MARKET WATCH 30 SEPTEMBER, 2015

NATIONAL

INTERNATIONAL

 

Textile Raw Material Price 2015-09-29

Item

Price

Unit

Fluctuation

Date

PSF

1077.01

USD/Ton

-0.72%

9/29/2015

VSF

2072.50

USD/Ton

0%

9/29/2015

ASF

2284.92

USD/Ton

0%

9/29/2015

Polyester POY

995.49

USD/Ton

-2.61%

9/29/2015

Nylon FDY

2524.00

USD/Ton

0%

9/29/2015

40D Spandex

5643.72

USD/Ton

0%

9/29/2015

Nylon DTY

2774.83

USD/Ton

0%

9/29/2015

Viscose Long Filament

5839.68

USD/Ton

0%

9/29/2015

Polyester DTY

1301.19

USD/Ton

-1.19%

9/29/2015

Nylon POY

2351.55

USD/Ton

0%

9/29/2015

Acrylic Top 3D

2473.05

USD/Ton

0%

9/29/2015

Polyester FDY

1093.47

USD/Ton

-1.76%

9/29/2015

30S Spun Rayon Yarn

2821.86

USD/Ton

0%

9/29/2015

32S Polyester Yarn

1740.15

USD/Ton

0%

9/29/2015

45S T/C Yarn

2743.48

USD/Ton

0%

9/29/2015

45S Polyester Yarn

1896.92

USD/Ton

0%

9/29/2015

T/C Yarn 65/35 32S

2320.20

USD/Ton

0%

9/29/2015

40S Rayon Yarn

2978.63

USD/Ton

0%

9/29/2015

T/R Yarn 65/35 32S

2555.35

USD/Ton

0%

9/29/2015

10S Denim Fabric

1.10

USD/Meter

0%

9/29/2015

32S Twill Fabric

0.92

USD/Meter

0%

9/29/2015

40S Combed Poplin

1.02

USD/Meter

0%

9/29/2015

30S Rayon Fabric

0.74

USD/Meter

0%

9/29/2015

45S T/C Fabric

0.75

USD/Meter

0%

9/29/2015

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.15677 USD dtd. 29/09/2015)

The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

Bid to push exports: ComMin seeks interest waiver, sops

Commerce Minister Nirmala Sitharaman on Tuesday sought immediate approval of interest subvention scheme, lowering cost of capital for exporters, increase in EXIM Bank’s capacity for export projects and restoration of tax benefits to special economic zones to provide cushion to exporters, reeling under the slowdown in global demand. Listing out its priorities to stem fall in exports, which fell 20.66 per cent from a year earlier to $21.26 billion in August 2015, registering fall for the ninth straight month, the commerce ministry made a presentation to finance minister Arun Jaitley and sought his ministry’s intervention in disbursing interest subvention while also increasing its outlay to Rs 2,200 crore for current fiscal against the Rs 1,650 crore provided for in the Budget. The meeting was attended by the commerce secretary, DGFT, revenue secretary, and chief economic advisor. “The minister asked for an increase in the corpus of National Export Insurance Account to Rs 4,000 crore along with adequate budget for export infrastructure in view of the reduction in amount of ASIDE scheme from Rs 800 crore to Rs 50 crore in 2015-16,” an official source said.

Elaborating on the reasons for the consistent decline in exports, the commerce ministry said that the main reasons for the decline include slowdown in global demand, sharp fall in crude prices, fall in commodity prices such as gold and copper, currency fluctuations including depreciation of Euro, Rouble, Brazilian Real and Yuan, and the slowdown in Chinese economy. The commerce ministry also said that the government should focus on leveraging potential for services, such as tourism, which has potential of $75 billion per annum and education. Worried over the abysmal performance of exports, commerce ministry has called a meeting of exporters on October 7 to discuss ways of containing the dip. The concerns also arise from the fact that now exporters are not confident of achieving even last year’s target as there is unlikely to be any upward trend in global demand any time soon. Last year the exports stood at $310.53 billion while imports were at $447.54 billion. The commerce ministry aims to take goods and services export to $900 billion by 2020 and increase India’s share in world exports to 3.5 per cent from 2 per cent. “The commerce ministry also urged the finance ministry to help make SEZs a hub for Make in India by restoring MAT and DDT benefits to these units and permitting the export to domestic tariff area at most favourable FTA rate,” the official said.

