Order Code RL34262
U.S. Clothing Imports from Vietnam:
Trade Policies and Performance
November 27, 2007
Michael F. Martin
Analyst in Asian Trade and Finance
Foreign Affairs, Defense, and Trade Division

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U.S. Clothing Imports from Vietnam:
Trade Policies and Performance
Summary
U.S. clothing imports from Vietnam grew from virtually nothing in 2000 to $3.2
billion in 2006. Vietnam was the 5th largest source of clothing imports for the United
States in 2006, behind (in order) China, Mexico, Indonesia, and India.
Much of that growth was the result of the gradual liberalization of U.S. trade
policy towards Vietnam. Although the United States terminated its trade embargo
on Vietnam in 1994, trade initially remained low because Vietnam did not have
“normal trade relations” (NTR) status. The signing of a bilateral trade agreement in
July 2000 allowed President Clinton to grant Vietnam temporary NTR status in
December 2001, leading to a sharp increase in U.S. imports from Vietnam, including
clothing. The rise in Vietnamese clothing imports led to the United States to push
Vietnam into a bilateral textile agreement in 2003 that set quantity quotas on the
import of selected clothing items. The bilateral textile agreement remained in effect
until the United States granted Vietnam permanent NTR status on December 20,
2006, as part of its accession into the World Trade Organization (WTO).
The liberalization of U.S. trade policy towards Vietnam raised concerns about
possible dumping by Vietnamese clothing exporters. Some members of Congress
and U.S. clothing and textiles companies argued that a surge in Vietnamese imports
may harm the U.S. clothing and textile industry. In part to secure Senate passage of
permanent NTR status for Vietnam, the Bush Administration agreed to establish a
“monitoring program” for selected clothing imports from Vietnam. From its
inception, there have been questions about the legality and effectiveness of the
monitoring program.
On October 26, 2007, the Department of Commerce (DOC) announced the
completion of its first six-month review of the monitoring data, finding that there was
insufficient evidence to warrant the self-initiation of an antidumping investigation.
The DOC also announced it would continue the monitoring program and plans on
conducting its second six-month review in March 2008.
There are a number of actions that Congress might take with regards to U.S.
trade policy towards Vietnam and the import of clothing from Vietnam. First,
Congress could revisit the question of the DOC’s legal authority to establish the
monitoring program. Second, Congress could also examine the issue of the
compatibility of the monitoring program with existing WTO agreements and
commitments. Third, Congress could investigate Vietnam’s compliance with its
promise to terminate all WTO-prohibited subsidies. Fourth, Congress could enact
legislation designed to counteract perceived unfair Vietnamese trade practices. Fifth,
Congress could examine the design and conduct of the monitoring program to
ascertain if it provides a reasonable basis for determining the need for an
antidumping investigation. Sixth, Congress could examine claims that the
monitoring program has adversely affected trade with and investments in Vietnam.
Seventh, Congress could allow the current trade policies to continue. This report will
be updated as circumstances warrant.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Summary of U.S.-Vietnamese Clothing Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Vietnam-U.S. Textile Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Vietnam’s WTO Accession and Permanent NTR Status . . . . . . . . . . . . . . . . 9
Monitoring Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Congressional Comments on the Proposed Monitoring Program . . . . 11
Criticism from U.S. and Korean Business Communities . . . . . . . . . . 12
Support from the U.S. Business Community . . . . . . . . . . . . . . . . . . . . 15
Comments from the Vietnamese Government and Companies . . . . . . 16
Commerce Decision to Proceed with the Monitoring Program . . . . . . 18
Commerce Department’s Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
The Structure of Vietnam’s Clothing Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Issues of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Types of Ownership Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Role of Vinatex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Level of Subsidization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Decision 55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Below Market Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Global Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Triangle Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Growth in Vietnam’s Clothing Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Overall Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Major Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Vietnam’s Role in the U.S. Clothing Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Overall Market Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Top Clothing Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Recent Trends in U.S. Clothing Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Implications for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
List of Figures
Figure 1. U.S. Imports from Vietnam, 1990-2006 . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 2. U.S. Clothing Imports from Top Suppliers, 2001-2006 . . . . . . . . . . . 32
Figure 3. Gross Output of U.S. Clothing Industry and U.S. Imports of Clothing from
Vietnam, 1995-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

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List of Tables
Table 1. Year-on-Year Increase in Monitored Clothing Imports from Vietnam . . 3
Table 2. Quota Utilization Rate for Clothing Imported from Vietnam,
2003-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table 3. Types of Vietnamese Clothing Establishments, 1998 . . . . . . . . . . . . . . 21
Table 4. Distribution of Real Output of Vietnam’s Clothing Industry,
Base Year 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table 5. The Clothing Commodity Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table 6. Vietnam’s Textile and Clothing Exports as a Share of Total Exports . . 30
Table 7. Vietnam’s Major Clothing Export Markets . . . . . . . . . . . . . . . . . . . . . . 31
Table 8. Leading U.S. Clothing Imports from Vietnam by Share of Total
Imports by Category, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

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U.S. Clothing Imports from Vietnam:
Trade Policies and Performance
Introduction
In the relatively short period of time since the United States resumed “normal
trade relations”(NTR) with Vietnam in 2001, there have been several controversies
regarding the importation of clothing from Vietnam into the United States.1 The
controversies surrounding U.S. clothing imports from Vietnam include allegations
of dumping, illegal transshipments, violations of the World Trade Organization
(WTO) agreements, and a controversial import monitoring program. In addition,
U.S. trade policy governing the import of Vietnamese clothing has changed course
several times, leading to claims of significant market disruption and regulatory
uncertainty. These claims are bolstered by the volatility of U.S. import data for
Vietnamese clothing over the last seven years.
There have been several shifts in U.S. trade policy with Vietnam since it was
first granted NTR status in 2001 that have possibly affected U.S. clothing imports
from Vietnam. A bilateral trade agreement concluded on July 13, 2000, significantly
lowered tariff rates on clothing imported from Vietnam. A bilateral textile agreement
that ran from May 1, 2003, until January 11, 2007, imposed quantity quotas on the
import of certain categories of clothing imported from Vietnam. Also, as part of its
accession into the WTO, Vietnam entered into an agreement with the United States
that, among other provisions, requires that Vietnam terminate various non-WTO
compliant subsidy programs for its clothing and textiles industries. Finally, on
December 8, 2006, Congress passed legislation granting Vietnam permanent NTR
status as of December 29, 2006.
Much of the recent contention about Vietnamese clothing exports to the United
States has focused on the U.S. Department of Commerce’s (DOC) implementation
of an “import monitoring program” for selected categories of Vietnamese clothing
on the day Vietnam joined the WTO — January 11, 2007. The announced import
monitoring program began on the same day Vietnam joined the WTO and is to expire
with the end of the Bush Administration on January 19, 2008.2 Under the program,
the DOC will collect monthly data on the quantity and unit values of five categories
of clothing imported from Vietnam — shirts, sweaters, swimwear, trousers, and
underwear — to determine if there is sufficient evidence to warrant the self-initiation
of an anti-dumping investigation.
1 For purposes of this report, clothing will include products imported under chapters 61 and
62 of the U.S. Harmonized Tariff Schedule (HTS). As such, it excludes textiles, headgear
and footwear.
2 “Textile and Apparel Products from Vietnam: Import Monitoring Program; Request for
Comments,” International Trade Administration, U.S. Department of Commerce, Federal
Register, Volume 71, Number 232, December 4, 2006.

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CRS-2
While acknowledging that the program would have “an impact on a broad array
of parties,”3 the DOC maintained that the monitoring of some Vietnamese clothing
imports “is not meant to inhibit legitimate trade.”4 Supporters of the program —
principally U.S. textile manufacturers — maintain that the monitoring is necessary
because the Vietnamese government is “illegally” subsidizing its clothing industry
and that Vietnamese exporters are dumping their products in the United States.5
According to the program’s backers, the data being collected by the monitoring
program will provide the necessary evidence to initiate an anti-dumping action
against Vietnamese clothing exports. Opponents of the program — a mixture of
clothing manufacturers, retailers and importers — believe that the collection of the
data violates various provisions of the WTO agreement, runs counter to past anti-
dumping practices, and has already had a negative effect on Vietnam’s exports to the
United States.
Interest in the monitoring program was heightened by expectations of the
DOC’s first formal review of the Vietnamese clothing imports being monitored.
According to the Federal Register announcement of the program, the DOC “intends
to conduct its formal evaluations of the information gathered under the monitoring
program on a biannual basis.”6 The DOC has also indicated that the categories of
products covered by the monitoring program (shirts, sweaters, swimwear, trousers,
and underwear) are not “static,” and may be changed “in response to input received
from interested parties, changes in the trade, or as the Department [of Commerce]
broadens its understanding of the composition and structure of the domestic textile
and apparel industry.”
Trade statistics for the first six months of 2007 provide some support to both
supporters and opponents of the monitoring program (see Table 1). U.S. imports of
sweaters made in Vietnam from January to June 2007 increased by over 85% when
compared to the same period last year.. Meanwhile, the volume of shirts and trousers
imported from Vietnam — the two largest imported categories being monitored in
the DOC program — during the first six months of 2007 rose by 28.1% and 25.8%
respectively, when compared the first half of 2006. However, the amount of
swimwear imported by the United States from Vietnam from January to June 2007
was virtually unchanged from a year ago, and the amount of underwear imported
declined by over 20% when compared to last year.
3 Opening remarks by David M. Spooner, Assistant Secretary for Import Administration,
U.S. Department of Commerce at a public hearing on the Vietnam Textile and Apparel
Import Monitoring Program held on April 24, 2007, in Washington, DC.
4 “Textile and Apparel Products from Vietnam: Import Monitoring Program; Request for
Comments,” International Trade Administration, U.S. Department of Commerce, Federal
Register, Volume 72, Number 14, January 23, 2007.
5 The United States generally responds to subsidies that violate WTO agreements by the
imposition of countervailing duties, not anti-dumping measures. Anti-dumping measures are
utilized when imported products are being sold in the United States at below fair market
value and cause demonstrable harm to U.S. manufacturers of similar products.
6 “Textile and Apparel Products from Vietnam: Import Monitoring Program; Request for
Comments,” International Trade Administration, U.S. Department of Commerce, Federal
Register, Volume 72, Number 14, January 23, 2007.

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Table 1. Year-on-Year Increase in Monitored Clothing Imports
from Vietnam
(in dozens)
Clothing
Percentage
January - June 2006
January - June 2007
Category
Change
Shirts
13,669,138
17,506,785
28.1%
Sweaters
14,803
27,399
85.1%
Swimwear
660,628
661,362
0.1%
Trousers
7,551,943
9,501,229
25.8%
Underwear
1,208,117
962,012
-20.4%
Source: Office of Textiles and Apparel, International Trade Administration, U.S. Department of
Commerce.
However, evaluating the growth in clothing imports from Vietnam using year-
on-year data may be potentially misleading for various reasons. First, under the
terms of the U.S.-Vietnam bilateral textile agreement, the United States was
permitted to set quotas on the volume of clothing imported from Vietnam in the years
2003 to 2006. As a result, the import figures for the last four years may have been
kept artificially low, and the ensuing growth in 2007 artificially enhanced. Second,
the international trade in clothing is comparatively seasonal, so comparisons based
on data from only part of a year may be biased. Third, because there is an
approximately six month lead time in the contracting of clothing, the trade volumes
for January to June 2007 supposedly reflect arrangements made prior to the
announcement of the monitoring program, and therefore will not reflect the alleged
negative impact the monitoring program has had on Vietnam’s clothing exports to
the United States.
On October 26, 2007, the DOC issued a press release stating that it had
concluded its first review of Vietnamese clothing imports and determined that “There
is insufficient evidence to warrant self-initiating an anti-dumping investigation.”7
According to the press release, there were no imports from Vietnam for 317 of the
486 clothing items being monitored, and that unit prices had increased for many of
the items where there had been imports from Vietnam. Comparisons of imports from
Vietnam to imports from other nations also failed to provide sufficient evidence to
warrant self-initiating an anti-dumping investigation. Assistant Secretary for Import
Administration David Spooner indicated that, despite the lack of evidence of
dumping, “The Department will continue to monitor apparel imports from Vietnam
7 “Commerce Completes First Review of Vietnam Import Data,” press release, U.S.
Department of Commerce, October 26, 2007.

