Vietnam Import Monitoring Creates Dispute

Retailers and other importers of textiles and apparel have sharply criticized the US Department
of Commerce’s (DOC’s) program to monitor imports as having a chilling effect on trade, while
textile manufacturers say it can provide a meaningful way to deal with subsidized imports that
disrupt the market.

At a hearing conducted by the DOC, battle lines were sharply drawn as the government moves
forward with its commitment to monitor textile and apparel trade and self-initiate anti-dumping
cases if it is determined that imports are undercutting US production of similar products by
selling them at prices below the cost of production.

The Washington-based National Council of Textile Organizations (NCTO) said it is highly
supportive of the program. Testifying on behalf of NCTO, Vice President Mike Hubbard said: We
believe the new program can provide a meaningful remedy to address subsidized apparel imports from
Vietnam that result in prices that are often below the cost of production. He said since Vietnam is
a non-market economy with state-owned production enterprises, it can rapidly increase its
production of apparel and offer it “at prices clearly aimed at market domination.”

Hubbard said information gained during the discussion of Vietnam’s accession to the World Trade
Organization showed that Vietnam subsidizes its textile and apparel sector in a number of ways,
including export subsidies, wage controls, preferential interest rates and tax refunds. “The most
startling example of this investment largesse,” Hubbard said, is $891 million invested in Vinatex,
which is world’s 10th-largest apparel producer and wholly-owned by the Vietnamese government.
Hubbard said the Vietnam government plans to invest another $1 billion in the company from 2006 to
2010. The textile lobbying association said it is highly unlikely, if not impossible, that Vietnam
could shift from such a centrally controlled and managed company to a market-based system in a
relatively short time. Hubbard concluded by saying because of Vietnam’s past record, “we believe
there is a distinct possibility that dumping will occur,” and the monitoring program is the best
way to address that problem.

On the other hand, Eric Autor, vice president and international trade council for the National
Retail Federation, Washington, said that even though the monitoring is just getting underway and
has shown no results, US retailers have sharply curtailed their orders for apparel from

“Implementation of the monitoring program has had a chilling effect on apparel sourcing from
Vietnam,” Autor said. “Pending orders from Vietnam have plummeted. At least one prominent retailer
has ceased all orders from Vietnam, another has cut its orders by 80 percent, and many others have
cut their orders substantially. “

Autor said trade remedy investigations inject a high degree of unpredictability into sourcing
decisions and that the mere threat that an anti-dumping investigation could be undertaken on a wide
range of apparel products is “a serious matter and one which is forcing apparel retailers to shift
their sourcing elsewhere.” He urged the Commerce Department to narrow the scope of its monitoring
program to only those products made in the United States where there is clear evidence that imports
from Vietnam are causing injury.

The Arlington, Va.-based American Apparel and Footwear Association (AAFA) urged the DOC to
refrain from initiating anti-dumping actions against Vietnam unless the action is “warranted by a
specific set of facts and supported by US apparel manufacturers.” AAFA’s Executive Vice President
Stephen Lamar said the DOC should make it clear that self-initiation of anti-dumping investigations
would occur only if the department determines there is a dumping of a particular product, US
domestic production of that same product is being harmed by that dumping, and US domestic producers
of the same product support the initiation of an investigation.

Lamar said a monitoring website established by the DOC to track Vietnamese trade is “confusing”
in that it lists categories of products being monitored “without any context, discussion or

With respect to the program itself, Lamar said: “We believe there is little support or interest
in this monitoring program among domestic apparel producers because much of what is produced
domestically does not compete against Vietnamese imports.”

May/June 2007