Trans Pacific Partnership

Seven Myths about Vietnam and Fabric Production:

How One Industrial Reality Proves Them All WRONG

Dr. Claudia AnselmiDirector of Sales & Operations, Hung Yen K&D – Carvico Group

March 6th 2013, Singapore

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Hung Yen Knitting & Dyeing Co.:

a Vietnamese Company

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Hung Yen is a leading Vietnamese company invested by Carvico (Italy).

Hun Yen produces world class warp knit fabric for swim and active wear.

� Initial investment of $40 Million USD by Carvico.

� 90% of fabrics go into garments for the U.S. market.

� ALL managers are Vietnamese, except for two Italian

directors.

� All workers are Vietnamese. Hung Yen represents

Vietnam’s future in a higher value chain segment of

the textiles business.

MYTH #1: Vietnam and other TPP countries don’t produce enough

HIGH QUALITY FABRIC to meet customer demand

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REALITY:

� Hung Yen and other Vietnamese companies produce world-

class fabric with Vietnamese materials.

TPP will stimulate further investment, industrial development and greater

output of high quality fabric in Vietnam. Give us the predictability and

preferential margins of TPP origin and you will not be disappointed.

Vietnam and Hung Yen / CARVICO is ready.

MYTH #2: Vietnam and other TPP Countries don’t have sufficient

capacity to produce the necessary QUANTITY of yarn and fabric in basic

products

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REALITY:

� Hung Yen and other Vietnamese companies have huge

potential to expand production of warp knit fabric (including

high chlorine resistant, nylon spandex, poly spandex).

� Malaysia, Mexico, Singapore and Vietnam have large yarn

capacity (i.e., nylon, polyester, cotton, denim) that could further

expand under TPP.

2010 2011 2012 2013 20150

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

30.000.000

HungYen capacity warp-knit fabric

MYTH #3: It will take TOO MUCH TIME for Vietnam to build fabric

and yarn infrastructure

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REALITY:

� Carvico’s Hung Yen investment in Vietnam took 9 monthsfrom the time they broke ground to full operations.

� Hung Yen and many other Vietnamese companies are already

operating and ready to expand.

Make TPP’s margins of preferences predictable and

investments will come.

That is the very reason why Vietnam has decided to join TPP.

MYTH #4: If Vietnam and other TPP Countries can’t use yarn and

fabric from CHINA, customers will migrate to Cambodia and Bangladesh,

which are likely to receive duty free-treatment from the U.S.

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REALITY:

� GSP preferences for countries such as Cambodia and Bangladesh

cannot be compared to stable TPP preferences and rules of origin.

� Cambodia’s and Bangladesh’s (current and future) industrial

reality in the sector of warp knit fabric cannot compare to

Vietnam’s offerings today.

Make TPP preferences worthwhile for TPP countries and

you

will see that TRADE WILL NOT BE DIVERTED.

MYTH #5: Allowing use of CHINA YARN and FABRIC in TPP

qualifying garments made in Vietnam will not harm Vietnam’s textile and

garment sector.

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REALITY:

� Massive subsidies are provided by China to its

fiber producers, distorting international trade

and creating risk if governments launch trade

investigations (i.e., costs, trade disruptions,

uncertainties, etc).

� Use of CHINA YARN and FABRIC in TPP

qualifying garments made in Vietnam will

HARM Vietnam’s textile and garment sector and

PREVENT its sustainable development into the

higher level of the value chain.

� Use of CHINA YARN and FABRIC in TPP qualifying garments will also harm, in the

medium/long term the very architecture of the TPP, which must not only cater to

traders’ margins, but also to sustainable industrial development, job creation and

the fight against unfair trading practices.

MYTH #6: A large “short supply list” is critical to the success of

Vietnam in the future

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REALITY:

� “Short supply” is slow, complicated, inflexible. Good for

lawyers. Bad for decision-making and flexibility.

� “Short supply” cannot become the “Trojan horse” to circumvent

the disciplines of the TPP and to benefit non-TPP countries to

the detriment of producers in TPP countries.

� With respect to warp knit fabric, Hung Yen could live with the

yarn forward rule of origin, but there is no need for a “short

supply list”. There is no short supply of warp knit fabric.

If “short supply lists” are necessary compromises in relation to other products,

then they must remain the exception to the “yarn forward” rule and must be

based on verifiable quantitative parameters. They must also be defined so

that quantitative a “carve out” may not jeopardize TPP countries’ interests.

MYTH #7: China’s advantage is because of “comparative

advantage”

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REALITY:

� This is WRONG and even kids know it: China is competitive

primarily because it subsidizes its production, engages in

systematic dumping and applies other unfair trading practices.

� The advocates of the China Fabric and Yarn for TPP rule simply

want to benefit from China’s WTO illegal subsidies and dumping

practices.

� This has already caused great distortion within the multilateral

trading system and it is difficult and costly to address through

domestic trade defense mechanisms and WTO rules.

Please do not expose TPP to similar distortions.

Tailor TPP to give benefits to TPP producers, NOT to non-TPP countries.

We only ask to be able to produce and grow our business within TPP without

having to worry about the unfair competition of countries like China.

CONCLUSION:

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� Hung Yen / CARVICO is ready to continue investing, producing, expanding

and employing in Vietnam. Our sector (warp knit fabric) can meet all the

challenges in terms of quality and quantity outputs resulting from TPP.

� The “yarn forward” rule of origin is acceptable and will assist TPP countries

like Vietnam to develop its textile industry in a sustainable manner and

along the entire value chain.

� There will be no “short supply” of warp knit fabric, both in quantitative and

qualitative terms, if the “yarn forward” rule is adopted for textile products.

� Therefore, warp knit fabric must not fall within a “short supply list”, if this

instrument is deemed necessary to broker a TPP deal in the textile sector.

� The TPP must first and foremost cater to the interest of TPP-based

producers. It should not serve the interests of competing countries like

China, Cambodia, and Bangladesh.

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THANK YOU FOR YOUR ATTENTION

HUNG YEN KNITTING & DYEING CO. LTD.

Pho Noi B Textile Garment Industrial Park

Nghia Hiep commune, Yen My District, Hung Yen Province – Vietnam

Tel: +84 321 6273 142

E-mail: claudia@hungyen-kd.com