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CRS-4
until the end of the Administration and work with all stakeholders to ensure an open
and transparent monitoring process.”8
While there was no requirement that the DOC take any action following the first
evaluation of the trade data, the program’s continuation arguably will keep the
monitoring program an issue of concern for the U.S. clothing manufacturers, the U.S.
textile industry, major clothing importers, and large retail outlets in the United States.
Among the possible Administration actions that could have been taken were the self-
initiation of an anti-dumping investigation on select clothing imports from Vietnam,
the opening of negotiations for a new bilateral textile agreement, and/or the
termination of the monitoring program. For the next six months, it appears that the
Administration has decided to take none of these options, but it will continue to
monitor clothing imports from Vietnam.
Summary of U.S.-Vietnamese Clothing Trade
The recent conduct of clothing trade between the United States and Vietnam has
been relatively short in duration, but varied in practice. After President Clinton
terminated a U.S. trade embargo against Vietnam on February 3, 1994, trade between
the United States and Vietnam grew rather slowly, in part because of the non-
preferential treatment Vietnam received under U.S. trade laws. Vietnam was not a
member of the World Trade Organization (WTO) so it was not eligible for “normal
trade relations” (NTR) status via that mechanism.9 Also, under U.S. law, Vietnam
could only be granted permanent NTR status by the passage of legislation, or granted
temporary NTR status by the conclusion of a bilateral trade agreement and
compliance with the “freedom of emigration” requirements of the Jackson-Vanik
amendment.10
Lacking NTR status, Vietnam’s exports to the United States were subject to
higher tariff rates than products from almost all other nations. For clothing imports,
products from Vietnam faced tariff rates two to nine times higher than goods
imported from countries with NTR status.11 As a result, while U.S. imports from
Vietnam steadily increased from virtually nothing in 1993 to just over $1 billion in
2001, U.S. clothing imports from Vietnam rose from zero to only $48 million over
the same period (see Figure 1).
8 Ibid.
9 Under the terms of WTO membership, any WTO member must grant NTR status to all
other WTO members.
10 For more information on NTR status for non-market economies, see CRS Report
RS22398, The Jackson-Vanik Amendment and Candidate Countries for WTO Accession:
Issues for Congress, by William H. Cooper.
11 For a more detailed discussion of the different tariff rates for NTR and non-NTR imported
clothing products, see CRS Report RL31470, The Vietnam-U.S. Textile Agreement, by Mark
Manyin and Amanda Douglas.

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CRS-5
The U.S.-Vietnam Bilateral Trade Agreement
After nearly five years of negotiations, the United States and Vietnam concluded
a bilateral trade agreement on July 13, 2000 — the first of two steps for Vietnam to
receive temporary NTR status.12 President Clinton exercised the authority granted
to him under the Trade Act of 1974 (P.L. 93-618) to waive the Jackson-Vanik
amendment. Enabling legislation in the U.S. Congress and Vietnam’s National
Assembly were subsequently passed, formally extending temporary “normal trade
relations” (NTR) status to Vietnam as of December 10, 2001
Having secured temporary NTR status, Vietnam’s exports to the United States
accelerated, rising from just over $1 billion in 2001 to $4.6 billion in 2003 (see
Figure 1). One of the main beneficiaries of Vietnam’s temporary NTR status was
its clothing industry, which saw its exports to the United States jump from $48
million in 2001 to $876 million in 2002 and $2.3 billion in 2003. By 2003, clothing
was 51.3% of Vietnam’s total exports to the United States.
Figure 1. U.S. Imports from Vietnam, 1990-2006
(in U.S. $ millions)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
0
2
94
5
96
7
99
01
2
4
06
199 1991 199 1993 19
199 19
199 1998 19
2000 20
200 2003 200 2005 20
Total Imports
Clothing
Source: World Trade Atlas.
Although the temporary NTR status stimulated imports from Vietnam, its
impact was mitigated by its impermanent nature. Under U.S. law, the President had
to reconfirm the waiver of the Jackson-Vanik amendment every year, and Congress
had the authority to override the President’s reconfirmation via a joint resolution
passed by both the House and the Senate. From 1998 to 2002, such a joint resolution
failed in the House. No resolutions were introduced between 2003 and 2005.
12 For more information on the negotiations and terms of the Vietnam-U.S. Bilateral Trade
Agreement, see CRS Report RL30416, The Vietnam-U.S. Bilateral Trade Agreement, by
Mark E. Manyin.

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CRS-6
For the international clothing market, the theoretical risk of Vietnam losing
temporary NTR status created two potential barriers to trade. First, major retailers
and importers supposedly shied away from purchasing clothing manufactured in
Vietnam as the date for the waiver renewal neared or when a joint resolution for
disapproval was introduced in Congress. Second, given the long-term uncertainty of
Vietnam’s NTR status, both domestic and foreign investors in Vietnam’s clothing
and textiles industry allegedly curtailed or postponed potential investment projects,
restricting the nation’s clothing and textile production capacity.
During the congressional debate over the bilateral trade agreement with
Vietnam, many members of Congress urged President Bush to negotiate a separate
bilateral textile agreement with Vietnam. Because Vietnam was not a WTO member
at the time, its clothing exports were not covered by the Agreement on Textiles and
Clothing (ATC) and therefore there were no quotas on Vietnam’s clothing exports
to the United States.13 Several members of Congress, and in particular members with
significant clothing and textile manufacturing in their districts or states, voiced
concern that a “surge” in Vietnamese clothing exports to the United States could
cause damage to U.S. clothing and textile companies and workers. In their opinion,
it was important that the United States conclude a bilateral textile agreement with
Vietnam that ensured fair competition and/or restricted the growth of Vietnamese
clothing exports to the United States.
The Vietnam-U.S. Textile Agreement
Negotiations of a separate bilateral textile agreement began soon after the
bilateral trade agreement went into effect. On April 25, 2003, the two nations agreed
to the terms of a bilateral textile agreement that placed quantity quotas on 38
categories of clothing imports from Vietnam starting on May 1, 2003, until
December 31, 2004. The quotas would automatically roll over in subsequent years
— with the inclusion of annual quantity increases of 2% for wool products and 7%
for all other products — unless the two nations terminated or renegotiated the
agreement by December 1. In addition, both nations pledged to “investigate and
punish” circumvention of U.S. import quotas, a provision added to the agreement in
part due to a U.S. Custom Service allegation that some Chinese clothing products had
illegally entered the United States by being mislabeled as products of Vietnam. The
agreement also lowered Vietnam’s tariffs on U.S. clothing and textiles exports to 7%
for yarn, 12% for fabric, and 20% for clothing.
Following the implementation of the bilateral textile agreement, Vietnam’s total
exports to the United States continued their rapid climb, but the growth in clothing
exports slowed dramatically (see Figure 1). Total U.S. imports from Vietnam rose
from $4.6 billion in 2003 to $5.3 billion in 2004, $6.6 billion in 2005, and $8.6
billion in 2006. Meanwhile, U.S. clothing imports from Vietnam crept up from $2.3
billion in 2003 to $2.5 billion in 2004, $2.7 billion in 2005, and $3.2 billion in 2006.
The share of clothing in Vietnam’s total exports to the United States declined from
51.3% in 2003 to 36.9% in 2006.
13 For more information on the WTO’s ATC, see CRS Report RL34106, U.S. Clothing and
Textile Trade with China and the World: Trends Since the End of Quotas, by Michael F.
Martin.

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CRS-7
Table 2. Quota Utilization Rate for Clothing Imported from
Vietnam, 2003-2006
(in percent)
Product Type
Category #
2003
2004
2005
2006
Average
Men & Boys and Women
338/339
91.2
99.4
86.4
91.8
92.2
and Girls Knit Cotton
Shirts
Men & Boys Coats and
334/335
100.0
88.2
86.2
92.1
91.6
Women & Girls Cotton
Coats
Men & Boys and Women
647/648
99.8
82.3
88.9
92.5
90.9
& Girls Man-made Fiber
Trousers
Men & Boys and Women
638/639 96.8
73.1
89.5
93.0
88.1
& Girls Man-made Fiber
Knit Shirts
Men & Boys and Women
347/348
98.9
84.3
77.5
91.3
88.0
and Girls Cotton Trousers
Men & Boys Non-knit
340/640
79.9
89.2
88.4
91.9
87.4
Cotton and Man-made
Fiber Shirts
Cotton and Man-made
342/642
100.0
77.2
78.0
80.6
84.0
Fiber Skirts
Women & Girls Non-knit
341/641
88.4
65.5
93.4
88.2
83.9
Cotton and Man-made
Fiber Shirts
Cotton & Man-made
352/652
99.8
68.8
61.2
96.4
81.6
Fiber Underwear
Other Cotton and Man-
359-S/659-
56.6
85.4
85.6
86.3
78.5
made Fiber Apparel
S*
Cotton and Man-made
351/651
99.6
43.2
65.8
78.5
71.8
Fiber Nightwear and
Pajamas
Men & Boys and Women
645/646
100.0
42.3
57.9
86.4
71.7
& Girls Man-made Fiber
Sweaters
Women & Girls Wool
435
82.9
52.1
53.1
91.3
69.9
Coats
Cotton & Man-made
200
78.6
49.6
59.2
79.7
66.8
Fiber Yarn
Other Synthetic Filament
620
82.4
30.4
67.9
79.4
65.0
Fabric
Men & Boys Wool Coats
434
69.0
22.2
64.3
96.9
63.1
Combed Cotton Yarn
301
94.0
63.9
17.9
75.5
62.8

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Product Type
Category #
2003
2004
2005
2006
Average
Men & Boys Wool
447
88.3
14.4
47.7
85.5
59.0
Trousers
Women & Girls Wool
448
84.5
29.7
29.4
73.0
54.2
Trousers
Cotton Sweaters
345
94.7
28.9
46.2
40.0
52.5
Other Cotton and Man-
359-C/
76.4
21.1
18.3
57.1
43.2
made Fiber Apparel
659-C*
Non-cotton Hosiery
632
42.2
9.9
21.5
66.8
35.1
Men & Boys Suit-type
333
28.2
4.4
34.3
73.2
35.0
Coats
Women & Girls Non-knit
440
0.0
2.9
83.4
14.1
25.1
Wool Shirts
Cotton Hosiery
332
7.5
0.7
20.8
28.9
14.5
Source: Office of Textiles and Apparel (OTEXA), International Trade Administration, U.S.
Department of Commerce.
*Quota covered only selected items in category
The imposition of import quotas on Vietnamese clothing also altered the
composition of Vietnam’s clothing exports to the United States. In 2003, 78.1% of
Vietnam’s clothing exports to the United States were in categories subject to quotas.
However, over the next three years, the value of Vietnam’s clothing exports subject
to quotas increased by 17.8% while clothing exports not subject to exports grew by
104.5%. As a result, Vietnamese clothing exports subject to quotas contributed
67.2% of the total bilateral clothing exports to the United States.
Only part of the sharp decrease in the growth of Vietnam’s clothing exports to
the United States can be attributed to the actual cap on imports created by the
quantity quotas. Table 2 reveals that the quantity quotas were potentially binding on
about a dozen of the 38 categories subject to import restrictions. For another dozen
categories, Vietnam used between half and three-quarters of the available quota. For
six categories, an average of less than half of the quota was used over the four years
the import restrictions were in place. On only three occasions, and only in 2003, did
U.S. imports fully use the available quota for a category of Vietnamese clothing
imports.
The less than full utilization of import quotas does not necessarily mean that the
import constraints had no impact on trade. According to industry sources,14 major
retailers and importers may shift where they source products in response to the
implementation of quotas. According to these market experts, importers do not want
to risk exceeding the import cap and be unable to import the products they desire, and
therefore turn to an alternative location to obtain the products. As a result, the
14 Information from telephone interviews with industry sources who wish to remain
anonymous.

