Over the last fifteen years, Vietnam has emerged as a leading example of how effective trade policies can foster industrial development, particularly within the clothing industry. This evolution is largely attributed to a strategic emphasis on Free Trade Agreements (FTAs), a focus on export-driven manufacturing, and integration into global supply chains. Sri Lanka stands to gain significant insights from Vietnam’s journey, which can be tailored to fit its own unique circumstances.
The advancements made by Vietnam become increasingly apparent when compared to Sri Lanka’s existing trade landscape. Historically, Vietnam has leveraged trade policy as a targeted growth mechanism, successfully negotiating 19 bilateral and multilateral FTAs that encompass roughly 60 countries. This strategic approach has resulted in a substantial increase in trade openness, rising from 19% of GDP in 1988 to 184% in 2022. Trade openness, which reflects the ratio of a nation’s international trade to its GDP, indicates a higher level of integration into global markets. In contrast, Sri Lanka’s trade openness is estimated to be between 50% and 55%, suggesting a lesser reliance on international trade and a more inward-focused economic growth strategy.
Vietnam’s extensive network of FTAs includes significant 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 pacts with countries like the UK, Israel, and the UAE. Collectively, these agreements provide Vietnam with access to crucial markets, including the EU, UK, Japan, Canada, Australia, China, South Korea, and ASEAN nations, which together represent a substantial portion of global GDP. This broad market access has reinforced Vietnam’s status as a dependable global sourcing center. Consequently, Vietnam’s apparel exports are expected to reach USD 46 billion by 2025, supported by a trade surplus of USD 21 billion. The growth trajectory has also been bolstered by the “China+1” strategy, as international brands diversify their sourcing away from China.
Over the past 15 years, Vietnam’s apparel exports have surged from $13 billion to $45 billion, reflecting a remarkable increase of 250%. In contrast, Sri Lanka’s apparel export growth has been more modest at just 58%, rising from $3.4 billion to $5.4 billion.
The effective negotiation and implementation of these numerous trade agreements in Vietnam are facilitated by a centralized and technically proficient negotiation framework that is politically supported. The lead negotiator operates at the deputy-ministerial level, ensuring authority across various ministries. For significant bilateral discussions, such as those with the U.S., Vietnam assembles specialized teams composed of multiple ministries, led by a full minister. This organizational structure contributes to Vietnam’s success in negotiating 19 FTAs with over 60 countries and achieving deep integration into global value chains.
Similar to Sri Lanka, Vietnam exports approximately 40% of its apparel to the United States. Although neither country had an FTA with the U.S. until recently, Vietnam successfully negotiated a tariff agreement following the introduction of reciprocal tariffs in April 2025, ensuring favorable market access to the U.S. Furthermore, there are three distinct trade agreements between Vietnam and Japan, facilitating a seamless flow of trade and significant Japanese investments into Vietnam.
In addition to Japan, Vietnam has established long-standing trade agreements with major markets such as the EU, the UK, and South Korea, further enhancing its apparel export capabilities.
While Sri Lanka cannot simply replicate Vietnam’s achievements, it can extract essential lessons from Vietnam’s experience. Access to markets through FTAs is only beneficial when coupled with stable policies, readiness for investment, and the ability to respond to market needs. To effectively utilize FTAs, Sri Lankan firms must adapt their sourcing and compliance strategies. Currently, Sri Lanka generates approximately USD 5 billion in apparel exports and provides jobs for about 350,000 individuals. However, to achieve higher targets, it is essential to refine its FTA strategy and make trade policies more accessible.
Strategic Recommendations
To fully capitalize on the benefits of FTAs, Sri Lanka should prioritize the following:
- Establish a dedicated team focused on the identification and negotiation of FTAs.
- Pursue FTAs with markets capable of driving strategic investments and serving as viable destinations for Sri Lanka’s export portfolio.
Vietnam’s experience illustrates that aligning trade access with investment, infrastructure, skill development, and sustainability enhances a nation’s position within global supply chains. Sri Lanka has the potential to emerge as a high-value, ethical apparel partner, but it must strategically leverage FTAs and bolster its competitiveness. As the Joint Apparel Association Forum (JAAF) and stakeholders in the apparel sector chart their futures, adopting a cohesive national approach that recognizes the industry’s growth potential is vital. The challenge lies in establishing the conditions necessary for the sector to flourish in its next development phase.
