Vietnam Could Replace Taiwan As A Bike Builder

HANOI, Vietnam—Bike companies may have another offshore manufacturing option if Congress approves legislation to normalize trade relations with Vietnam.

Legislation to reduce the punitive tariffs passed through the House this year, and Congress is expecting a bilateral trade agreement from President George W. Bush to seal the deal.

A handful of American companies are already in Vietnam, manufacturing for the European market, and more than 30 Taiwanese companies have opened shop there.

Though many are using Vietnam to compete with Taiwan for European market share, some said the country could compete with China, which ships the lion's share of U.S. imports.

"In sporting goods, companies have been going there for years, mostly for the Canadian and European markets. Labor rates are better than the Philippines and more on par with China," said Duncan Robins, Watermark's gear president and former Yakima chief executive officer.

Momentum toward normal trade with Vietnam has been growing since President Bill Clinton lifted the trade embargo in 1994 and opened the U.S. Embassy in Hanoi in 1996.

Last year the United States signed an agreement with Vietnam to normalize trade relations in exchange for the country opening its doors to more American products. In August the White House tentatively granted rights to three U.S. air carriers to provide service to Vietnam.

Currently U.S. companies can import from Vietnam but they must pay 40 percent tariffs on average—10 times the normal rate.

A lack of bicycle infrastructure could prevent foreign investment. But the country has been bringing itself up to speed, spending $4.5 billion on development projects in the first half of 2001.Vietnam granted 200 foreign projects this year with a combined registered capital of $968 million.

By manufacturing in Vietnam, companies avoid anti-dumping tariffs the European Union placed on products coming from China. Schwinn opened a Vietnam factory partially for this reason.

Kenda's Vietnam factory is producing an increasing number of tires and tubes, said Jim Wannamaker, Kenda's bicycle division product manager.

But bike companies jumping to Vietnam could represent a negative trend, Wannamaker said.

"The industry keeps moving around the world, looking for lower manufacturing costs. Unlike the auto industry which has established manufacturing countries, the manufacturing of bicycles is like a caravan of traveling circuses," Wannamaker said.

"Is this good for the industry? Not in my opinion. Our industry has seen numerous product recalls probably due to pressure to bring products to the market faster and cheaper. Sometimes the vendors are new and untried—rookies make mistakes. Sometimes an established vendor is forced to cut corners to stay afloat. "This country-hopping behavior prevents long-term vendor relationships, which are crucial to product improvement," Wannamaker said.

Others are skeptical of bike production in Vietnam. Sandy Liman, K2's bike division head, said some of K2's partners use Vietnamese factories.

"Can they make bikes in Vietnam? Yes. How do I feel about it personally? Fine. Can they make what American IBDs are looking for? No," Liman said.

President Bush will give Congress the necessary bilateral agreement to vote on soon, and congressional approval is expected. Many Senators have said improving trade relations will improve political relations.