How Vietnam turned FTAs into apparel growth, and what Sri Lanka can learn

In the past fifteen years, Vietnam has become a prime example of how trade policy can drive industrial growth, particularly in the apparel sector. This transformation is the result of a strategic focus on Free Trade Agreements (FTAs), export-oriented manufacturing, and integration into global value chains. Sri Lanka can draw valuable insights from Vietnam's experience, adapting them to its unique context.

Vietnam’s progress becomes even clearer when viewed against Sri Lanka’s current trade profile. Over the past several decades, Vietnam has used trade policy as a deliberate growth tool, implementing 19 bilateral and multilateral FTAs that cover around 60 economies. This has helped deepen its trade openness from 19% of GDP in 1988 to 184% in 2022. Trade openness measures the value of a country’s international trade as a share of GDP, and a higher ratio generally reflects stronger integration with global markets. By comparison, Sri Lanka’s trade openness is estimated at around 50% to 55%, indicating that international trade plays a smaller role in the economy and reflecting the country’s more inward-looking growth pattern.

Vietnam’s FTA network includes major agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the EU-Vietnam Free Trade Agreement (EVFTA), the Regional Comprehensive Economic Partnership (RCEP), and bilateral agreements with markets such as the UK, Israel, and the UAE. Collectively, these agreements give Vietnam access to key markets including the EU, UK, Japan, Canada, Australia, China, South Korea, and ASEAN countries, covering a major share of global GDP. This wide market access has strengthened Vietnam’s position as a reliable global sourcing hub. As a result, Vietnam’s apparel exports are projected to reach USD 46 billion by 2025, supported by a trade surplus of USD 21 billion. Its growth has also been reinforced by the “China+1” strategy, as global brands continue to diversify sourcing beyond China.

In the past 15 years, Vietnam’s apparel exports have grown from $13bn to $45bn an increase of 250%. By contrast, Sri Lanka’s apparel exports have grown just 58% from $3.4 to $5.4bn.

In order to successfully negotiate and implement these numerous trade agreements, Vietnam’s negotiation architecture is highly centralized, technically strong, and politically empowered.

The dedicated chief negotiator sits at deputy-minister level, ensuring authority across ministries.

For major bilateral negotiations (e.g., with the U.S.), Vietnam forms specialized, multi-ministry teams led by a full minister.

This structure is one reason Vietnam has been able to negotiate 19 FTAs covering 60+ economies and integrate deeply into global value chains.

Like Sri Lanka, Vietnam exports some 40% of its apparel to the USA. Whilst neither country until recently had an FTA with the USA, in the wake of the USA Reciprocal Tariffs introduced in April 2025, Vietnam has now reached an agreement with the USA on tariffs ensuring that when the dust settles, Vietnam will have market access to the USA at concessionary tariff rates. 

With Japan, another big market for apparel from Vietnam, there are not one, but three separate trade agreements between the two countries ensuring a free flow of trade between the two countries, including very significant investments from Japan into Vietnam from which this trade flows. 

Similarly, whether its with the EU, the UK or South Korea all major markets for apparel from Vietnam, there are long standing trade agreements in place. 

Sri Lanka's apparel sector cannot merely replicate Vietnam's success but can learn critical lessons. Market access through FTAs is only meaningful with consistent policies, investment readiness, and the capacity to respond to market demands. Effective use of FTAs requires firms to adapt their sourcing and compliance processes. Currently, Sri Lanka generates US 5 billion dollars in apparel exports and employs about 350,000 people, but to reach higher targets, it must improve its FTA strategy and make trade policies more accessible.

Strategic recommendations

To maximize the benefits of FTAs, Sri Lanka should focus on

1. Sri Lanka needs to have a full time dedicated resource for identification and negotiation of FTAs. 

2. FTAs need to be done with markets that can drive strategic investments into the country, and act a market for Sri Lanka’s export basket. 

Vietnam’s experience demonstrates that aligning trade access, investment, infrastructure, skills, and sustainability strengthens positions in global supply chains. Sri Lanka has the potential to become a higher-value, ethical apparel partner, but it must strategically leverage FTAs and enhance competitiveness. As the Joint Apparel Association Forum (JAAF) and the apparel sector plan their future, adopting a national approach that recognizes the industry’s growth potential is crucial. The challenge lies in creating the conditions for the sector to thrive in its next phase.