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CRS-9
creation of an import quota on Vietnamese clothing may have diverted trade to other
nations even in cases where there was still available import capacity.
Vietnam’s WTO Accession and Permanent NTR Status
Congressional interest in U.S. clothing imports from Vietnam reemerged during
the negotiations over the terms of Vietnam’s WTO accession.15 U.S. textiles and
clothing manufacturers sought to extend the import quotas on Vietnamese clothing
products as part of Vietnam’s accession agreement, or to include in the agreement
safeguard measures similar to those included in China’s WTO accession agreement.16
However, neither provision was included in Vietnam’s WTO accession agreement.
What was included in the agreement were requirements that Vietnam terminate
various non-WTO compliant subsidy programs supporting its domestic clothing and
textile industry and allegedly benefitting its exports of clothing. The agreement
includes an enforcement mechanism during the first 12 months after Vietnam’s
accession that would permit the United States — or any other WTO member — to
impose import quotas if, after consultation and third-party arbitration, it was
determined that Vietnam had not terminated its non-WTO compliant subsidies.
Although Congress had no direct role in Vietnam’s accession to the WTO,
congressional approval was necessary to extend to Vietnam permanent NTR status.
As a member of the WTO, the United States was required to extend permanent NTR
status to Vietnam once it became a member.
Opposition to extending permanent NTR status to Vietnam focused on a number
of different issues, including alleged human rights abuses, claims of discrimination
against foreign-owned companies operating in Vietnam, and charges of inadequate
intellectual property rights protection. In addition, Senator Elizabeth Dole and
Senator Lindsey Graham objected to the lack of safeguard measures in the WTO
accession agreement to protect the U.S. clothing and textile industry from a potential
surge in imports from Vietnam. They reportedly decided to place a “hold” on the bill
before the Senate to grant Vietnam permanent NTR status.17
In a joint letter to U.S. Trade Representative (USTR) Susan Schwab, Senators
Dole and Graham explained their “concerns regarding Vietnam’s WTO accession
terms and the recently concluded U.S.-Vietnam bilateral agreement.”18 The two
senators write, “We believe that unless the government takes specific steps to ensure
that the U.S. textile industry can be defended against a communist country that
15 For a general discussion of Vietnam’s WTO accession, see CRS Report RL33490,
Vietnam PNTR Status and the WTO Accession: Issues and Implications for the United
States, by Mark E. Manyin, William H. Cooper, and Bernard A. Gelb.
16 For a description of the Chinese safeguard measures, see CRS Report RL34106, U.S.
Clothing and Textile Trade with China and the World: Trends Since the End of Quotas, by
Michael F. Martin.
17 “Vietnam Measure Facing Difficult Path,” Congress Daily, August 4, 2006.
18 Letter from Senator Elizabeth Dole and Senator Lindsey O. Graham to USTR Schwab,
September 18, 2006.

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CRS-10
heavily subsidizes its textile and apparel sector, this agreement is likely to cause
large-scale job losses in both of our states.” In the letter, Senators Dole and Graham
specifically express concern about Vietnam’s ability “to artificially lower prices
through its state sponsored system,” and state that it would be “unreasonable to ask
U.S. workers to compete with products manufactured under a state-run economy
without at least providing an adequate mechanism for the industry to defend itself.”
On September 28, 2006, USTR Schwab and U.S. Commerce Secretary Carlos
Gutierrez sent a letter to Senator Dole and Senator Graham pledging to initiate a
monitoring program for Vietnamese selected clothing imports immediately upon
Vietnam’s WTO accession. In addition, USTR Schwab and Secretary Gutierrez
stated in the letter, “If this monitoring process indicates that dumping exists and the
domestic industry fully cooperates in supplying data available to the domestic
industry indicating the existence of material injury caused by such imports, the
Department [of Commerce] will self-initiate anti-dumping investigations with respect
to the relevant products.”19 Based on this commitment, Senator Dole and Senator
Graham removed their hold on the permanent NTR for Vietnam legislation.
Although the pledged monitoring program removed one barrier to Vietnam’s
permanent NTR status, other issues delayed final passage of pending legislation. On
December 8, 2006, the House of Representatives passed H.R. 6406, a larger bill
containing provisions granting Vietnam permanent NTR status by a vote of 212-184.
H.R. 6406 was then coupled with H.R. 6111 (a tax extension bill) and sent to the
Senate, where it passed by a vote of 79-9. On December 20, 2006, President Bush
signed the bill into law (P.L. 109-432) and, as provided under the law, the United
States formally extended permanent NTR status to Vietnam on December 29, 2006
— less than two weeks before Vietnam officially became the 150th member of the
WTO.
Monitoring Program
With the passage of P.L. 109-432 and Vietnam’s membership in the WTO, U.S.
trade relations with Vietnam entered into a new phase of formally agreed free trade.
As part of its agreement with Vietnam, the United States discontinued the quantity
restrictions on clothing imports from Vietnam that had been in effect since May
2003. Also, clothing imports from Vietnam were now permanently eligible for the
lower NTR tariff rates, ending the annual temporary NTR renewal process. For its
part, Vietnam had pledged to cease any non-WTO compliant subsidies to its clothing
and textile industries or face the possible reimposition of import quotas by the United
States or any other WTO member.
The only non-market action by the United States available to influence the
import of clothing from Vietnam was the promised monitoring program mentioned
in the letter by USTR Schwab and Secretary Gutierrez. On December 4, 2006, the
Import Administration of the U.S. Department of Commerce’s International Trade
Administration published a request for public comment in the Federal Register
which laid out the basic outline of the proposed monitoring program.
19 Letter from USTR Susan Schwab and U.S. Commerce Secretary Carlos Gutierrez to
Senator Elizabeth Dole and Senator Lindsey Graham, September 28, 2006.

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CRS-11
According to the Federal Register announcement, the monitoring program
would begin upon Vietnam’s accession to the WTO and will expire at the end of the
current administration (January 19, 2009). The initial of list of products to be
monitored — trousers, shirts, underwear, swimwear, and sweaters — had been
“identified as being of special sensitivity.”20 The monitoring program would collect
data on the quantity, value, and unit price of goods imported from Vietnam in the
selected categories. Comments on the monitoring program — including comments
on the product coverage, the creation of “production templates,” and information on
the U.S. textile and apparel industry — were to be submitted to the Import
Administration by December 27, 2006. The announcement also indicated that there
would be a public hearing on the program, which was subsequently scheduled for
April 24, 2007, in Washington, DC.
However, in a second request for public comment published in the Federal
Register on January 23, 2007, the Import Administration stated that “the Department
[of Commerce] recognizes that these five product categories are too broad for
effective monitoring.”21 So, it indicated it would “focus on those traditional three-
digit textile and apparel categories of greatest significance based on trade trends,
composition of the U.S. industry and input from parties, as appropriate.”22 The
announcement also stated that the product coverage “is not intended by the
Department [of Commerce] necessarily to be static,” and that changes in product
coverage may occur in response to changes in trade, input from interested parties, or
“as the Department [of Commerce] broadens its understanding of the composition
and structure of the domestic textile and apparel industry.”23 The Department also
indicated that the monitoring program “is not meant to inhibit legitimate trade.”24
The deadline for comments for this second request was January 31, 2007.
Both announcements also stated that there would be biannual evaluations of the
data collected by the monitoring program “to determine whether sufficient evidence
exists to initiate an anti-dumping investigation consistent with U.S. law and our
international obligations under the WTO.”25 No set dates were given for the biannual
evaluations.
Congressional Comments on the Proposed Monitoring Program.
From its inception, the monitoring program has been the subject of some controversy
within Congress. While Senator Dole and Senator Graham supported the program,
other members of Congress questioned its legality and economic merits. In a May
2, 2007 letter to Secretary Gutierrez, six members of the House Ways and Means
Committee — Representatives Earl Blumenauer, Jim Ramstad, Mike Thompson, Jim
McDermott, Joseph Crowley, and Ron Kind — stated they were “deeply concerned
that the disruption in trade caused by the import monitoring program is cutting away
20 Federal Register, December 6, 2006, page 70365.
21 Federal Register, January 23, 2007, page 2861.
22 Ibid.
23 Ibid.
24 Ibid.
25 Federal Register, December 6, 2006, page 70365.

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CRS-12
at many of the benefits of granting PNTR to Vietnam” and that “these negative
impacts come at no benefit to U.S. apparel producers.”26 In addition, the
Representatives wrote “the Department of Commerce must demonstrate the specific
statutory authority for this unprecedented type of program.”27 They also expressed
concern that the program may violate “a number of agreements under the World
Trade Organization.”
Having questioned the legitimacy and economic benefits of the monitoring
program, the Representatives suggested that the scope of the monitoring program
“should be limited to those apparel products, defined at the ten-digit HTS level,
produced in a commercially viable fashion in the United States, for which producers
of those products have asked for monitoring, and for which there is evidence of
material injury to those producers being caused by imports from Vietnam.”28
Senators Dianne Feinstein and Gordon Smith also expressed their concerns
about the monitoring programs in separate letters to Secretary Gutierrez.29 In her
letter of December 26, 2006, Senator Feinstein wrote, “I request that the Department
[of Commerce] submit any proposed program to public comment through a Notice
of Proposed Rulemaking; [and] demonstrate in such notice how the proposed
program is consistent with applicable statutory requirements and international
obligations of the United States....” In his letter of January 31, 2007, Senator Smith
echoes Senator Feinstein’s comments, writing, “it is important for the Department
[of Commerce] to outline in detail the statutory authority it believes it has to
implement the announced monitoring program and to self-initiate anti-dumping
measures under these circumstances.” Senator Smith also suggests that the proposed
program should undergo the usual “Notice of Proposed Rulemaking” process.30
Criticism from U.S. and Korean Business Communities. Opposition
to the monitoring program also came from various segments of the U.S. business
community. A coalition of eight trade associations and 29 separate U.S. companies
sent a letter to Secretary Gutierrez and USTR Schwab on October 11, 2006
expressing their “extreme disappointment at the agreement the Administration
negotiated with Senators Elizabeth Dole and Lindsey Graham.”31 According to the
letter, “implementing this ill-considered and damaging agreement places at risk the
ability for us and all other U.S. companies to continue current business and generate
new business in Vietnam.” The letter also voices their displeasure at the lack of
consultation with interested U.S. companies, leading members of Congress, and the
26 Letter to Secretary Gutierrez from members of the House Ways and Means Committee,
May 2, 2007.
27 Ibid.
28 Ibid.
29 Copies of the Senators’ letters are available online under the “requests for public
comment” at [http://ia.ita.doc.gov/download/vietnam-textile-monitoring/vtm-index.html].
30 For an explanation of the federal rulemaking process, see CRS Report RL32240, The
Federal Rulemaking Process: An Overview, by Curtis W. Copeland.
31 Letter to Secretary Gutierrez and USTR Schwab, October 11, 2006.

