiency. When choosing suppliers, Decathlon will prioritize companies which are responsible to their employees, the community and the environment, offer competitive prices and ensure quick delivery and product quality,” Thang said.

Decathlon’s requirements are also the demand of other brands in the world. Therefore, VITAS warned Vietnamese textile and garment exporters to the EU that apart from competitive prices, stable quality and quick delivery, they should pay greater attention to “green” factors to attract orders.

According to VITAS, Tan De Sportswear Manufacturing Joint Stock Company, Viet Tien Garment Corporation, and Garment 10 Corporation have invested in production according to the requirements of foreign brand owners. Notably, Tan De Sportswear Manufacturing Joint Stock Company’s factory in Thai Binh Province has transformed production to meet global green standards. However, most Vietnamese textile and garment companies are small to medium in size and green transformation is a challenge for them.

Vu Duc Giang said that VITAS will continue connecting domestic companies with foreign brand owners and the Government; coordinate with reputable international organizations to develop programs in the fields of labor, green energy, recycling, digital transformation, brand building, human resource management; organize trade promotion delegations, and create opportunities for domestic companies to learn from others’ experience and seek customers.

“We also encourage domestic companies to invest in infrastructure to create a safe, green and clean environment for production as required by foreign brand owners,” Vu Duc Giang emphasized.