Strength in cotton spinning in Vietnam benefits US exports

For the sixth year Vietnam’s demand for raw cotton has increased. United States is responsible for about 50% of Vietnam’s imports YTD, a 10% increase from the last 3 years.

China’s now-ended cotton price support program required that the state reserve purchase large amounts of cotton, which drove up cotton prices in China relative to global levels. As a result of this uncompetitive pricing, a wave of Foreign Direct Investment flowed into Vietnam’s spinning sector.

With ASEAN-China Free Trade Agreement, Vietnam-produced cotton yarn has duty free access to China, versus a 40 percent above-quota duty on raw cotton. Many Chinese-owned mills relocated to Vietnam, spinning the same yarn using the same (mostly U.S.) cotton, then shipping the yarn to China. About half to two-thirds of Vietnam’s cotton imports are spun in foreign-owned mills, with much of it exported to China.