The epidemic three years ago and international trade frictions intensified, making foreign trade business more and more difficult, labor costs increased year by year, and freight rates continued to rise, but this gave Southeast Asian countries an opportunity to take advantage!
Vietnam is the big winner!
In the first half of the year, 50% of apparel exports went to the United States, with total shipments reaching US$17 billion.
Of the total export value in the first half of this year (H1) of US$17.875 billion, Vietnam exported more than 50% of its clothing to the United States. According to an analysis of export data, about 78% of the country’s clothing is exported to five countries including Japan, South Korea, China and Canada. Japan is the country’s second largest market.
According to FTF market data, Vietnam’s apparel exports to the United States from January to June 2022 were worth US$9.094 billion, accounting for 50.88% of the total exports of US$17.875 billion in the same period.
During the period under review, exports to Japan were $1.635 billion (9.15%), South Korea was $1.556 billion (8.71%), China was $793.371 million (4.44%), and Canada was $732.067 million (4.10%). Germany, the United Kingdom, France, the Netherlands, Australia, Belgium and Switzerland are other markets for Vietnam, with export volumes exceeding 1% each.
Last year, the United States was the largest importer of Vietnamese clothing, with huge profits. According to FTF data, Vietnam exported clothing worth US$14.284 billion in 2021, accounting for 45.78% of its total exports of US$31.201 billion. By 2021, exports to Japan will be US$3.450 billion (11.06%), South Korea will be US$3.294 billion (10.56%), China will be US$1.734 billion (5.56%), and Canada will be US$1.199 billion (3.84%).
Strong consumer demand in North America and the transfer of some purchase orders
Fueling surge in trade between U.S. and India
According to the JOC report, during the epidemic, strong consumer demand in North America and the transfer of some purchase orders drove a surge in trade between the United States and India.
Bhavik Mota, Maersk’s regional sea freight management director for Central and Western Asia, said that even if economic growth slows down, U.S. importers’ “China-plus-one” sourcing strategy will continue to bring benefits to Indian manufacturers. (The China-Plus-One strategy is a business strategy that avoids investing only in China and diversifies its business into other countries.)
“In the first half of 2022, despite rising inflation concerns and the impact on consumer behavior in Western markets, we saw continued demand for goods from India to North America,” Mota said.
Data from PIERS, a unit of S&P Global, showed that container traffic between India and the United States increased by 8.3% year-on-year in the first half of 2022, after surging 23.5% in all of 2021.
Much of this growth was driven by U.S. imports from India, which accounted for about two-thirds of the 1.16 million TEU shipped between the two countries in the first half of this year. Import freight volumes from India increased by 12.4% in the first half of this year after surging 31.4% in 2021, while outbound freight volumes from the United States to India increased by 1.1% in the first half of this year after rising by 10.5% last year.
Data from the Indian Ministry of Commerce shows that in the fiscal year 2021-2022 (as of March this year), total merchandise trade between India and the United States increased by 48.3%, reaching a record high of US$119.42 billion, pushing the United States to become India’s largest trading partner.
Daniel Krassenstein, global supply chain director of US industrial packaging manufacturer ProconPacific, said that China is still the world’s largest production center, but tariff conflicts, the impact of the epidemic and rising labor costs are slowly eroding China’s dominant market position. He added that increased industrial productivity due to automation and worker training has helped reduce manufacturing costs in India, especially for “labour-intensive” consumer goods.
An executive at a Mumbai-based apparel manufacturer who declined to be named noted that U.S. importers had been seeking to reduce their reliance on Chinese manufacturing long before the epidemic triggered a surge in U.S. consumer demand.
“For example, China’s apparel exports to the United States fell by 24.2% in January 2022 compared with the same period in 2019, while U.S. imports from India surged by 53.4%,” the executive said. U.S. fashion companies may find it operationally unfeasible to source many apparel products from China as U.S. Customs and Border Protection will issue an enforcement strategy for Chinese labor, which is expected to further boost demand potential for Indian goods.”
Additionally, major ocean carriers have increased capacity between the United States and India in response to increased demand. Sunil Vaswani, executive director of the Container Shipping Lines Association, which represents foreign carriers operating in India, said: “India’s exports have grown in the past two years due to increased efforts to reship empty containers back to India and the introduction of additional capacity by shipping lines. ”
Among the leading shipping lines operating the India-US trade route, MSC and Maersk recorded the largest increases in terms of cargo volume, the JOC report said. In the first half of 2022, MSC handled 34.1% of U.S. imports from India, up from 20.8% in the same period in 2020, as cargo volumes increased by 178.3%. In addition, Maersk’s share jumped from 9.5% in 2020 as cargo volume increased by 212.3%.rose to 17.5%.
Southeast Asia’s advantages are highlighted
But there is still a gap with China, so we need to be prepared for danger in times of peace.
It is reported that the “China Plus One” strategy is a business strategy to avoid investing only in China and diversify its business into other countries. Over the past 20 years, Western companies have invested in China due to low production costs and a huge domestic consumer market. But as rising operating costs in China increase operating costs, the initial advantages of cheap labor and market demand provided by China are slowly being overshadowed by what ASEAN countries can offer.
The benefits include cost control, risk diversification, and access to new markets in the economy. But the strategy comes with its own difficulties, including adapting to new laws, new markets and streamlining operations in multiple locations. Moreover, it is unrealistic to completely leave China now. The China Plus One strategy has also brought benefits to China, allowing it to develop high value-added industries while maintaining low-end manufacturing. However, it does reduce the amount of manufacturing growth, giving the rest of the economy a chance to prosper.
All in all, in recent years, Southeast Asia’s advantages have gradually become more prominent, and it has received support from many countries, and its export volume has also increased. We also have to pay attention to this. Southeast Asia has developed rapidly in recent years. Although Southeast Asia is still far behind China, we should be prepared for danger in times of peace. The lessons of history tell us that we cannot underestimate any opponent, let alone belittle oneself, and cannot be arrogant.
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