Navigating a new world order: Marco Breu on trade remapping in Southeast Asia
Entrepreneur and investor Marco Breu has 25 years at McKinsey under his belt. After establishing and leading their Southeast Asia office, he now serves as a Senior Advisor to Syre on public sector and SOE work in Vietnam. To say the least, he has extensive experience from Southeast Asia's private and public sectors, unlocking growth by driving transformation and new possibilities. We asked him about the impact of trade remapping and regionalization of value chains on the textile industry.
How would you describe the current state of circularity in Southeast Asia — especially in Vietnam — and where does the textile industry stand in all this?
"Vietnam has been pretty shaken up by the tariffs and has made it abundantly clear that diversification of exports is critical. At the same time, it is also critical to move up from simple production and manufacturing to more value-added production. Competing at the low-skilled or low-technical level of the value chain is not what Vietnam wants to be positioned in. Hence, propositions that are at a higher technological level, more green, more sustainable, and also circular are sought after and definitely a priority. Vietnam has also pretty stiff targets on CO2 reduction, becoming closer to being carbon neutral without very clear action plans in place on how to achieve such a lofty goal. So again, propositions that support such a goal are welcome and companies seeking to invest in such solutions should be received with open arms."
In your eyes, how will economies in key textile-producing markets be impacted by the ongoing trade remapping?
“First of all, it is anyone’s guess how that remapping really happens, what it includes, whether countries are being treated relatively equally by the U.S. or getting into a variety of different agreements. Surely, announcements have been based on an underlying ‘shock and awe strategy’ and the ultimate outcome could still be quite different. Nevertheless, the confidence in the U.S. as a reliable trading partner has certainly been shaken and some of the benefits of producing at low cost might be reduced. So, for certain technologies and products, production onshoring in the U.S. will be reconsidered. However, for most of the trade it will still not be an option. So, as a company I would rebalance my dependence on the U.S. as much as possible. For what’s being exported I would look carefully into my global footprint and perhaps rebalance where I can see fewer tariffs between the U.S. and that country. I would also decompose my production chain and see how and where to produce in the most effective way, further rebalancing capacities. Some countries in Asia, including Vietnam, should be quite worried in the mid- to long run, should trade go back to a complex net of tariffs and taxes.”
There is talk of change within and regionalization of value chains, is that something you see playing out on the ground?
“Most definitely. Vietnam has benefited and is still benefitting a lot from the rebalancing of global footprint and diversification from China, simply for its geopolitical location/proximity, its productive, reasonably priced labor, and its relatively stable political situation. I believe this will continue. At the same time, unless Vietnam manages to negotiate a trade agreement with the U.S. that puts it into equal standing with other emerging markets, it might see a strong headwind coming. On the other hand, a diversification of exports into other markets and a focus on collaborations should be accelerated to stabilize foreign direct investments and the competitiveness of its export industry.”
Interested in a European perspective? Read the interview with Global Fashion Agenda’s María Luisa Martínez Díez