South Korean fashion firms based in Vietnam are expected to benefit from the free trade agreement (FTA) between the Southeast Asian country and the European Union, which went into effect this month, a report showed Tuesday.
"Under the agreement, clothes producers based in Vietnam can enjoy the benefit of the latest FTA for goods made with South Korean materials," the Korea International Trade Association (KITA) said in its report.
Clothes produced with Chinese materials, on the other hand, cannot enjoy the benefits of the Vietnam-EU trade deal, as the world's No. 2 economy does not have a pact with the union.
South Korea implemented its own FTA with the EU in 2015.
Vietnam's imports of South Korean materials to produce clothes reached $1.7 billion in 2019, accounting for 11.5 percent of the total. Those of Chinese goods reached $6.7 billion, or 58.9 percent.
KITA said exports of South Korean materials to the Southeast Asian nation may also increase down the road on the back of the Vietnam-EU FTA.
The association said the latest deal with Vietnam is expected to increase demand for Vietnamese clothes in Europe as well. Currently, the EU depends on China for 30 percent of its clothes imports, but it slaps tariffs of up to 12 percent.
"Vietnam has been making aggressive moves to open up its markets. It currently holds FTAs with 52 countries and has emerged as the trade hub of Southeast Asia," the KITA report said.
"South Korean firms based in Vietnam should utilize the FTA networks and set up long-term strategies," it added.
Vietnam was the third-largest export destination for Asia's No. 4 economy in 2019, with China and the United States standing as the top two.
South Korea's combined exports to Vietnam in 2019 reached $48 billion, down 0.9 percent from a year earlier. Over the cited period, the country's exports dipped 10.4 percent amid the growing protectionism around the globe and falling prices of memory chips. (Yonhap)