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CRS-13
Vietnamese government during the time it was discussing the matter with Senators
Dole and Graham.
Overall, most of the responses to the Import Administration’s requests for public
comments were generally critical of the monitoring program.32 In addition to the
concerns raised by members of Congress about the statutory authority for the
monitoring program, its consistency with existing international obligations, and the
lack of a period of public commentary for a proposed rulemaking,33 another major
criticism of the program was the apparent lack of a U.S. clothing manufacturing
industry that might be materially injured by the Vietnamese imports.
In its written comments to the Import Administration, the U.S. Association of
Importers of Textiles and Apparel (USA-ITA) urged the Department of Commerce
drop the monitoring program because no U.S. apparel manufacturers supported it.
In his testimony at the public hearing about the monitoring program, Chairman of the
International Textile Group, Wilbur L. Ross, Jr. questioned whom the monitoring
program was meant to protect: “To the best of my knowledge, there are no American
apparel producers whose output is truly characterized as competitive to Vietnam’s
exports to this country.”34 The lack of competitive U.S. clothing manufacturers was
reiterated by Stephanie Lester, Vice President for International Trade at the Retail
Industry Leaders Association (RILA). According to Ms. Lester, “most of the products
that RILA members purchase from Vietnam could not be supplied by domestic [U.S.]
production.”35
The monitoring program was also challenged on its potential negative effects
on U.S. companies considering sourcing clothing from Vietnam. In his oral testimony
at the public hearing on April 24, 2007, Gary Ross of the USA-ITA said:
The monitoring program has very real consequences. By targeting broad
categories of products made in Vietnam, it forces USA-ITA member companies
to reconsider Vietnam as a sourcing option. At the very least, importers and
retailers are looking at the calendar and mapping out worst-case scenarios,
deciding what the earliest possible point in time is when Vietnamese products
32 A complete set of the comments submitted to the Import Administration is available
online at [http://ia.ita.doc.gov/download/vietnam-textile-monitoring/vtm-index.html].
33 A group of 6 trade associations and 15 individual companies filed a joint comment on
December 27, 2006 that included a relatively detailed critique of the proposed monitoring
program on all three of these issues. A copy of their submitted comments is available at
[http://ia.ita.doc.gov/download/vietnam-textile-monitoring/cmts-20061227/vietnam-textil
e-monitoring-index.html].
34 Testimony of Wilbur L. Ross, Jr., Chairman, International Textile Group, at the Textile
and Apparel Products from Vietnam Import Monitoring Program Public Hearing, April 24,
2007.
35 Testimony of Stephanie Lester, Vice President for International Trade, Retail Industry
Leaders Association, at the Textile and Apparel Products from Vietnam Import Monitoring
Program Public Hearing, April 24, 2007.

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CRS-14
brought into the U.S. market could be subject to an additional bonding
requirement or dumping duty.36
In its written comments on the proposed program, the National Retail Federation
(NRF), stated:
In response to the greater unpredictability and risk to their sourcing operations
created as a result of the commitment [to implement the monitoring program], a
number of NRF members have decided to limit their exposure to Vietnam, either
by substantially cutting their orders in the second half of 2007, or to terminate
them entirely.37
The NRF goes on to state that its members have indicated that the cancelled orders
will “move to other Asian countries, not the United States or other Western
Hemisphere countries.”
Several of the commentators pointed to the biannual review mechanism as
heightening the market uncertainty created by the program. In the words of the
American Apparel and Footwear Association (AAFA), “A decision every six months
about potential anti-dumping cases can be very unsettling and will no doubt have a
chilling effect on trade.”38
A third common comment from U.S. businesses critical of the proposed
monitoring program was the potential burden it would place on U.S. companies
importing clothing from Vietnam. In its written comments, the AAFA stated, “We
are concerned that the program could result in significant new paperwork or import
entry requirements, which would create an unfair burden on U.S. apparel
importers.”39
A fourth general category of criticism focused on the seemingly vague and fluid
methodology being used in the monitoring program. Several commentators indicated
that it was unclear how the data being collected could be used to evaluate the alleged
presence of dumping.40 Some argued that the three-digit categories of imports being
monitored were too broad for use in anti-dumping investigations.41 Others pointed
out that U.S. manufacturing data was apparently not available using the same
36 Ross, op. cit.
37 Written comments by the National Retail Federation, submitted to the Import
Administration on December 27, 2006.
38 Written comments by the American Apparel and Footwear Association, submitted to the
Import Administration on December 27, 2006.
39 Ibid.
40 For example, in its comments submitted on behalf of Hanesbrands, Inc. on January 31,
2007, Sandler, Travis and Rosenberg, P.A. wrote, “[P]roduct categories used for collecting
data, the traditional three-digit textile category and the 10-digit Harmonized Tariff System
(HTS) code, are too broad to permit accurate analysis.”
41 For example, the Retail Industry Leaders Association (RILA) wrote in their comments of
December 27, 2007, “While the three-digit category system ... may be familiar lexicon to
the industry, these categories are overly broad and could not be used for purposes of either
an anti-dumping investigation or Commerce’s proposed monitoring program.”

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CRS-15
categories as the import data being monitoring, making impact assessment difficult.42
Virtually all of these commentators maintained that the Import Administration
needed to clarify their methodology prior to implementing the program and to make
the methodology more transparent.
In addition to critical comments from U.S. businesses, the Import
Administration also received joint submissions from two Korean trade associations
— the Korea International Trade Association (KITA) and the Korean Apparel
Industry Association (KAIA).43 The criticism contained in the two submissions made
by KITA and KAIA were consistent with the categories described above, with one
additional concern. KITA and KAIA maintain that the monitoring program would
deny benefits to other WTO members by undermining the value of investments made
by other WTO members in Vietnam’s clothing industry.
Support from the U.S. Business Community. Although most of the
comments received by the Import Administration were critical of the proposed
monitoring program, there were some that supported its implementation. The
supportive comments generally focused on four issues: (1) The potential threat of a
surge in Vietnamese clothing imports causing harm to U.S. clothing and textile
manufacturers; (2) the dominance of state-owned manufacturers in Vietnam’s
clothing industry; (3) the alleged subsidies received by the Vietnamese clothing
industry from its government; and (4) the ability to easily shift production from one
clothing category to another makes it vital to monitor a broad range of clothing
products. For most of the supporters of the monitoring program, the perceived risk
inherent in these four issues was sufficiently grave that it was vital for the monitoring
program to begin as soon as possible.
In the words of the National Council of Textile Organizations (NCTO), “The
concerns of the U.S. textile industry about surges of imports from Vietnam are based
on recent experience, not mere speculations.”44 According to the NCTO, imports
from Vietnam rose by 220% between 2002 and 2006. The American Manufacturing
Trade Action Coalition (AMTAC)45 writes in its January 31, 2007 comments, “Since
Vietnam was given ‘normal trade relations’ access to the U.S. textile and apparel
market on December 10, 2001, its exports have increased by 6,849% and now total
$3.4 billion.”46 The implication is that Vietnam’s past rapid increase in clothing
exports to the United States indicates an ability to rapidly increase exports in the
future.
42 Comments submitted by Sandler, Travis and Rosenberg, P.A. on behalf of Hanesbrands,
Inc. on January 31, 2007.
43 The law firm of Vinson and Elkins submitted comments on behalf of KITA and KAIA on
December 27, 2006, and January 31, 2007.
44 Comments submitted by the NCTO on January 31, 2007.
45 According to AMTAC’s webpage [http://www.amtacdc.org], its mission is “to preserve
and create American manufacturing jobs through the establishment of trade policy and other
measures necessary for the U.S. manufacturing sector to stabilize and grow.”
46 Comments submitted by AMTAC on January 31, 2007.

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CRS-16
The supporters of the monitoring program maintain that this rapid growth in
exports to the United States is in part due to the dominance of state-owned factories
in the Vietnamese clothing industry. AMTAC states in its January 31, 2007
comments, “Aside from China, Vietnam is the only other country with a large, state-
owned textile and apparel sector. Vinatex, fully owned by the Vietnamese
government, is the 10th largest garment producer in the world.”47
The alleged dominance of state-owned factories in Vietnam’s clothing industry
becomes important when examining the third issue raised by supporters of the
monitoring program. The supporters claim that state-owned factories receive
significant indirect and direct subsidies from the Vietnamese government, thereby
allowing them to export clothing at prices below “fair market value.” In the words
of the NCTO, “Vietnam is one of two countries (the other being China) which has
a large state-owned, state-subsidized textile and apparel sector. Governments in both
countries have poured billions of dollars in subsidies into their respective sectors
with the apparent goal being dominance of global apparel supply chains.”48
According to AMTAC, the subsidies — which were revealed by Vietnam during its
WTO negotiations — take the form of preferential interest rates, wage controls, rent
holidays, export subsidies, preferential tax rates, and direct investments by the
Vietnamese government.49
The fourth issue raised by supporters of the monitoring program has to do with
the production conditions of Vietnam’s clothing industry. According to some of the
commentators, Vietnam’s clothing manufacturing is relatively labor-intensive
production using semi-skilled workers. As a result, they maintain it is relatively easy
for factories to shift production from one clothing product to another, and so it is
vital that the monitoring program covers a wide range of apparel. In the words of the
NCTO:
Apparel manufacturing is, in important ways, a simple process. A sewing
machine operator can produce dozens of different types of garments from a
single machine. To a significant extent, the operator does not become skilled in
producing a specific type of garment.... Thus, a typical sewing plant can, and
does, have the ability to assemble a woman’s dress, a man’s cotton pant, a child’s
sweatshirt and so on and so forth.... The reality of the production process
therefore calls for monitoring on a broader rather than on a more specialized
basis.50
Comments from the Vietnamese Government and Companies. The
response of the Vietnamese government and Vietnamese clothing manufacturers to
the proposed monitoring program was muted in tone, but critical in content. In its
submitted comments and testimony, Vietnam’s Ministry of Trade focused on the
program’s possible violation of U.S. WTO obligations and the negative effect on
legitimate trade. The Vietnam Textile and Apparel Association (VITAS) reiterated
many of the criticisms raised by U.S. businesses, but also challenged
47 Ibid.
48 Comments submitted by the NCTO on December 27, 2006.
49 AMTAC, op. cit.
50 NCTO, op. cit.

