The scheme will be in operation from September 24, 2021 to March 31, 2030 and the incentive under the scheme will be payable for five years. The government has extended the deadline till February 14 for submitting applications for the Rs 10,683 crore-Production Linked Incentives scheme for textiles. "Earlier, the date of submission of online application under PLI Scheme for Textiles was up to 31st January 2022," the textiles ministry said in a statement on Friday. As per the prescribed norms, the scheme will be in operation from September 24, 2021 to March 31, 2030 and the incentive under the scheme will be payable for five years. Any company/firm/LLP/trust willing to create a separate manufacturing firm under the Companies Act, 2013, and invest a minimum Rs 300 crore, excluding land and administrative building cost, to manufacture notified products will be eligible to get the incentive. This is subject to the entities achieving a minimum of Rs 600 crore turnover by the first performance year. Under the scheme, FY 2024-25 will be considered as the first performance year. Any company/firm/LLP/trust willing to create a separate manufacturing company and invest a minimum Rs 100 crore, excluding land and administrative building cost, to manufacture notified products will be eligible to get incentive when they achieve a minimum of Rs 200 crore turnover by the first performance year.
Source: Zee News
With just two days left for finance minister Nirmala Sitharaman to present the Union budget 2022-23, the Tamilnadu Chamber of Commerce and Industry has put forward its expectations of the micro small and medium enterprises (MSME) sector to her. Their key demand was that the budget focus on simplifying taxation, investment and offering further incentives to Indian startups. The chamber stated that offering incentives to startups and MSME units could help revenue as well as employment generation, which are the key to stabilize the economy that is recovering the hit suffered due to the Covid19 pandemic for two years. Measures such as streamlining approvals, compliance for ease of doing business, quicker adoption of technology and the accessibility of funds that can mobilize growth were among their expectations. Pointing to the exorbitant prices of the raw materials that are not uniform and controlled, they urged the government to rationalize GST on manufacturing for MSME and bring it down to at least 12% from the existing 18%. Specific production linked incentive (PLI) schemes for 13 sectors – auto components, automobile, aviation, chemicals, electronic systems, food processing medical devices, metals and mining, pharmaceuticals, renewable energy, telecom, textiles and apparels – have been very successful. Various sectors should also be added under the scheme to create national manufacturing champions and generate more employment opportunities. Government schemes led by lending banks for MSMEs and SMEs should be extended at least till the end of calendar year 2022. Schemes supporting infra and job creation should continue. Stating that overall credit demand in the country is picking up, they added that there should be a push towards affordable housing and reinforce the existing financing systems to provide liquidity to stuck real estate projects. “Since MSME sector plays a very vital role in developing the nation’s economy and creating more job opportunities in rural and urban areas, we are optimistic that the finance minister would definitely fulfil the expectations of the MSME sector in the forthcoming union budget 2022-23,” chamber president N Jegatheesan said.
Source:Times of India
With just a few more days for the Union budget, industries in Coimbatore and Tiruppur districts expect measures that will help the units tide over challenges they face because of the high raw material prices. The textile and clothing sector has demanded removal of import duty on cotton, at least for extra long staple varieties and speciality cotton. It has also asked for duty free import of cotton during the last few months of the cotton season. The pumpset manufacturing units have sought seed funding to industrial associations to make bulk purchase of raw materials for their members. President of Southern India Engineering Manufacturers Association KV Karthik said, “We cannot expect steps in the budget to control raw material prices. But, the government can support industrial associations that will benefit their members,” he said. Further, the government should support research and development activities with incentives. This is a time when the industries want to develop new products. So, those who take up research and development jointly with recognised research centres, should be able to reflect 200% of the amount spent as their expense. This was available earlier but the amount was reduced later, he said. According to the president of Coimbatore District Small Industries Association M.V. Ramesh Babu, the Income Tax for proprietor and partnership firms should be reduced to 20 % from the current level of 30 %. Companies and corporates pay only 20 % now. Micro, Small and Medium-scale Enterprises (MSMEs) realise just 5 % - 6 % profit. Lower IT slab will improve the competitiveness of these units, he said. Further, the MSMEs are in dire need of more funds. The working capital is eroded because of high raw material prices. Hence, the working capital should be converted to long-term term loans and the government should make available funds for working capital. The number of rate slabs in Goods and Services Tax (GST) should be reduced to three from six, he said. J. James, president of Tamil Nadu Association of Cottage and Tiny Enterprises, said the government should allocate funds only for the micro sector. The schemes are all for the MSME sector and the beneficiaries are small and medium-scale units. The micro units require funds without any criteria to meet the present challenges, he said.