SOURCE: The Financial Express

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Apparel Training and Design Centre (ATDC) signs MoU with Andhra Pradesh State Skill Development Corporation (APSSDC) for skill development in textile and garment sector

Apparel Training and Design Centre (ATDC) signed an MOU with Andhra Pradesh State Skill Development Corporation (APSSDC) for skill development in textile and garment sector. The MoU has been signed initially for a period of 2 Years and it aims at imparting employment oriented training and encourages entrepreneurship through Skill Development to the youth & women. The MoU was signed in the presence of Honorable Chief Minister of Andhra Pradesh Shri N Chandrababu Naidu, Minister Atchannaidu Kinjarapu, Labour & Employment, Factories, Youth & Sports, Skill Development and Entrepreneurship and Shri. Mallikarjuna Rao, Chairman APSSDC at Vijayawada. The MoU was signed between Dr. Darlie Koshy, DG&CEO, ATDC and Dr. Subbarao Ghanta, MD & CEO, APSSDC. MoU outlines the commitment of both the parties to enter into joint initiatives in which ATDC offer specific vocational training programs as per the skills needed for the job and demands of the industry to train particularly youth.

ATDC will also leave no stones unturned to impart necessary skills to empower the students which would help them in getting job and starting their own business. Special emphasis would be given to impart soft skill and communications skills to groom the trainees. This MoU will be a significant help to achieve and train the maximum. Immediately ATDC is planning to set up a training centre in Tenali with the support of NSL Textiles (Guntur Garments) 28 kms from Vijayawada. ATDC has state of art infrastructure offering shop floor, supervisory and managerial level courses within the education and training eco- system which provides a comprehensive training and also assures full support said Dr. Subbarao Ghanta, MD & CEO, APSSDC. Andhra Pradesh State Skill Development Corporation (APSSDC) has been set-up by the Government of Andhra Pradesh as the nodal body for skill training programmes in the state.

SOURCE: Yarns&Fibers

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₹150-cr textile processing park among slew of industrial projects in Tamil Nadu

A ₹150-crore integrated textile processing park will come up in Ramanathapuram, Chief Minister J Jayalalithaa announced in the Assembly on Tuesday. The 224-acre industrial park will have space for 30 textile units with cumulative investments of over ₹450 crore and generate 6,000 jobs. A 10 million litres a day desalination plant will be set up to meet the water requirements. The project facilitated by Tamil Nadu Industrial Development Corporation will be funded by a Central grant of ₹70 crore, focus product scheme assistance of ₹40 crore and State Government and State Industries Promotion Corporation funding of ₹40 crore. Some of the other projects announced included an investment by Tamil Nadu Salt Corporation which will partner a private sector to establish a ₹200-crore caustic soda plant in Nagapattinam district.

TIDCO will set up a ₹350-crore engineering and design centre for aerospace products. This two-lakh square foot facility will be established in Vallam-Vadagal in Sriperumbudur. This project will be set up through a special purpose vehicle, the Chennai Aerospace Park Ltd. The Chennai Trade Centre will be expanded at a cost of ₹298 crore with a 16,000 sq metre exhibition hall and a multi-tier car park. The Transport Corporation of India will set up a 43-acre logistics park with an investment of ₹270 crore. This will come up in Sriperumbudur and Thiruvallur, she said.