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CRS-17
characterizations of Vietnam’s clothing industry as being state-owned and heavily
subsidized.
In its December 22, 2006 letter to the U.S. Department of Commerce, Vietnam’s
Ministry of Trade focused on the program’s possible violation of existing U.S. WTO
obligations. After expressing “disappointment” about the Commerce Department’s
implied intent to initiate anti-dumping investigations against Vietnamese clothing
exports, the letter asserted, “This program is a violation of Article 23 of the GATT
1994 as it causes nullification and serious prejudice to the interests of Vietnam as a
WTO member.”51 The letter continued by stating, “Furthermore, this Program is also
inconsistent with the Bilateral Agreement between Vietnam and the United States on
Vietnam’s accession to the WTO signed on 31 May 2006.”52
The Trade Ministry’s second letter to the Commerce Department shifts its focus
to the negative impact it argues the monitoring program has had and will have on
legitimate trade between Vietnam and the United States:
Although the additional information in the second-round proposal mentions the
fact that this Program does not aim at restraining legal trade, in fact it has created
negative impacts — causing worries and unstable mentality for U.S. importers
placing orders in Vietnam right from the very first month of 2007, and making
it impossible for Vietnam textile and apparel manufacturers to pro-actively plan
their production, and above all, creating instabilities for workers in Vietnam’s
textile and apparel industries.53
Then, during its testimony at the April 24, 2007 hearings on the monitoring
program, the spokesperson for the Trade Ministry said, “Vietnam’s Ministry of Trade
must continue to reaffirm our clear and consistent view to strongly protest the
‘Monitoring Program on Textile and Apparel Import from Vietnam.’”54 The
representative continued, “It is clear that this program is discriminatory, contrary to
the most important principle and the pillar of the WTO — GATT Article 1.” The
Trade Ministry’s testimony also claimed that monitoring program violates Article 23
of the GATT by nullifying the benefits of WTO membership, and Article 18.1, which
governs anti-dumping actions between WTO members. The testimony also reasserted
that the monitoring program was reducing legitimate trade between the two nations,
and thereby “having a severe affect on jobs and employment in Vietnam.”
The response of VITAS to the proposed monitoring program was more detailed,
diverse, and disapproving than that of the Trade Ministry. One important aspect of
its comments was challenge to the assertions that Vietnam’s textile and garment
industry was largely state-owned and heavily subsidized by the government. In its
51 Letter for the Ministry of Trade, The Socialist Republic of Vietnam to the Department of
Commerce of the United States, December 22, 2006.
52 Ibid.
53 Letter for the Ministry of Trade, The Socialist Republic of Vietnam to the Department of
Commerce of the United States, January 29, 2007.
54 Statement of the Representative from the Ministry of Trade of Vietnam at the Hearing on
the Department of Commerce’s Monitoring Program on Textile and Apparel Import from
Vietnam, April 24, 2007.

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CRS-18
December 20, 2006 letter VITAS stated, “The Vietnam textile and garment industry
consists of over 2,000 enterprises. Of these, only 50 are state-owned, while 1,400 are
private and 450 are foreign direct investment (FDI) enterprises.”55 The letter also
contested claims that state-owned enterprises dominate Vietnam’s clothing exports
to the United States, stating “In 2005, only 25 state-owned textile and garment
enterprises exported their products to the United States, making up only 8.1% of total
export turnover of textiles and garments to the United States.” According to VITAS,
all of Vietnam’s state-owned clothing and textile enterprises will be privatized
(“equitized”) by 2008.
On the issue of subsidization, VITAS wrote that it “takes strong exception to the
unsupported — and unsupportable — allegation in the comments submitted by
AMTAC and [the] NCTO, contending that Vietnam ‘heavily subsidizes their
industry.’”56 Calling AMTAC’s reference to Vietnam’s WTO disclosure
“misleading,” VITAS maintained in its letters that the Vietnamese government has
fulfilled its WTO accession obligations to terminate prohibited subsidies to its textile
and apparel industries. In addition, VITAS pointed out that within its WTO accession
agreement, there already exists a formal mechanism to resolve claims that Vietnam
provides prohibited subsidies to its clothing and textile industry. If the United States
has evidence that Vietnam is providing its clothing and textile industry with
prohibited subsidies, VITAS argued that the United States should use the existing
mechanism, rather than instituting a special monitoring program.
Commerce Decision to Proceed with the Monitoring Program. The
U.S. Department of Commerce decided to implement the program as scheduled on
January 19, 2007. The specific product coverage selected for the monitoring program
included the following categories, organized by product type and including category
number:
! Trousers — Men and boys cotton trousers (347); women and girls
cotton trousers (348); men and boys wool trousers (447); women and
girls wool trousers (448); men and boys man-made fiber trousers
(647); women and girls man-made fiber trousers (648); and silk or
vegetable fiber trousers (847);
! Shirts — Men and boys cotton knit shirts (338); women and girls
cotton knit shirts (339); men and boys cotton non-knit shirts (340);
women and girls cotton non-knit shirts (341); wool knit shirts (438);
wool non-knit shirts (440); men and boys man-made fiber knit shirts
(638); women and girls man-made fiber knit shirts (639); men and
boys man-made fiber non-knit shirts (640); women and girls man-
made fiber non-knit shirts; silk or vegetable fiber knit shirts (838);
and silk or vegetable fiber non-knit shirts (840);
! Underwear — cotton underwear (352); man-made fiber underwear
(652); and silk or vegetable fiber underwear (852);
55 Letter from VITAS to the U.S. Import Administration, December 20, 2006.
56 Letter from VITAS to the U.S. Import Administration, January 29, 2007.

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CRS-19
! Swimwear — selected items in categories 359 and 659; and
! Sweaters — cotton sweaters (345); men and boys wool sweaters
(445); women and girls wool sweaters (446); men and boys man-
made fiber sweaters (645); women and girls man-made fiber
sweaters (646); and non-cotton vegetable fiber sweaters (845).
The responsibility to administer the monitoring program was assigned to the Import
Administration of the U.S. Department of Commerce. However, the gathered data
is being released to the public by Department of Commerce’s Office of Textiles and
Apparel (OTEXA). Each month, OTEXA releases the quantity, unit value and total
value of each three-digit category being monitored on its web page,
[http://www.otexa.ita.doc.gov/vn.htm]. For each three-digit category, the web page
also provides the data at the 10-digit HTS code level.
Commerce Department’s Review
On October 26, 2007, the DOC announced that a review of the first six months
of data for selected categories of clothing imported from Vietnam “found insufficient
evidence to warrant self-initiating an antidumping investigation.”57 According to
Assistant Secretary Spooner, “After a fair and objective analysis of the data,
Commerce found insufficient evidence of dumping from Vietnam.”58 However,
Assistant Secretary Spooner went on to say, “The Department will continue to
monitor apparel imports from Vietnam until the end of the Administration and work
with all stakeholders to ensure an open and transparent monitoring process.”
In response to requests from CRS, the DOC has declined to release the details
of their review, but it did provide some indications of its findings. According to the
DOC press release, of the 486 10-digit HTS lines monitored during the first six
months of the program, 317 lines had no imports from Vietnam. Of the 169 lines
where there were imports from Vietnam, “many” had rising unit values. Falling unit
values are often associated with evidence of dumping.
The press release also reported that DOC compared the unit values and import
levels for Vietnam to other clothing suppliers for the United States, including a
number of Asian suppliers (Bangladesh, Cambodia, India, Indonesia, Macau,
Malaysia, Pakistan, the Philippines, and Thailand) and the DR-CAFTA nations
(Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and
Nicaragua). Noticeably missing from the list of suppliers used for comparison were
Canada, China, Hong Kong, and Mexico — historical major suppliers of U.S.
clothing imports. However, the press release did not definitively state that the
comparison was limited only to the countries mentioned.
57 “Commerce Completes First Review of Vietnam Import Data,” press release, U.S.
Department of Commerce, October 26, 2007.
58 Ibid.

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The DOC also indicated that it “will continue to monitor trade in these
categories [emphasis added] during the next six-month review that will begin in
March 2008, after receipt of the January 2008 data.” This implies, but does not
explicitly state, that the monitoring program will continue to cover the same five
major categories of imports from Vietnam — shirts, sweaters, swimwear, trousers,
and underwear — and possibly the same 486 10-digit HTS lines. Attempts to clarify
this issue with DOC representatives were unsuccessful. The DOC will also continue
to post the collected import data on its Vietnam Textile and Apparel Import
Monitoring Program web page.59
The initial response to the DOC’s review was comparatively muted. Vietnamese
press coverage was limited to the scope of the press release, with no official
statement from a representative of the Vietnamese government.60 VITAS Chairman
Le Quoc An was reportedly not surprised by the review’s finding, but he indicated
that VITAS would continue to press the DOC to either terminate the monitoring
program or narrow the number of items being monitored.61
In the United States, only one of the various trade associations that testified at
the December 2006 and April 2007 hearings issued a statement in the week following
the DOC press release of October 26, 2007. The National Retail Federation (NRF)
“expressed satisfaction” with the DOC’s decision, stating that it “confirms American
retailers’ long-standing contention that there is no basis to launch antidumping
investigations against Vietnamese-made apparel.”62 NRF vice president Erik Autor
also stated that the decision “vindicates the retail industry’s argument that there was
no rationale for setting up the textile monitoring program in the first place, and
certainly no reason for continuing it.”63 None of the U.S. senators or representatives
that commented on the proposed monitoring program issued statements after the
announcement of the results of the DOC’s first biannual review.
The Structure of Vietnam’s Clothing Industry
There are sharp differences of opinion regarding the current structure of
Vietnam’s clothing industry. As was previously discussed, some of the supporters
of the monitoring program maintain that Vietnam’s clothing industry is dominated
by state-owned and -operated enterprises that are heavily subsidized by the
Vietnamese government, gaining unfair advantage in the global market. Many
opponents to the monitoring program contend that Vietnam’s clothing industry
consists of hundreds of small, privately-owned and -operated companies that receive
59 [http://ia.ita.doc.gov/download/vietnam-textile-monitoring/vtm-index.html].
60 Comment based on review of major online press outlets (including Thanhnien News and
Vietnam Economic Times) and various Vietnamese governmental web pages.
61 “DOC: No Evidence of Vietnam Dumping Apparel,” Vietnam Economy, October 30,
2007.
62 “NRF Welcomes Decision Not to Self-Initiate Antidumping Investigations Against
Apparel from Vietnam,” press release, National Retail Federation, October 30, 2007.
63 Ibid.