Source: The Hindu
The talks covered 26 policy areas including trade in goods and services such as financial services and telecommunications, investment, intellectual property, customs, sanitary and phytosanitary measures, technical barriers to trade, gender, sustainability and geographical indicators. The talks covered 26 policy areas including trade in goods and services such as financial services and telecommunications, investment, intellectual property, customs, sanitary and phytosanitary measures, technical barriers to trade, gender, sustainability and geographical indicators. New Delhi: India and the United Kingdom on Friday concluded the first round of negotiations, for a bilateral Free Trade Agreement (FTA), the commerce and industry said in a Joint Outcome Statement. The talks covered 26 policy areas including trade in goods and services such as financial services and telecommunications, investment, intellectual property, customs, sanitary and phytosanitary measures, technical barriers to trade, gender, sustainability and geographical indicators. “Both teams maintain a shared ambition to conclude negotiations by the end of 2022- as part of both sides’ efforts to secure a comprehensive agreement,” the ministry said in a statement, adding that the negotiations were “productive. The negotiations were held virtually for over weeks and saw the coming together of technical experts from both counties for discussions in 32 separate sessions. India and the UK formally launched negotiations for an FTA earlier this month with an aim to put an interim agreement in place by mid-April followed by a comprehensive deal by the end of the year. The second round of negotiations is due to take place on March 7-18.
Source: Economic Times
Textiles and clothing exports over the 2011-19 period have been elastic to changes in tariffs imposed on such products by India’s trade partners. Every 1% increase in tariff rates reduces the sector’s export growth by 1.1%. Over the past few years, import tariffs and India’s attitude towards free trade have been a point of contention for many economists. Since 2014, India has on average seen a 5% rise in average tariff rates. Arvind Subramanian and Shoumitro Chatterjee have pointed out that India has raised import tariffs on over 3200 goods from most favored nations, which signals a protectionist stance to shield domestic industries. However, on the same hand, the government has, rightfully, come up with bills and policies which promote the export of products from India (Foreign Trade Policy 2015-20 and the recent re-establishment of the US-India Trade Policy Forum) and encourage manufacturing and assembly lines (Production Linked Incentive Scheme or PLI) to be set up in the country itself. One can argue that these policies override one another given India’s retaliation from its trade partners. This could partly be because of increasing protectionism pre-covid and partly as a response to counter India’s increased import tariffs on raw materials and intermediate goods. Although the government’s move carried the right intent of encouraging foreign manufacturers to set up shop in India, it actually led to increased tariffs by India’s largest trade partners i.e., the US and the UAE. In order to study the effect of such tariffs on India’s exports, let’s evaluate four product groups which the government has been focusing on over the past few years namely, textiles and clothing, capital goods, food products, and agricultural raw materials, and chemicals, fuels, and metals. For these product groups, we tried to check the sensitivity of India’s export growth to two variables: a) import tariffs imposed by India and b) retaliatory tariffs imposed by our trade partners from 2011-19. For this analysis, we have used data from the WITS portal. The reason for taking the time period between 2011-19 and not the years prior to that is because of the size of the trade. From 2000-2010, India did not hold a big market share in the export of any product and the proportion of expenditure on Indian imports by its trade partners was negligible compared to their total import bill. Therefore, the elasticity of demand for Indian products was not affected by tariff impositions. Also, during 2000-2010, India was still in the phase of expanding its trade base by reducing all tariffs and making the economy more open, and therefore, there were no retaliatory tariff hikes by trade partners which is what this article intends to study. Textiles and Clothing A major proportion of India’s export growth in this sector comes from MSMEs. They have greatly benefited from the change in definition and the PLI scheme. However, MSMEs in this industry face difficulties caused by tariff as well as nontariff barriers. Covid-19 induced lockdowns reduced the capacity utilization ratio significantly for some MSMEs compared to larger companies due to their substantial dependence on export demand at times and the need for a continuous influx of skilled workers to grow. We found textiles and clothing exports over the 2011-19 period have been elastic to changes in tariffs imposed on such products by India’s trade partners. Every 1% increase in tariff rates reduces the sector’s export growth by 1.1%. It is important to note