Trade between Vietnam and Japan

Item: Textiles

● About Vietnam's textile industry

Textile and garment is the most labor-intensive industry in Vietnam with more
than 2.5 million people, accounting for 25% of the workforce in the industrial sector
and accounting for 17% of Vietnam's exports. 8% to GDP.

Of the nearly 6,000 companies currently operating in Vietnam's textile and

garment industry, 2% are state-owned enterprises, 15% are foreign-invested
companies and 83% are private companies. Although accounting for a small
proportion in number, state-owned enterprises are the dominant sector and act as a
gateway for foreign companies to exploit Vietnam's cheap labor force.

In recent years, the production value, output and export turnover of the textile and
garment industry have continuously increased.

● About the Japanese textile market

Japan is the second largest market in the world for textile consumption with a
value of about 95 billion USD/year (according to Yano Research Institute), of which
the daily fashion market for young women accounts for about 5 billion USD. 60% of
the overall clothing market and is worth about $28 billion. The supply of textiles and
garments to the Japanese market is mainly from imports, accounting for 95% of the
total.

Currently, Japan's domestic production accounts for only about 30% of the total
consumption of textiles and garments in the domestic market. Therefore, the import
demand for textiles in this market is very large. Particularly for garments, this
country's imports in 2017 reached more than 6 billion USD.

With the goal of gradually reducing imports to the Chinese market, in recent
years, the Japanese government has set a goal to reduce imports from China to other
low-cost suppliers, including Vietnam. China's textile and garment market share in
Japan decreased from 90% in 2010 to about 6% in 2017, and Japan's policy to
decrease to about 50% in the next few years and Vietnam is a partner of Japan. Option
to replace.
 Japan is the third largest textile and garment import market of Vietnam,
accounting for more than 13% of the total export turnover of Vietnam's textiles and
garments, second only to the US market and the EU market.

● About trade exchange

- Exporting garments to Japan

In the period from 2010 to 2017, Vietnam's textile and garment exports to Japan
increased by 15.9% per year on average. In 2010 - the first year of implementation of
the Vietnam - Japan Bilateral Partnership Agreement, Vietnam's textile and garment
imports into Japan enjoyed a tax rate of 0%, so the turnover of textiles and garments
into this country reached 1.2 billion VND. increased by 20% compared to 2009,
accounting for about 10% of Vietnam's textile and garment export turnover.

Notably, in 2011 the export value of our country's textiles and garments to Japan
reached the highest level of 46.4%; and in years like 2016 and 2015, the rate slowed
down to only 6.3 and 4.2%/year.

In the first eight months of 2018, textile and garment exports to Japan reached
$2.47 billion, up 25.63% over the same period in 2017.

Year Value Increase/ Share of Vietnam's Share of Japan's

(USD) decrease garment exports (%) apparel imports (%)
over the
same
period (%)

2013 2.380 20,51 13,27 7,38

2014 2.620 10,12 12,53 8,89

2015 2.900 10,69 12,21 10,53

2017 3.110 7,28 11,96 12,53

First 8 months 2.471 25,63 12,51

 of 2018

Source: Compiled from preliminary statistics of the General Department of Customs

and Trademap

Relative supply and relative demand of exported products from Japan and
Vietnam:
According to preliminary statistics from the General Department of Customs, the
textile and garment group consistently ranks first in turnover among goods exported to
Japan. In 2020, Vietnam's textile and garment exports reached nearly US$4.42 billion,
accounting for almost 22% of Vietnam's export turnover. In the opposite direction,
Vietnam has imported a large amount of electronic equipment and components from
Japan, of which imports reached about 7.17 billion USD.
Following, we have the analysis:
Suppose that:
● aLT - aLT*: the unit labor requirement for Garments and textiles in Vietnam and
Japan;
● aLE - aLE*: the unit labor requirement for Computers, electronic products, and
components in Vietnam and Japan;
● QT - QT*: Quantity of Textile produced from Vietnam and Japan.
● QE - QE*: Quantity of Electronic components produced from Vietnam and
Japan.
● PT: Price of the textile
● PE: Price of the electronic component
● L: The total number of labor hours worked in Vietnam
Suppose that:
a¿ a ¿∗¿
➔ < ¿
a¿ a¿∗¿ ¿
PT
➔ The relative price of Textile to Electronic components :
PE
a¿ PT a ¿∗¿
< < ¿
a¿ P E a¿∗¿ ¿
 The point (1) is the intersection of the relative demand curve and the relative
supply curve.
a¿ PT a ¿∗¿
Since < < ¿ -> Vietnam has comparative advantage in Textile and Japan
a¿ P E a¿∗¿ ¿
has comparative in Electronic component.
For at point (1) Vietnam completely specialized in Textile production and Japan
specialized in Electronic components production, trade is taken place because both
Vietnam and Japan are willing to participate in trade.

RCA (Revealed Comparative Advantage):

 Viet Nam Textile and Clothing export from 2000 - 2020 compare with Japan

Viet Nam Textile and Clothing export from 2000 - 2020 compare with Japan

Textile and Clothing Total export values in 2020:

Country Export (US$ Thousand)
Viet Nam 37,104,712.69
World 792,074,446.75

Total export values in 2020:

Country Export (US$ Thousand)
Viet Nam 281,441,457
World 17,063,056,820,50

We have the fomula:

37,104,712.69 792,074,446.75
RCA of Textile and Clothing = ( 281,441,457 )÷ ( 17,063,056,820,50 )=2.840>2.5

=> Textile and Clothing of Vietnam has a very high comparative

advantage.