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CRS-21
little help from the central government when facing a highly competitive global
market.
Issues of Ownership
The ownership structure of
Vietnam’s clothing industry is a
Table 3. Types of Vietnamese
complex mix of typically larger, state-
Clothing Establishments,
owned enterprises; smaller collectively-
1998
owned or private companies; and
newer, foreign-owned manufacturers.
Layered over this mix of ownership
Number of
Ownership Type
arrangements is a currently state-owned
Establishments
“holding company” called the Vietnam
State-Owned 97
National Textile and Garment Group,
or Vinatex, that oversees the operation
* Centrally-Owned
20
and management of a number of state-
* Locally-Owned
77
owned, joint stock and joint venture
enterprises in the clothing industry, plus
Cooperatives
39
provides an array of technical support
services for Vietnam’s clothing and
Private
39
textile sectors.
Limited Liability
Companies
176
T yp e s o f O w n e rs hip
Arrangements. Starting in 1986, the
Joint Stock
Vietnamese government has been
Companies
5
gradually restructuring its economy
Household
away from a predominantly centrally
Establishments
68,073
planned system into a market-oriented
one. As part of its “Doi Moi”
TOTAL
68,429
(renovations) process, the Vietnamese
Source: General Statistics Office of Vietnam.
government has allowed the
development of privately-owned
clothing manufacturers that compete with the existing state-owned clothing
companies. Over the last few years, the Vietnamese government has started to
partially divest itself of some of the state-owned clothing companies in a process they
call “equitization.” Finally, the Vietnamese government has also allowed direct
foreign investment in clothing companies, either wholly-owned or joint ventures. As
a result, there are several different ownership arrangements currently operating in
Vietnam’s clothing industry.
According to a national survey of its industries, Vietnam had a total 68,429
clothing manufacturing establishments as of June 30, 1998 (see Table 3). The vast
majority of those establishments — 99.5% — were “household establishments,”
families that were independently employed making clothes. Of the remaining 356
non-household clothing establishments, about one in four were state-owned
enterprises and about half were “limited companies.”
Since 1998, Vietnam has implemented a series of policy changes regarding the
ownership of manufacturing establishments. In October 2005, Vietnam’s National

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CRS-22
Assembly passed a new Enterprise Law64 that clarifies the distinction between
different types of ownership, as well as specifies which types of enterprises are open
to foreign equity participation. In addition, the Vietnamese government has also
begun the process of divesting itself of full-ownership of clothing manufacturers.
The purported goal is to transform the state-owned enterprises into joint shareholding
(or stock) companies in which the state holds a controlling interest. The divesting
process, or “equitization,” is to be completed in the clothing industry by 2010.65
However, the “equitization” of Vietnam’s state-owned clothing companies does
not insure that they will no longer be subject to government intervention in their
operations or “free” of state subsidies. Also, unless there is a corresponding change
in managerial behavior, the “equitization” of clothing companies does not
automatically mean the new joint shareholding companies will be profit-motivated,
responsive to market pressures, and free from political influence.
Although most of Vietnam’s clothing establishments are household operations,
the value of the nation’s clothing production is more evenly divided between the
state-owned enterprises, the domestic private sector, and foreign-invested companies
(see Table 4). Plus, as the process of “equitization” continues and more overseas
investors become partial owners of clothing manufacturing facilities in Vietnam,
there has been a notable shift in the structure of production away from locally-owned
state enterprises and household producers towards foreign-invested companies. The
decline of locally-owned state enterprises is most likely due to their transformation
into joint shareholding companies. The decline of household producers is probably
attributable to increased competition from the joint shareholding companies and/or
foreign-invested enterprises.
Table 4. Distribution of Real Output of Vietnam’s Clothing
Industry, Base Year 1994
(in percent)
Type of Ownership
2000
2001
2002
2003
2004
2005
State-Owned
31.9
28.3
26.4
25.4
25.3
22.6
* Centrally-Owned
15.2
13.5
12.6
15.4
17.5
16.5
* Locally-Owned
16.7
14.8
13.8
10.0
7.8
6.1
Privately-Owned
43.3
45.3
44.1
38.4
38.7
39.3
* Collective
0.7
0.8
0.4
0.4
0.5
N/A
* Private
17.5
20.9
21.2
18.6
21.6
N/A
64 The law is referred to as “Enterprise Law (2005),” and is coded as “60/2005/QH11.” The
full text of the law is available online at [http://www.hepza.gov.vn/en/Document/Legal/].
65 In the “equitization” of companies, the Vietnamese government frequently retains a
majority share of the stocks and divides the minority share of the stocks between the
workers of the company and private investors, including foreign owners. The shares
allocated to private investors are typically auctioned off.

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CRS-23
Type of Ownership
2000
2001
2002
2003
2004
2005
* Household
25.1
23.6
22.5
19.4
16.7
N/A
Foreign-Invested
24.8
26.4
29.5
36.2
36.0
38.1
Source: General Statistics Office of Vietnam.
Role of Vinatex. While the shift in the ownership structure of Vietnam’s
clothing industry continues, the structure and purpose of Vinatex is undergoing a
concurrent transformation. Vinatex is currently a state-owned “general corporation”
that oversees the operations of a mixture of 7 state-owned clothing and textile
companies, 9 private clothing companies, 41 joint shareholding (stock) companies,
6 joint venture companies, and 7 clothing and textile research and educational
institutions.66 In the past, despite its official relations with the various clothing
manufacturers, Vinatex’s authority over the manufacturers was limited, especially
when it came to the distribution of profits. According to Le Quan An, chairman of
Vinatex, “Before our state companies acted independently. If they made a profit,
they kept it.”67
In 2006, the Vietnamese government developed a restructuring plan for Vinatex
— with the help of PricewaterhouseCoopers — that called for the “equitization” of
Vinatex and its transformation into a “profit-oriented holding company.”68
According to Vietnam’s Ministry of Industry, Vinatex is to begin its “equitization”
in 2007 with the goal of completing its transformation into a joint stock holding
company in 2008.69 As planned, the equitization will not reduce the value of the
government’s capital holding in Vinatex, but instead will issue new shares for sale
to private investors to attract new capital. Also, as a result of its already completed
restructuring, Vinatex now collects a portion of the profits of the joint stock
companies and joint ventures in which it is a shareholder. In the words of Vinatex
chairman An, “Now we act as a real owner.”70
The restructured Vinatex is to focus its efforts in five major areas.71 First, it will
“invest, produce, supply, distribute, import and export in the field of textile and
garment.” Second, it will set up joint ventures with domestic and foreign investors.
Third, Vinatex will “develop and expand” both domestic and overseas markets, “as
66 Figures based on Vinatex’s organizational chart, available online at
[http://www.vinatex.com].
67 “Dressed for International Success,” by Amy Kazmin, Financial Times, July 25, 2006,
p. 8.
68 Ibid.
69 “Ministry of Industry Allowed to Decide Setting Steering Committee for Vinatex’s
Equitisation,” press release of August 24, 2007, as reported and translated on Vinatex’s
webpage, [http://www.vinatex.com].
70 Kazmin, op. cit.
71 Information for the following paragraph extracted from Vinatex’s webpage,
[http://www.vinatex.com].

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CRS-24
well as assign member companies to penetrate into potential markets.” Fourth, it will
conduct research and improve technological applications in Vietnam’s clothing and
textile industries. Fifth, Vinatex will provide technical training for the workers and
management in Vietnam’s clothing and textile industry.
A sixth area of operation recently added is financial assistance. On July 19,
2007, Vinatex announced that it was going to open a bank to provide services to
Vietnam’s “leading industrial enterprises.”72 A joint venture with Vietnam
International Bank, Hanoi Beer-Alcohol and Beverage Corporation, Vietnam Steel
Corporation, and unnamed additional investors, the new bank will begin operations
with an estimated $62.5 million in capital.
The equitization and restructuring of Vinatex complicates the emerging
structure of Vietnam’s clothing industry. From an ownership perspective, a growing
portion of clothing production in Vietnam is taking place outside of state-owned
enterprises, and it theory, there will be no state-owned clothing factories in Vietnam
by 2010. However, the transformation of Vinatex into a holding company holding
shares in many of Vietnam’s largest clothing companies as well as a major
commercial bank raises questions about the real extent to which the Vietnamese
government is willing to release the clothing industry from state control.
Level of Subsidization
There are a number of direct and indirect ways by which Vietnam (or any
nation) could subsidize its clothing industry. Among the direct ways are (1)
financing investments for the clothing industry; (2) offering incentive payments (such
as tax rebates) for the achievement of export or production targets; and (3)
guaranteeing government procurement contracts to domestic clothing manufacturers.
Among the indirect ways are (1) offering below market loans or credit to Vietnamese
clothing companies; (2) lowering or eliminating tariffs on imported materials or
equipment used by the clothing industry; (3) providing materials and/or labor at
below market prices; and (4) erecting administrative barriers to foreign competition
to Vietnam’s clothing industry in its domestic consumer market.
Vietnam’s past practice of providing its clothing industry with a variety of direct
and indirect subsidies has been and continues to be of concern. As previously
indicated, some U.S. textile manufacturers point to Vietnam’s subsidization of its
clothing industry as evidence of unfair competitive practices and the need for
safeguard measures. Also, during the negotiation of Vietnam’s accession to the
WTO, the United States insisted on a commitment from Vietnam to cease its WTO-
72 “Textile Company to Open Bank,” Thanh Nien News, July 19, 2007.

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CRS-25
prohibited subsidies for the clothing industry.73 Vietnam made such a commitment
and asserts that it has fully complied with those commitments.
Decision 55. People and organizations who think that the Vietnamese
government may still be subsidizing its clothing and textile industry often point to
the events surrounding “Decision 55.” On April 23, 2001, the Vietnamese
government released Decision 55/2001/QD-TTg , or “Decision 55,” which provided
for the investment between 2001 and 2005 of 35 trillion dong — or approximately
$2.2 billion — in various projects designed to assist Vietnam’s textile and clothing
industry. These projects included financial support for the cultivation of cotton, the
development of infrastructure for Vietnam’s textile industry, and credit preferences
for specific projects related to Vietnam’s clothing and textile industries. Decision 55
also called for the investment of 30 trillion dong (approximately $1.9 billion)
between 2006 and 2010.
As part of its WTO accession agreement, Vietnam pledged to end all WTO-
prohibited subsidies to its clothing and textile industry, and on May 30, 2006,
Decision 55 was revoked by Decision 126/2006/QD-TTg. According to Vietnamese
officials, the United States “might have misunderstood the spirit” of Decision 55, and
misconstrued it to provide for direct government financing of the projects.74 Instead,
much of the funding for the projects mentioned in Decision 55 were to be financed
by the private sector and foreign investors.75 According to Vinatex chairman Le
Quoc An, government assistance to Vietnam’s clothing industry between 2002 and
2005 was limited to small loans from Vietnam’s Development Assistance Fund
(DAF), totaling 1.9 trillion dong, or approximately $118 million.76 Following the
revocation of Decision 55, the Vietnamese government has directed Vinatex to take
the lead in raising funds to support the expansion of Vietnam’s clothing industry.77
In response, Vinatex announced that “Vietnamese textile and garment
companies are prepared to forgo subsidies” and “stand on its own feet.”78 According
73 Under the WTO Agreement on Subsidies and Countervailing Measures defines two
categories of subsidies — prohibited subsidies and actionable subsidies. As the name
implies, the former are prohibited under the terms of the agreement because the subsidies
are specifically designed to distort international trade. The prohibited subsidies consist of
policies such as export targets or requirements to use domestic goods. Actionable subsidies
consist of government policies that another WTO member argues are having an adverse
effect on its interests. In the case of actionable subsidies, it is the responsibility of the
complaining WTO member to demonstrate the adverse effect, and it is the responsibility of
the subsidizing WTO member to either terminate the subsidy or eliminate the adverse effect,
if the adverse effect has been proven to exist.
74 “PM Repeals Textile Subsidy to Ease US Talks,” by Dong Hieu, VietnamNet, June 14,
2006.
75 Ibid.
76 Ibid.
77 “Government Ends Support for Textile and Garment Industry,” Thanh Nien News, June
14, 2006.
78 “Vietnam Textile Industry Ready to Stand on Its Own Feet,” Thanh Nien News, June 13,
(continued...)