SOURCE: The Hindu Business Line

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The Rajasthan State Industrial Development and Investment Corporation (RIICO) signs MoU for new apparel park in Jaipur

The Rajasthan State Industrial Development and Investment Corporation (RIICO) has signed a memorandum of understanding (MoU) with VICO Infrastructure to set up an apparel park in Jaipur. The MoU worth Rs 300 crore was signed during the inauguration of Vastra-2015, an international textile and apparel fair. The new textile park will create employment for more than 6,000 people, as per media reports.  Santosh Kumar Gangwar, the union minister of state for textiles, said at the inaugural ceremony of Vastra-2015, that the Centre has approved seven textile parks to be set up in Rajasthan under the Scheme for Integrated Textile Parks (SITP). These parks are expected to create jobs and invite investments in Rajasthan. Gangwar also emphasised the need for addressing pollution related matters of the textile industry and informed that the Centre has approved setting up of a Common Effluent Treatment Plant (CETP) Balotra, a town famous for hand block printing and textile industry. He said the Modi government stresses on providing skill development and training to generate employment and wants to turn Rajasthan into a textile hub in the near future. Vasundhara Raje, chief minister of Rajasthan, said, “We have set a target to provide 15 lakh jobs in the next few years and large number of it is expected to come from the textile sector.” The fourth of its kind, Vastra-2015, being held in Jaipur, is a platform for young fashion designers to display their work and interact with buyers and exhibitors from around the world. More than 227 buyers from 54 countries and 11 states are expected to visit the ongoing three-day fair.

SOURCE: Fibre2fashion

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German textile partnership to spread wings in India

On the sidelines of the Indo-German intergovernmental consultations, Hans-Joachim Fuchtel, Parliamentary State Secretary in the German Ministry for Economic Cooperation and Development will address “The Partnership for Sustainable Textiles – An Opportunity for Global Supply Chains” at the Federation of Indian Chambers of Commerce and Industry (FICCI) in New Delhi on October 5.

Established in October 2014, Germany-based 'The Partnership for Sustainable Textiles – An Opportunity for Global Supply Chains' is multi-stakeholder initiative, comprising textile and clothing industry, retailers, trade unions and civil society, which pools the strength and expertise of its members in order to bring about social, ecological and economic improvements all along the textile supply chain. In so doing, the Textiles Partnership aims to tackle common challenges more effectively, exploit synergies through joint projects on the ground, learn from one another and thus improve underlying conditions in the producer countries. The Partnership has said that Indian textile and garment industries are of great importance at all levels of the value chain – given that globally, India is the second biggest producer of cotton as well as for further processing of textiles and garments.

India has great potential to profit at all levels of the value chain due to the increasing demand of sustainable textiles. Germany's Minister for Economic Cooperation and Development, Gerd Müller, implemented the German Partnership for Sustainable Textiles to improve the conditions along the complete textile value chain. The German Partnership for Sustainable Textiles comprises of more than 150 member organizations, currently covering approximately 45 per cent of the German textile retail industry and is aiming at a long-term market coverage of 75 per cent. Currently, the German Partnership for Sustainable Textiles is increasingly aligning itself internationally. Therefore, the Ministry of Economic Cooperation and Development as a member of the German Partnership for Sustainable Textiles, is implementing its targets at the levels of the EU, OECD or into the G-7 process, amongst others, the Partnership said.

SOURCE: Fibre2fashion

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RBI provides booster shot to economy, cuts repo rate by 50 basis points

In a big boost for the markets and economy, RBI governor Raghuram Rajan cut repo rate by 50 basis points to 6.75%. The repo rate now stands at a 4-1/2 year low. Rajan kept the Cash Reserve Ratio ( CRR) unchanged at 4%. "Since our last review, the bulk of our conditions for further accommodation have been met. The January 2016 target of 6 per cent inflation is likely to be achieved. In the monetary policy statement of April 2015, the Reserve Bank said that it would strive to reach the mid-point of the inflation band by the end of fiscal 2017-18. Therefore, the focus should now shift to bringing inflation to around 5 per cent by the end of fiscal 2016-17," RBI said.

