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Footwear will lose $100mil with EU’s decision
The Vietnam Leather and Footwear Association (Lefaso) is going to release a response to the EU’s decision to remove Vietnam-made footwear from the general system of preferences (GSP) today, June 16.
A source with Lefaso said that the response will come under the form of communiqué after it consulted with the Ministry of Industry and Trade and its members during the last two days. The source said that Lefaso believes that the EU’s decision is unfair to Vietnam’s footwear industry.
The European Commission mission in Hanoi announced the decision at a press briefing on June 13, saying that Vietnam will not enjoy the current GSP any more. EU Ambassador Sean Doyle said that Vietnam’s footwear industry has become very competitive.
Under GSP rules, any country whose exports account for 15% of the gross export revenues by GSP beneficiaries is considered to have reached a certain level of competitiveness and therefore does not need to be given preferential tariffs. However, the EU GSP regime foresees that sectors that meet the 15% threshold shall continue enjoying GSP benefits if they constitute at least 50% of all GSP imports originating from the country in question.
A representative of the EC mission explained Vietnam is in this category as its footwear exports made up 19.9% of the EU’s relevant gross imports from GSP beneficiary countries in the period of 2004-2006.
However, in the new category, Vietnam’s footwear exports to the EU will be imposed 5-10% in tax instead of the preferential tariffs of 3.5-5%, commencing on January 1, 2009.
The representative of Lefaso has warned that the new tax rates will make Vietnamese footwear enterprises lose over $100mil a year. More importantly, he said, the decision will have severe impacts on the lives of labourers in the footwear industry, mostly women and poor people.
Moreover, as Vietnam’s footwear industry is now enjoying 49.1% of the total GSP imports originating from Vietnam (statistics provided by the EU), lower than the stipulated ratio of 50%, Vietnam is eligible for the lower GSP rates.
According to Lefaso, in 2007, the EU remained the biggest consumption market for Vietnamese shoes, bringing in the turnover of $2.6bil, an increase of 33.9% over 2006.
Though it has the advantage of a cheap labour force, Vietnam’s productivity remains very low: profit is just 25% of the added value average. A 450-labourer chain can make 500,000 pairs a year, equal to 1/35 of the productivity of Japanese workers, 1/30 of Thai, 1/20 Malaysian and 1/10 Indonesian workers.
At the end of 2007, Vietnam’s footwear industry had 600,000 labourers, 80% of whom were women.
VNN
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