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CRS-26
to Le Quoc An, while the industry would face “serious difficulties” without the
subsidies, it would “mobilize money from local and foreign investors” for
investments in new facilities and technology.79 To that end, Vinatex announced on
July 19, 2007, that it was talking with a group of investors — including the Vietnam
International Bank, Vietnam Steel Corporation, and Hanoi Beer-Alcohol and
Beverage Corporation — about opening a commercial joint-stock bank to provide
financial services to Vietnam’s clothing and textile industries.80 The proposed bank’s
initial capital is to total 1 trillion dong, or approximately $63 million.
Below Market Wages. One indirect means of subsidization of Vietnam’s
clothing industry frequently mentioned is the payment of below market wages to
clothing workers. The claim is that by keeping clothing workers wages down,
Vietnam’s clothing companies can either earn higher profits or lower their prices
below market prices. Higher profits will allow the clothing companies to expand
their operations and secure a larger share of the global clothing market, and below
market clothing prices will help Vietnamese companies out-compete other clothing
manufacturers.
There is some circumstantial evidence to support the claim that Vietnam’s
clothing companies are paying their workers below market wages. Several studies
of Vietnam’s clothing and textile industry find that the average wage of clothing and
textile workers in Vietnam is less than the average wage for other Vietnamese
manufacturing workers.81 However, it is argued that lower wages in the clothing and
textile industries are not unusual in other nations (including the United States)
because of the high level of global competition and the higher than average
employment of women in these industries.82
Global Competition
Another important aspect of Vietnam’s clothing industry is the nature of its
participation in the competitive global clothing market. According to Professor Gary
Gereffi, the global clothing market is a prime example of buyer-driven commodity
78 (...continued)
2006.
79 Ibid.
80 “Textile Company to Open Bank,” Thanh Nien News, July 19, 2007.
81 Examples include Caroline Brassard, “Wage and Labour Regulations in Vietnam within
the Poverty Reduction Agenda,” revised draft, National University of Singapore, 2004; and
John Thornburn, Nguyen Thi Thanh Ha, and Nguyen Thi Hoa, “Globalisation and the
Textile Industry of Vietnam, Discussion Paper 10,” paper presented at U.K. Department for
International Development Workshop on Globalisation and Poverty, Hanoi, September 23
and 24, 2002.
82 See Khalid Nadvi and John Thoburn, “Challenges to Vietnamese Firms in the World
Garment and Textile Value Chain, and the Implications for Alleviating Poverty,”Journal of
the Asia Pacific Economy, Vol. 9, No. 2 (2004), pp. 249-267; and John Thoburn, Kirsten
Sutherland, and Nguyen Thi Hoa, “Globalization and Poverty: Impacts on Households of
Employment and Restructuring in the Textiles Industry of Vietnam,” Journal of the Asia
Pacific Economy, Vol. 12, No. 3 (2007), pp. 345-366.

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CRS-27
chain, in which the “large retailers, marketers and branded manufacturers play the
pivotal roles in setting up decentralized production networks.”83 In the analysis of
Gereffi and others, buyer-driven commodity chains are characterized by highly
competitive, decentralized manufacturing, frequently involving multiple countries.
In addition, Gereffi and other scholars maintain that the retailers, marketers and
branded manufacturers secure control over the actual clothing manufacturers and the
suppliers of materials and equipment used in producing clothing by controlling
product design and brand names. As a result, most of the profits in the clothing
industry flows to the retailers, marketers, and branded manufacturers.
This analysis is based on a commodity chain approach that examines the
production flow of clothing from raw materials to retail sale (see Table 5). In
general, the major retailers control both the design and the marketing of the final
clothing items. The wholesalers and exporters typically contract with the major
retailers to source the clothing items from a network of manufacturers, who in turn
subcontract the textile companies to provide the materials needed to produce the
clothes. The textile companies similarly purchase the raw materials they need from
suppliers of either natural or synthetic fibers. In general, this production chain is
initiated by the decision of the retailers to procure clothing.
Table 5. The Clothing Commodity Chain
Wholesalers
Raw Material
Textile
Clothing
and
Retailers
Suppliers
Companies
Manufacturers
Exporters
Natural
Cotton, Wool,
Thread,
Fibers
Silk, Hemp
Yarn, Fabric
Cutting,
Labeling,
Marketing,
Assembly,
Packaging,
Oil,
Polymers,
Sales
Synthetic
Finishing
Shipping
Natural Gas
Synthetic
Fibers
Fibers, Cloth
Source: Modified from Gary Gereffi, 2002 (see footnote 71).
Vietnam’s clothing industry is by and large restricted to the center of this
commodity chain, competing for contracts to produce some of the more competitive
types of clothing such as women’s clothing and cotton clothing. This market segment
is often characterized by what some analysts call “triangle manufacturing.”84
Triangle Manufacturing. Triangle manufacturing typically involves three
key parties — a retailer, a sourcing company, and a manufacturer. The retailer
contracts the sourcing company to procure clothing according to very detailed
specifications. The sourcing company usually subcontracts the manufacturing of the
clothing items to a network of clothing manufacturers that it knows, trusts, and
monitors. The clothing manufacturers produce the clothing items and then ship the
83 Gary Gereffi, “Outsourcing and Changing Patterns of International Competition in the
Apparel Commodity Chain,” paper presented at the “Responding to Globalization: Societies,
Groups, and Individuals” Conference, Boulder, Colorado, April 4-7, 2002.
84 See Byoungho Jin, “Apparel Industry in East Asian New Industrialized Countries,”
Journal of Fashion Marketing and Management, Vol. 8, No. 2 (2004), pp. 230-244.

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CRS-28
products directly to the retailers. Once the clothing shipments are received and pass
inspection, the retailer pays the sourcing company, who then pays the manufacturers.
Within the confines of triangle manufacturing, there is also a pattern of
progression for the clothing manufacturers. At first, the manufactures tend to operate
under a “cut-make-trim” (CMT) arrangement with the sourcing company, where the
manufacturer is provided all the materials for the production of the clothing item and
only assembles the final product. Later on, the manufacturer may advance into an
“original equipment manufacturing” (OEM) arrangement in which the sourcing
company or the major retailer provides the manufacturer with the product design and
it is up to the manufacturer to purchase the necessary materials to make the clothing
items. In some cases, clothing manufacturers have been able to expand their activities
further out in the commodity chain and undertake “original brand-name
manufacturing” in which they may design the clothes to be sold either under their
own brand name or under the brand name of a major retailer.
Because the sourcing company usually has a significant number of
manufacturers able to supply the clothing items, competition for the subcontracts
tends to be keen, and the manufacturers are often pushed to lower their prices and
speed up their production in order to win the contract. In Vietnam, the state-owned
companies and the foreign-invested companies are generally considered better able
to compete for “triangle manufacturing” contracts because they are larger in size and
have easier access to operating capital.
To improve the overall profitability of Vietnam’s clothing industry and reduce
its dependency on the major retailers and marketers, the Vietnamese government is
attempting to follow in the footsteps of Hong Kong, Singapore, South Korea and
Taiwan. The “four Asian dragons” were able to transform their manufacturing
sectors in response to highly competitive global market conditions in various ways.
In the clothing industry, Hong Kong, South Korea, and Taiwan not only diversified
their manufacturing throughout Asia (including China), but also have moved up and
down the clothing commodity chain into clothing design (up chain) and brand name
development (down chain). Under the Decision 55, the Vietnamese government
apparently had decided to focus its efforts on up chain development by increasing
investments into its domestic textile industry and its production of raw materials used
in the clothing industry. However, with the revocation of Decision 55, the focus
seems to have shifted to down chain development.
Growth in Vietnam’s Clothing Exports
Vietnam’s exports of clothing have experienced rapid growth over the last 12
years, but this expansion has largely been in line with the overall increase in
Vietnam’s total exports. However, what has changed is the mix of Vietnam’s major
markets for its clothing exports, with the rapid rise in the importance of the U.S.
market over the last few years.

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CRS-29
Overall Growth
Over the last 12 years, Vietnam’s textile and clothing exports have increased
over seven-fold, according to its General Statistics Office (see Table 6). In 1995,
Vietnam’s exports of textiles and clothing were worth $766 million, and contributed
14.1% of the nation’s total export earnings.85 In 2002, textile and clothing exports
reached $2.73 billion, and 17.9% of total export value. Since then, while the value
of textile and clothing exports have continued to rise, their share of total exports has
declined. Preliminary data for 2006 has the total value of Vietnam’s textile and
clothing exports at $5.83 billion, but only 14.7% of total exports.
85 The General Statistics Office of Vietnam does not report textile and clothing exports
separately.

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CRS-30
Table 6. Vietnam’s Textile and Clothing Exports as a Share of
Total Exports
(in U.S. $ billions)
Textile and
Share of Total
Year
Total Exports
Clothing Exports
Exports
1995
0.77
5.45
14.1%
1996
0.99
7.26
13.7%
1997
1.50
9.19
16.4%
1998
1.45
9.36
15.5%
1999
1.75
11.54
15.1%
2000
1.90
14.48
13.1%
2001
1.98
15.03
16.4%
2002
2.73
16.71
17.9%
2003
3.61
20.15
16.7%
2004
4.43
26.49
16.7%
2005
4.77
32.45
14.7%
2006*
5.83
39.83
14.7%
Source: General Statistics Office of Vietnam.
*preliminary data
Major Markets
The U.S. decision to grant Vietnam normal trade relations (NTR) status in
December 2001 apparently led to a dramatic shift in the structure of Vietnam’s
clothing exports (see Table 7). In 2001, Vietnam’s leading export markets for its
clothing were Japan and the 27 members of the European Union, or EU-27.86
Vietnam’s combined clothing exports to Japan and the EU-27 amounted to over two-
thirds of its clothing exports in 2001. By contrast, Vietnam shipped only 2.6% of its
clothing exports to the United States in 2001.
However, after receiving NTR status, Vietnam’s clothing exports to the United
States jumped to nearly $1 billion in 2002, readily surpassing exports to both Japan
and the EU-27, which declined slightly from the previous year. As a result, the
United States became Vietnam’s largest clothing export market in 2002. The sharp
rise in clothing exports to the United States continued into 2003, when over half of
Vietnam’s clothing exports were sent to the United States, while exports to Japan and
the EU-27 continued to decline.
The decline in exports to Japan and the EU-27 ended in 2004, with a slight
rebound in clothing sales to Japan and a larger rise in exports to the EU-27.
Meanwhile, growth in clothing exports to the United States were possibly curbed in
86 Among the EU-27 members, the top two markets were Germany and the United Kingdom.

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CRS-31
part due to the imposition of quotas by the United States. However, those protective
measures were not sufficient to stop the advance in the U.S. share of Vietnam’s
clothing exports. In 2004, nearly $6 of out of every $10 of clothing exports from
Vietnam went to the United States.
Table 7. Vietnam’s Major Clothing Export Markets
(in U.S. $ millions and percent)
Value
2001
2002
2003
2004
2005
World
1,819.7
2,562.3
3,386.3
4,135.8
4,558.0
USA
46.4
995.3
1,946.4
2,432.5
2,579.9
Japan
562.7
457.1
443.2
469.9
574.8
EU-27
652.8
591.3
554.0
718.4
860.8
Share
USA
2.6%
38.8%
57.5%
58.8%
56.6%
Japan
30.9%
17.8%
13.1%
12.0%
12.6%
EU-27
35.9%
23.1%
16.4%
17.4%
18.9%
Source: Global Trade Atlas.
In 2005, Vietnamese clothing exports to the United States increased by just over
$147 million. However, exports to Japan and the EU-27 increased by a combined
total of more than $247 million. As a consequence, there was a small decline in the
U.S. share of Vietnam’s clothing exports in 2005, and a corresponding slight rise for
both Japan and EU-27.
Although 2006 trade figures were not available for this report, there are
indications that the modest shift away from the United States and back towards Japan
and the EU-27 extended for another year. Because of its concerns about the possible
continuation of protective measures by the United States as part of Vietnam’s WTO
accession agreement, the Vietnamese government has allegedly encouraged its
clothing companies to export to Japan and the EU-27.87 With Vietnam’s accession
to the WTO and the termination of U.S. clothing quotas, it is unclear if the shift away
from the United States and towards Japan and the EU-27 will be repeated in 2007.
Vietnam’s Role in the U.S. Clothing Market
Over the last five years, there has been a marked increase in U.S. clothing
imports from Vietnam. Despite repeated changes in U.S. trade policy towards
Vietnam — including the conferral of normal trade relations, the imposition of
import quotas for selected clothing items, and compliance with Vietnam’s WTO
accession — there has been steady growth in Vietnam’s clothing exports to the
United States, and, with it, a rise in Vietnam’s overall market share in the United
87 Based on confidential interviews with sources involved in U.S.-Vietnamese clothing trade.