"While the Reserve Bank's stance will continue to be accommodative, the focus of monetary action for the near term will shift to working with the Government to ensure that impediments to banks passing on the bulk of the cumulative 125 basis points cut in the policy rate are removed. The Reserve Bank will continue to be vigilant for signs that monetary policy adjustments are needed to keep the economy on the target disinflationary path," RBI explained.  "Looking forward, inflation is likely to go up from September for a few months as favourable base effects reverse. The outlook for food inflation could improve if the increase in sown area translates into higher production," Rajan said.

On inflation, RBI said, "Looking forward, inflation is likely to go up from September for a few months as favourable base effects reverse. The outlook for food inflation could improve if the increase in sown area translates into higher production. Moderate increases in minimum support prices should keep cereal inflation muted, while subdued international food price inflation should continue to put downward pressure on the prices of sugar and edible oil, and food inflation more generally. It is important that pro-active supply-side management by the government be in place to head off any food price pressures should they materialise, especially in respect of onion and pulses."

RBI also acknowledged the need for a more accommodative policy. "Investment is likely to respond more strongly if there is more certainty about the extent of monetary stimulus in the pipeline, even if transmission is slow. Therefore, the Reserve Bank has front-loaded policy action by a reduction in the policy rate by 50 basis points. "The modest pick-up in the growth momentum in the first half of 2015-16 benefited from soft commodity prices, disinflation, comfortable liquidity conditions, some de-clogging of stalled projects, and higher capital expenditure by the central government. Underlying economic activity, however, remains weak on account of the sustained decline in exports, rainfall deficiency and weaker than expected momentum in industrial production and investment activity." The Reserve Bank Governor has been under pressure from the Finance Ministry as well as the industry to cut interest rate to spur economic recovery and mitigate the impact of slowing China on India.

SOURCE: The Economic Times

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Global crude oil price of Indian Basket was US$ 44.70 per bbl on 29.09.2015

The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 44.70 per barrel (bbl) on 29.09.2015. This was lower than the price of US$ 44.79 per bbl on previous publishing day of 28.09.2015. In rupee terms, the price of Indian Basket decreased to Rs 2958.75 per bbl on 29.09.2015 as compared to Rs 2959.80 per bbl on 28.09.2015. Rupee closed weaker at Rs 66.18 per US$ on 29.09.2015 as against Rs 66.08 per US$ on 28.09.2015. The table below gives details in this regard: 

Particulars

Unit

Price on September 29, 2015 (Previous trading day i.e. 28.09.2015)

Pricing Fortnight for 16.09.2015

(Aug 28 to Sep 11, 2015)

Crude Oil (Indian Basket)

($/bbl)

44.70              (44.79)

47.42

(Rs/bbl

2958.75          (2959.80)

3147.27

Exchange Rate

(Rs/$)

66.18              (66.08)

66.37

SOURCE: PIB

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India up 16 spots to 55th in global competitiveness

India has jumped 16 places on the Global Competitiveness Index, according to the latest rankings released by the World Economic Forum (WEF) on Tuesday. It now ranks 55th among 140 countries, against 71st in 2014-15. But, despite this massive jump, which follows five years of a decline on the list, India still ranks seven notches lower than it did in 2007. Switzerland tops the latest rankings, followed by Singapore, the US, Germany and Netherlands.

The WEF report attributes the jump in India's ranking "to the momentum initiated by the election of Narendra Modi, whose pro-business, pro-growth, and anti-corruption stance has improved the business community's sentiment towards the government". The report, however, says if a constant sample of 135 countries is considered for both 2014-15 and 2015-16, India's ranking would remain unchanged at 55th.

