Three years ago, the outbreak of COVID-19 and international trade frictions intensified, making foreign trade more and more difficult to do. Labor costs increased year by year, and freight costs rose slowly, which gave Southeast Asian countries an opportunity to take advantage of!

Vietnam is the big winner! In the first half of the year, 50% of garment exports went to the United States

Total shipments were $17 billion

Vietnam exported more than 50 percent of its apparel to the United States out of total exports of $17.875 billion in the first half of this year (H1). About 78 per cent of the country's clothing exports go to just five countries: Japan, South Korea, China and Canada, according to an analysis of export data. Japan is the country's second-largest market.

According to FTF market data, the value of Vietnam's apparel exports to the US in January-June 2022 was $9.094 billion, accounting for 50.88% of total exports of $17.875 billion in the same period.

During the period under review, exports to Japan stood at $1.635 billion (9.15 percent), Korea at $1.556 billion (8.71 percent), China at $793.371 million (4.44 percent), and Canada at $730.67 million (4.10 percent). Germany, the United Kingdom, France, the Netherlands, Australia, Belgium and Switzerland are Vietnam's other markets, each with more than 1% of exports.

Last year, the United States was the largest importer of Vietnamese clothing, which is highly profitable. According to FTF, Vietnam exported apparel worth $14.284 billion in 2021, accounting for 45.78% of its total exports of $31.201 billion. By 2021, exports to Japan amounted to $3.45 billion (11.06 percent), South Korea to $3.294 billion (10.56 percent), China to $1.734 billion (5.56 percent) and Canada to $1.199 billion (3.84 percent).

North American consumer demand and part of the purchase order shift

Driving a surge in trade between the United States and India

According to the JOC report, strong consumer demand in North America and a shift in some purchase orders have driven a surge in trade between the US and India during the pandemic.

Bhavik Mota, Maersk's head of regional shipping management for Central Asia, said the China-plus-one sourcing strategy of US importers would continue to benefit Indian manufacturers even if economic growth slowed. (The China-plus-One strategy is a business strategy to avoid investing exclusively in China and diversify into other countries.)

"In the first half of 2022, we have seen sustained demand for goods from India to North America despite rising inflation concerns and their impact on consumer behavior in Western markets." Mota said.

Container traffic between India and the US rose 8.3 per cent year-on-year in the first half of 2022, after surging 23.5 per cent for the whole of 2021, according to S&P Global's PIERS.

Much of that growth has been driven by US imports from India, which accounted for about two-thirds of the 1.16 million TEU of cargo shipped between the two countries in the first half of this year. Import cargo volumes from India rose 12.4 percent in the first half of the year, after surging 31.4 percent in 2021; Outbound shipments from the United States to India rose 1.1 percent in the first half of this year, after a 10.5 percent increase last year.

Total merchandise trade between India and the United States rose 48.3 percent to an all-time high of $119.42 billion in the 2021-22 fiscal year (ended March this year), pushing the United States to become India's top trading partner, commerce Ministry data showed.

China remains the world's largest production center, but tariff conflicts, the impact of the pandemic and rising labor costs are slowly eroding its dominant market position, said Daniel Krassenstein, head of global supply chain at Procon Pacific, a U.S. industrial packaging maker. He added that increased industrial productivity due to automation and worker training was helping to reduce manufacturing costs in India, especially for "labor intensive" consumer goods.

An executive at a Mumbai-based garment manufacturer, who asked not to be named, noted that American importers had been looking to reduce their reliance on Chinese manufacturing long before the pandemic triggered a surge in consumer demand in the United States.

"For example, China's garment exports to the US fell 24.2 per cent in January 2022 compared with the same month in 2019, while US imports from India surged 53.4 per cent," the executive said. "Us fashion houses may find it operationally unfeasible to source many of their clothing products from China as the US Customs and Border Protection is set to release its enforcement strategy on Chinese Labour, which is expected to further boost the potential demand for Indian goods."

In addition, major ocean carriers have increased capacity between the United States and India to cope with increased demand. Sunil Vaswani, executive director of the Container Line Association, which represents foreign carriers operating in India, said: "Exports from India have grown over the past two years due to increased efforts to re-ship empty containers back to India and the introduction of extra capacity by shipping companies."

In terms of cargo volume, MSC and Maersk saw the largest increase among the leading shipping lines operating Indo-US trade routes, JOC reported. MSC handled 34.1 percent of US imports from India in the first half of 2022, up from 20.8 percent in the same period of 2020, due to a 178.3 percent increase in cargo volume. Maersk's share jumped to 17.5% from 9.5% in 2020, thanks to a 212.3% increase in cargo volume.

Southeast Asia highlights its advantages

However, there is still a gap with China

The "China Plus One" strategy is known to be a business strategy to avoid investing only in China and diversify into other countries. Western companies have invested in China over the past two decades because of low production costs and a large domestic consumer market. But as the rising cost of doing business in China increased operating costs, the initial advantages of cheap Labour and market demand that China offered were slowly eclipsed by the advantages that ASEAN countries could offer.

The benefits include cost containment, risk diversification, and new market access to the economy. But the strategy has its own difficulties, including adapting to new laws, new markets and a leaner presence in multiple locations. And it's not realistic to leave China altogether. The China plus one strategy has also benefited China, which has been able to develop high value-added industries while maintaining low-end manufacturing. However, it does reduce the amount of manufacturing growth, giving other economies a chance to prosper.

In short, in recent years, the advantages of Southeast Asia have gradually become prominent, and it has won the support of many countries, and the export volume is also increasing. To this, we have to pay attention. Southeast Asia has developed rapidly in recent years. Although there is still a gap between Southeast Asia and China, we should be mindful of danger in times of peace. The lesson of history tells us that we should not look down on any opponent, not to belittle ourselves and not to be arrogant. Although Southeast Asia is far from China at present, it is likely to match or surpass China in the future.