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States. However, Vietnam remains a comparatively modest supplier of U.S. clothing
imports. Even in the market segments where Vietnam is among the top three
suppliers to the United States, its portion of import supply with few exceptions
remains below 10%.
Overall Market Share
The recent rapid growth in U.S. clothing imports from Vietnam should be
considered in the context of the overall growth of U.S. clothing imports and in
comparison with other major suppliers, such as China and Mexico. As shown in
Figure 2, the increase in U.S. clothing imports from Vietnam since 2001 is relatively
small when compared to the overall increase in U.S. clothing imports, as well as to
the rise in clothing imports from China. In 2006, the United States imported $73.4
billion of clothing, of which $19.9 billion were from China, $5.4 billion were from
Mexico, and $3.2 billion were from Vietnam. However, the rise in Vietnamese
clothing imports over the last five years does roughly correspond to the decline in
imports from Mexico.
Figure 2. U.S. Clothing Imports from Top Suppliers, 2001-2006
(in U.S. $ billions)
80
70
60
50
40
30
20
10
0
2001
2002
2003
2004
2005
2006
World
China
Mexico
Vietnam
Source: Global Trade Atlas
Overall, Vietnam’s share of the U.S. clothing imports rose from 0.1% in 2001
to 4.3% in 2006. By contrast, China’s share increased from 11.0% to 27.1% over the
same five year period. The second largest clothing supplier to the United States,
Mexico, saw its share decline from 13.7% to 7.4% between 2001 and 2006.
In 2001, Vietnam was not among the top 25 suppliers of clothing imports to the
United States. Following the passage of normal trade relations, Vietnam was the 20th
largest source of U.S. clothing imports in 2002. In 2003, Vietnam jumped to 5th in
the list of leading clothing suppliers for the United States. However, following the

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imposition of import quotas, Vietnam’s ranking dropped to 7th in 2005, only to
rebound to 5th in 2006 — behind (in order) China, Mexico, Indonesia, and India.
Top Clothing Imports
While Vietnam may be only the 5th largest overall supplier of clothing imports
for the United States with a share of 4.3%, it is possible that it may be a dominant
supplier of select categories of clothing. However, an examination of U.S. import
data at the four-digit level of the HTS code does not find evidence of submarket
dominance by Vietnam. Even in the few categories where it is among the top three
sources for U.S. imports, Vietnam rarely provides more than 10% of the total
imports.
For Chapter 61 of the HTS code, which includes “articles of apparel and
clothing accessories, knitted or crocheted,” there were six subcategories at the four-
digit level in which Vietnam was one of the top three suppliers in 2006 (see Table
8). For Chapter 62, “articles of apparel and clothing accessories, not knitted or
crocheted,” there were five such subcategories.
Table 8. Leading U.S. Clothing Imports from Vietnam by Share
of Total Imports by Category, 2006
HS
Value
Import
Description
Code
(U.S. $ Millions)
Share
Chapter 61 - Knitted or Crocheted Clothing
6101
Men’s & Boys’ Coats
49.962
7.4%
6102
Women’s & Girls’ Coats
69.109
8.3%
6106
Women’s & Girls’ Shirts & Blouses
117.536
9.0%
6111
Babies’ Garments & Clothing
53.571
3.3%
6113
Garments made of fabric impregnated
17.010
10.3%
with plastic, rubber or for theatrical
scenery
6114
Garments, N.E.S.
62.165
6.4%
Chapter 62 - Not-Knitted or Crocheted Clothing
6201
Men’s & Boys’ Coats
191.241
12.9%
6202
Women’s & Girls’ Coats
140.952
8.0%
6209
Babies’ Garments & Clothing
41.542
6.5%
6210
Garments made of fabric impregnated
99.495
9.6%
with plastic, rubber or for theatrical
scenery
6216
Gloves & Mittens
15.253
7.5%
Source: Global Trade Atlas
It is worth noting that only one of the 11 clothing submarkets in which Vietnam
was a major source of U.S. imports in 2006 — HS 6106 — significantly overlaps
with the clothing categories being monitored by the DOC’s monitoring program. For
most of the categories being monitored, Vietnam was generally not among the top 10

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suppliers for the United States and/or Vietnam’s market share was below 3%. Two
exceptions in Chapter 61 were men’s and boys’ knitted or crocheted shirts, where
Vietnam ranked 5th and provided 6.2% of the imports; and men’s and boys’ knitted
or crocheted sweaters, where Vietnam ranked 7th and provided 3.9% of the imports.
Also, the main competitors to Vietnam in the U.S. clothing import market are
not generally the Dominican Republic-Central America Free Trade Agreement
(DR-CAFTA) nations, but China and other Asian nations. For the 11 submarkets
listed in Table 8, Guatemala, Honduras, and Mexico are the only American nations
that appear among the top five suppliers for the United States, and in only three of
those submarkets.88 This provides some support for the view that limiting clothing
imports from Vietnam would probably result in production being shifted to other
Asian sources, rather than to manufacturers in the United States or elsewhere in the
Americas.
Recent Trends in U.S. Clothing Production
Recent trends in the gross output of the U.S. clothing industry provide an
ambiguous picture of the possible effect of the recent rise in clothing imports from
Vietnam (see Figure 3). Between 1997 to 2004, there was a general decline in the
value of U.S. clothing production that corresponded with the period of most rapid
growth in the clothing imports from Vietnam. In 2005, U.S. clothing production rose
slightly, at the same time that the growth in clothing imports from Vietnam slowed
down. Both of these trends were generally consistent with the argument that clothing
imports from Vietnam were displacing clothing manufactured in the United States.
However, there are aspects of the recent trade trends that raise doubts about a
causal link between the rise in clothing imports from Vietnam taken alone and the
decline in U.S. clothing production. First, the decline in U.S. production predates the
end of the U.S. trade embargo on Vietnam, indicating that other factors may be
involved. Second, the decline in U.S. production between 2000 and 2004 — over $30
billion — is nearly 13 times the size of the increase in clothing imports from Vietnam
during the same time period — another possible indication that other factors may be
responsible for the decline in U.S. clothing production. Third, both U.S. clothing
production and clothing imports from Vietnam rose in 2005, which is contrary to the
relationship expected if clothing imports from Vietnam were causing a decline in
U.S. production. Finally, because its has been a relatively short period of time since
Vietnam has been allowed to export clothing to the United States, it is difficult to
demonstrate any reliable trends or conduct time series analysis that will provide
statistically significant results.
88 Mexico and Guatemala for HS 6114, Mexico and Honduras for HS 6210, and Honduras
for HS 6216.

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CRS-35
Figure 3. Gross Output of U.S. Clothing Industry and U.S. Imports of
Clothing from Vietnam, 1995-2005
90
80
70
60
ns
io 50
ill
40
.S. $ B
U 30
20
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
U.S. Clothing Production
U.S. Clothing Imports from Vietnam
Source: Bureau of Economic Analysis, U.S. Department of Commerce; Global Trade Atlas.
Implications for Congress
The completion of the first review by the Department of Commerce of its
monitoring program provided little resolution or clarity to a number of questions
raised about the authority and the necessity of establishing such a monitoring
program. The DOC press release appears to have been carefully worded to avoid a
flat denial that there was evidence of dumping by Vietnam, while simultaneously
providing possible grounds for the continuation of the monitoring of selected
Vietnamese clothing imports. In addition, there is sufficient ambiguity in the
language of the press release to allow the DOC to amend or alter the categories of
Vietnamese clothing imports it monitors, if it chooses to do so.
For Congress, there are several aspects of the current status of U.S.-Vietnamese
trade relations for clothing that might be examined. First, the Department of
Commerce has not publically responded to requests from some members of
Congress, the Vietnamese government, and some major U.S. clothing importers for
the legal basis for establishing the monitoring program. The Federal Register
announcement of the creation of the monitoring program did not include the usual
federal law citation establishing the authority to create the program. Congress could
act to revisit the question of DOC’s legal authority for establishing the monitoring
program.
Second, there was concern by several members of Congress that the current U.S.
trade policy towards Vietnam’s clothing imports may violate both the spirit and the
letter of the U.S. commitments to other WTO members. As such, Congress might
act to review the monitoring program to decide whether or not it violates existing

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CRS-36
WTO agreements, exposing the United States to the risk of a formal complaint from
Vietnam.
Third, Congress could investigate Vietnam’s compliance with its promise to
terminate all WTO-prohibited subsidies to its clothing and textile industry. As
indicated by their submitted comments on the monitoring program, some U.S. textile
manufacturers are concerned that Vietnam is not living up to its promise, and
continues to use direct and indirect subsidies to support its clothing exports. Such
an investigation might also include research into Vietnam’s labor market to ascertain
if the Vietnamese government is suppressing the wages of clothing and textile
workers below fair market values.
Fourth, possibly based in part of the results the investigation mentioned above,
Congress could choose to pass legislation designed to counteract perceived unfair
trade practices by Vietnam in its export of clothing to the United States. The
proposed legislation might incorporate provisions that would make it easier to initiate
anti-dumping or countervailing duty investigations in cases involving non-market
economies, such as Vietnam.
Fifth, Congress may decide to consider the claims of major clothing retailers and
importers that the monitoring program has stunted trade with and investments in
Vietnam, thereby possibly causing them economic harm. The DOC review was
designed to examine trade data to determine whether or not there was sufficient
evidence to self-initiate an antidumping investigation against Vietnam. It did not
analyze the trade data to determine if the program had distorted trade during its first
six months of operation.
Sixth, Congress could also investigate the administration and operation of the
monitoring program to determine if it is correctly identifying the types of clothing in
which there might be possible dumping by Vietnam. Among the criteria typically
considered as being necessary conditions for proof of possible dumping are below
market prices and significant market share. In its review of clothing imports from
Vietnam, the DOC reported rising unit prices and implied that prices were
comparable to other clothing suppliers. As for market share, some experts assert that
unless a supplier provides more than 4% of the overall supply of a product, it cannot
cause sufficient harm to substantiate dumping claims. At present, there are very few
categories of clothing for which Vietnam achieves the market threshold level.
Finally, Congress might decide to allow the current trade policies to continue
and review the monitoring program to see if there are any significant changes in its
scope, methodology or approach over the next six months. One criticism previously
raised with the biannual review process was the problem of the seasonal nature of the
global clothing market. By continuing the monitoring program for a full year, some
the seasonal characteristics of the clothing market can be better factored into the
analysis of the collected trade data.

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