The Global Competitiveness Index is an annual assessment to gauge the factors driving productivity and prosperity across 140 countries. It measures a country's performance on 12 pillars -institutions, infrastructure, macroeconomic environment, heath and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation. The World Bank's ease-of-doing-business survey ranks India at 142. The government has repeatedly promised to implement reforms to push the ranking to within the top 50. The latest WEF rankings show India's institutions are now "judged more favourably" (ranked 60th against 70th in 2014-15). The report says in terms of trust in politicians, India ranks 31st, while on favouritism in the decisions of government officials and burden of government regulations, it ranks 32nd and 27th, respectively.

A big improvement was seen in the country's macroeconomic stability through the past year, with its ranking jumping 10 places to 91st in 2015-16. Part of this could reflect the recent moderation in inflation, the fall in the current account deficit and steps taken by the government to control its fiscal deficit. On infrastructure, the ranking moved up six notches - now, it ranks 29th on the quality of railroad infrastructure and 11th on the available airline seats per km. But on other key parameters, it fares poorly, ranking 61st on the quality of roads and 98th on electricity supply. The WEF report is rife with anomalies. Health and primary education is seen as an area of improvement, with India's ranking jumping 14 places. This is surprising, as on one of the indicators - quality of primary education - it ranks 52nd, which is at odds with various surveys such as the Annual Status of Education Report that show how poorly the country fares in this regard.

Another surprise is India ranks 25th on hiring-and-firing practices in the labour market, a sharp contrast to public discourse in India that sees restrictive labour laws as thwarting growth in the manufacturing sector. The report lists corruption, policy instability, inflation, access to financing, government instability and inadequate supply of infrastructure as the top concerns in terms of doing business in India.

SOURCE: The Business Standard

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‘Set up free trade area in South Asia quickly’

India has said that all South Asian economies need to speedily work towards a free trade area within the region with a defined time-line, preferably 2020, as the first step towards achieving the joint vision of a South Asian Economic Union. “I am confident that consensus can be achieved for a defined time-line for 100 per cent tariff liberalisation with special and differential treatment for Least Developed Countries (LDCs) and vulnerable economies,” Commerce & Industry Minister Nirmala Sitharaman said at the South Asia Economic Conclave organised by the Commerce Ministry and industry body CII on Tuesday. While India has already allowed duty-free access to goods from LDC countries of South Asia as part of the South Asia Free Trade Agreement (SAFTA), it is ready to go to 100 per cent for non-LDCs, too, as per the Safta roadmap agreed by India with Pakistan in November 2012, Sitharaman said.

2020 target

At least four of the eight SAARC countries — which include India, Pakistan, Sri Lanka, Maldives, Nepal, Bhutan, Bangladesh and Afghanistan — are looking at a free trade area by 2020. India is willing to take asymmetric responsibility towards achieving the goal, she added. Bangladesh Commerce Minister Tofail Ahmed pointed out that while India had extended duty free access to its markets for all products except tobacco and liquor, it faced access problems for items such as jute. India needs to invest more in the South Asian region for better regional integration, said Maldives Finance Minister Abdulla Jihad. Sitharaman admitted that a very small part of India’s outward investments (less than 5 per cent) was directed towards South Asia, and there was a need for more investment flows to happen in the region. Bhutan emphasised on the need for freer movement of goods. “The road to regional prosperity lay in facilitating seamless movement of goods, capital and people across the entire region,” said Lyonpo Norbu Wangchuk, Minister of Economic Affairs, Bhutan.

While the motor vehicle agreement signed between India, Nepal, Bangladesh and Bhutan was the first step towards a better arrangement for movement of vehicles in the region, it could not be a substitute for a SAARC motor vehicle act, which could cut down transportation costs and time substantially, Sitharaman said. On the issue of setting up a South Asia Development Bank for financing infrastructure projects in the region, Sitharaman said that the fiscal constraints of South Asian countries are an impediment in raising enough equity capital for the bank. Members must evolve a road-map for a special purpose vehicle (for the bank), even if it is modest, she said.

