In the past, the trade relations between Australia and China were just amazing and always maintained a year-on-year growth. Both nations traded numerous products and services to and from each other worth billions and concluded their bilateral trade on a positive note each year. Unfortunately, trade tensions crept into the bilateral trade relations between Australia and China due to which things got worse, and by 2020-21, the trade between both nations declined significantly.
You might be thinking that what happened in the year 2020-21 that created these trade differences between both countries. So, in the year 2020, China applied several strict trade rules on multiple Australian exports such as seafood, coal, barley, and wine due to which Australia was facing difficulties in getting its products sanctioned. With this, the Australian services exports also got collapsed and thus declined such as education and tourism because of strict Covid-19 policies.
Out of all the major Australian Exports, Cotton exports from Australia to China also got interrupted and as a result, the Australian cotton producers started looking for alternative countries options to whom they can export their produce at a decent profit margin. After a lot of research, the next best fit for cotton exports from Australia was none other than Vietnam. Let’s understand this shift in chronological order.
AUSTRALIAN COTTON PRODUCERS CHOSE VIETNAM OVER CHINA – CHRONOLOGICAL INSIGHTS
Soaring trade tensions between Australia and China let Australian cotton producers diversify and look for other best markets across the globe in order to supply their produce to them. During their lookout, they found Vietnam as the best option for exporting cotton.
With this, Vietnam became the largest and biggest importer of Australian cotton from the year 2020. During the year 2020-21, the Vietnam Import Data registered cotton imports from Australia worth USD 555 million which was more by almost 900% when compared with the year 2019-20.
The point to be noted is that the trade tensions between Australia and China are not the only cause behind this shift. There are multiple reasons that make Vietnam a better option as compared to China. Some of them are:
- Cheap and efficient labor
- Free trade agreement
- Accessible location
- Growing demand for garments and apparel
TREND IN WHICH THE SHIFT IS OBSERVED OF AUSTRALIAN COTTON TO VIETNAM
Below is the table that depicts how Australian producers shifted their export preference from China to Vietnam in past years and how Vietnam Trade Data values started to increase.
|AUSTRALIA’S CHANGE OF PREFERENCE, I.E., FROM CHINA TO VIETNAM
|COTTON EXPORTS TO VIETNAM
|COTTON EXPORTS TO CHINA
|USD 1.17 billion
|USD 75.06 million
|USD 615.99 million
|USD 76.86 million
|USD 54.46 million
|USD 169.13 million
|USD 80.96 million
|USD 775.32 million
|USD 346.66 million
|USD 223.74 million
|USD 284.98 million
|USD 249.18 million
|USD 173.03 million
|USD 346.49 million
As per the table, the value of cotton imports as per the Vietnam Import Data report is the highest, whereas the exports to China are the lowest in the year 2022. This shows that there is a considerable amount of shift in the momentum of the Australian exporters.
WHAT ARE THE THREE MAJOR AGREEMENTS THAT ARE BACKING COTTON EXPORTS FROM AUSTRALIA TO VIETNAM?
There are three FTAs that are motivating Australian cotton exporters to export their produce to Vietnam. They are as follows:
- ASEAN-Australia-New Zealand FTA (AANZFTA)
- Regional Comprehensive Economic Partnership (RCEP)
- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
These agreements serve as a better reach to Vietnamese for accessing the raw items that are to be used in producing goods. In a nutshell, on the one hand, Australia has the skill to produce raw materials in abundance, and on the other hand, Vietnam has the world’s most efficient and skilled labor. Due to these characteristics, there comes a perfect win-win condition for both countries.
PEOPLE OF VIETNAM ARE GETTING USED TO AUSTRALIAN COTTON
It has been observed that the demand for Australian Cotton is rising in Vietnam which is also encouraging Australia to export cotton in huge quantities. As it is known that Vietnam is one of the primary sources of apparel and garment exports and it is estimated that in the year 2023, the exports of these items would touch USD 46-47 billion. Due to this fact, Vietnam is on the list of the largest cotton-importing nations in the world after China and Bangladesh.
Moreover, the location of Vietnam is also one of the best things that promote trade between Vietnam and other nations and helps to keep up with Vietnam Export Data and Vietnam Import Data as it shares most of its coastline with the South China Sea which is the most common sea route for the majority of trade deals.
LIFE EXPECTANCY OF THE TRADE BETWEEN AUSTRALIA AND VIETNAM – OUR LAST VERDICT
According to the ongoing situation between Australia and China, and the growing cotton trade between Australia and Vietnam, it is assumed that Australia will keep up with Vietnam for some time.
The market of Vietnam has proved to be the growth aspect for the cotton merchants of Australia. The trade tensions with China accompanied by a plethora of benefits with Vietnam have been successful in replacing China with Vietnam as the largest Australian cotton export market.
Till now, both nations, i.e., Vietnam and Australia have benefitted from the trade and there are few chances that this relationship will end soon.
Source URL: https://medium.com/@tradeimex11/why-has-vietnam-become-the-largest-cotton-importer-from-australia-747a1a621285