SOURCE: The Hindu Business Line

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China-Textiles and Garment Exports Continue to Pick Up in August

China's exports of textiles and garment surged 5.78% month-on-month in August to near US$ 28.83 billion, according the figures released by the General Administration of Customs on September 8. The exports of textile yarn, fabric and made-up goods edged up moderately over July to US$ 9.74 billion, while the exports of garment and accessories climbed 7.6% month-on-month to near US$ 19.09 billion. In January-August of 2015, China's exports of textiles and garment totaled about US$ 193.32 billion, down 4.59% from a year earlier. The exports of textile yarn, fabric and made-up goods dropped by 1.61% to US$ 72.16 billion, while the exports of garment and accessories dropped 6.41% to US$ 112.29 billion. After hitting another bottom in 37 months (following the bottom of US$ 10.85 billion in February 2014) in this March, the exports began to pick up and reached the peak since the beginning of 2015 in August. In the same period, China's shoe export totaled US$ 36.29 billion, down 3.2% in value and 7.4% in quantity from a year earlier.

SOURCE: The Global Textiles

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US Clothing and Apparel segment to rise by another 5% over rest of 2015

The whole the US clothing and apparel segment is slated to rise another 5 percent or so over the rest of the year of 2015. The same figure in 2014 was just one percent. The initial trends in the US textile and apparel industry indicated that 2015 would be fairly a good year. The growth would be led by basic mill products like fibers and fabrics. However, after their essentially flat 2014 pattern, the more highly fabricated items that include carpets, household furnishings and industrial products, also should begin to show growth at a much faster pace in 2015. The demand for rugs and carpets would be enhanced by a strong growth in the housing segment. The sales of these products remained virtually unchanged in the last four years.

In 2014, the total sale of housing in the US touched 1 billion square feet which was 4 percent from the prerecession level. However 2015 is predicted to be much netter for the housing industry. This would directly affect the textile industry as well. There have been announcements of stepped up investments aimed at producing new and better carpet products by companies engaged in the business and in the increasing of output and efficiency. Segments like filtration, protective apparel, roofing and geotextiles and the non-woven fabrics The segment is also expected to register strong growth in 2015. The segment of active wear is also increasing as more and more people are wearing active wear for activities other than exercising and this has resulted in sales, growing at double the rate noted for non-active wear. The market predictions for the denim market for the rest of 2015 are also significantly better. The popularity of variants in this segment is gaining popularity like the 100-percent cotton denim. However the market for traditional denim is also expected to do well. With a balance between shipments and demand and supply, the average prices in the overall textile industry is likely to remain stable throughout the year.

SOURCE: Yarns&Fibers

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New Zealand ratifies World Trade Organisation Trade Facilitation Agreement

Trade Minister Tim Groser today announced that New Zealand has formally accepted the World Trade Organization (WTO) Trade Facilitation Agreement (TFA). “The TFA is designed to facilitate trade through the simplification and streamlining of customs and border processes,” said Mr Groser. The implementation of the TFA will provide concrete benefits to New Zealand businesses over time, minimising costs associated with getting products across borders and into the marketplace. In particular, New Zealand’s agricultural exporters will benefit from a provision to provide for the release of perishable goods within the shortest possible time. “New Zealand’s acceptance of the TFA reflects New Zealand’s commitment to the WTO and the multilateral trading system. New Zealand is working actively with other WTO members in the lead up to 10th WTO Ministerial Conference to be held in Kenya in December this year. “A credible and effective WTO is of long term importance for New Zealand as a small country dependent on global trade,” said Mr Groser. New Zealand Permanent Representative to the WTO, Vangelis Vitalis formally delivered New Zealand’s instrument of acceptance of the WTO Trade Facilitation Agreement to WTO Director General Roberto Azevêdo on Tuesday night New Zealand time. The TFA will enter into force once two thirds of WTO Members (107 of the current 161 Members) have accepted it.

SOURCE: The Scoop

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Market economy status for China is a disaster for Europe

What is a market economy? A system in which free trade and enterprise are encouraged to thrive, or one that is closely controlled by a powerful central government, repeatedly guilty of anti-competitive conduct and hostile towards new entrants.  That is the question facing Brussels policy-makers, who are currently deciding whether to recognise China as a “market economy” – a decision I believe could be a disaster for the EU, costing upwards of 3.5m jobs and hitting GDP growth across the region by €228bn a year.  The seeds of this ticking time bomb were sown back in 2001, when China joined the World Trade Organisation (WTO) following 15 years of talks. China’s admission to the WTO, which governs global trade rules, came with a crucial clause that handed existing members – including those in the EU and the US – the right to “ignore Chinese prices and costs in anti-dumping cases and instead calculate dumping margins using external benchmarks”. Anti-dumping is a protectionist tariff a government imposes on foreign imports, if it thinks that they’re priced below normal market value. This effectively meant the US and Europe could place much higher duties on imports from China in anti-dumping cases than if China was treated as a market economy.

However, Chinese officials now argue that the provisions of their original agreement means that all member governments must grant China market economy status (MES) automatically on 11 December 2016. If this happens, then Europe’s fragile economic recovery could be set back years.  Research undertaken by the Economic Policy Institute shows that if the EU decides to give away MES to China, then between 1.7m and 3.5m jobs would be put at risk by allowing Chinese companies to undercut domestic production by flooding the EU with cheap goods. In addition, more than 2m direct jobs in highly import-sensitive manufacturing industries could be at risk, due to surges of imports in specific industries such as paper, ceramics, steel, motor vehicle parts.

So why are we on the verge of this economic catastrophe? It is because China maintained extensive controls over the economy through 71 detailed five-year plans and 22 national industrial-sector plans, faithfully implemented by provincial and local governments. Currency manipulation by China has also acted as a subsidy to its exports to the EU and other countries, as well as a tax on EU exports to China, and to all other countries where EU products compete with those from China. These subsidies and support policies, plus the rapid growth of planned investments in “leading and pillar” industries in China’s five-year development plans, have led to sustained overproduction and substantial excess capacity throughout the Chinese manufacturing industries.

Even without MES, China has been able to dramatically increase exports to Europe by a remarkable 11.1 per cent annual rate over the past 15 years, rising from €74.6bn in value in 2000 to €359.6bn in 2015. Quite simply, if the EU decides to grant MES to China, imports from it would increase at least by between 25 and 50 per cent over the next three to five years. Declining demand for domestic manufactured goods in the EU due to surging imports could also have a depressing effect on business investment in manufacturing. I advise the EU to consider the hundreds of billions of euros of output and millions of jobs that would be at risk before unilaterally offering MES to China. But how likely is this all? Although some EU officials are believed to be leaning in favour of granting MES to China, prominent analysts and trade lawyers disagree whether the provisions of China’s WTO accession agreement require other WTO members to grant MES to China next year.

According to AEGIS Europe, an industry alliance that promotes manufacturing, investment, employment, growth and innovation in Europe, a decision to grant China MES can only be made if China meets five specified EU criteria that determine what a market economy is. The two most important of these are: does the government influence the operative decisions of firms or are they made in response to market signals? And does the legacy of the command economy, in terms of public ownership, barter trade and so on, affect firms’ operations?

Both the US Department of Commerce and the EU Commission have found, during the course of anti-dumping investigations, that firms in China do not operate under market economy conditions and that China as a whole does not meet the technical criteria for MES. Even worse, China is not meeting obligations under its WTO Accession Protocol to take steps that would turn China into a market economy – in particular, its obligation to allow nearly all prices to be determined by the market.  It is in China’s own, long-term interest to take the hard steps necessary to become a true market economy. However, Chinese President Xi and the current generation of leaders are stuck in the past, and too dependent on the old model of export-led growth to rescue China from its deep economic troubles. The EU needs keep up the external pressure on China to reform by maintaining the current system of treating China as a non-market economy.

SOURCE: The Cityam

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