that retaliation on tariffs does not come on similar products but comes on products where the demand is more elastic. Countries tend to increase tariffs on those products for which they want to reduce external dependence. For India, materials for manufacturing like electronic items, metals, etc. make up the list where tariff hikes are prevalent. However, this is not the case for India’s trade partners, i.e. they have different trade policies and raise tariffs on product categories where they face a trade deficit. For example, the US has a trade deficit of $ 8 billion with India for textiles, and therefore raised tariffs on Indian textiles when India raised tariffs on goods imported from the US. Capital Goods The capital goods industry is one where every Indian government has tried to push for an increase in exports but has not quite achieved that feat. The trade demand for capital goods is linked more to capital expenditures globally rather than tariff barriers. Analysis shows that for every 1% increase in Global Gross Capital Formation (GCF), there is a 2.7% growth in Indian exports. Even though this number looks good, it is not, relative to the higher base of growth for GCF. A 1% increase in GCF equates to an increase of approximately US$ 230 billion globally and a 2.7% increase in Indian exports equates to roughly US$ 1.5 billion which is less than 0.01% of a potential increase in global trade. This problem can be attributed to the history of inverted duty structure on these goods, the high cost of inputs, and technological obsolescence. Indian exports are mostly focussed on heavy earth moving equipment and heavy electricals which is surprisingly also the largest import category within capital goods. Important foreign markets, with high Capex potential, don’t encourage the import of Indian capital goods because Indian standard-setting bodies at times lack recognition. India’s major export partners like the US, UAE, Germany, etc. are countries with which India doesn’t have free trade agreements (FTAs), once again making capital goods from the country expensive. India has therefore not been able to fully utilize its FTAs given such non-tariff barriers and low competitiveness. Inverted duty structure and high costs mean that businesses find it cheaper to import capital goods into India rather than buy them domestically. Specifically, an inverted duty structure means that the tariffs on imports of finished goods are lower than that on raw material needed to make these capital goods. Mainly, high tariffs are on imports of steel and electronic equipment, which are essential raw materials used for such goods, and currently, China is our main supplier for these. The domestic cost of production for capital goods, however, has risen in tandem with these tariffs. Indian manufacturers prefer importing Chinese steel and electronic equipment due to better metallurgical advances and better technology, and they are relatively cheaper even after paying import tariffs. China is able to produce at lower rates than India because of its larger capacities and supply reserves. In 2019, China produced 996 million metric tonnes of steel which is over 53% of the world’s total supply. This makes China the price setter in the industry. While the government needs to address the issues that place domestic producers at a disadvantage, the capital goods sector also needs to invest and upgrade domestic technological and production capabilities to emerge as a globally competitive producer and exporter. The government should facilitate these efforts to improve technological depth through adequate investments and incentives. Food Products and Agricultural Raw Materials Food products and agricultural raw materials is a product group that is rather inelastic to tariff changes by India’s trade partners and nontariff barriers as was proven by the covid19 pandemic. However, there have been other trends that need to be acknowledged in this space. The agricultural import bill for cereals like wheat and maize has seen a 9,675% increase, especially from 2013 to 2016, making it difficult for local farmers to explore the market. The government also abolished the import tariff on wheat, maize, rice, and other food crops in order to bring down food inflation and also reduced the harvest stored in government food storage facilities. These policies, especially at a time when the country’s farmers were facing the uncertainty around demonetization, left them with little working capital available for production. This coupled with problems like low productivity per hectare, a large domestic market to cater to led to a fall in India’s agricultural raw material exports. Although, the government has managed to replace some of the export loss of agricultural raw materials through processed food products thus giving an industrial outlook to India’s agricultural sector. This is a great opportunity to move away from exporting primary products and promoting value addition within the sector. Analysis shows that despite an increase in tariffs by India’s trade partners on processed food products and agricultural raw materials originating from India, exports have not been too sensitive to these hikes and sustained around $ 6 to $ 7 billion from 2011 to 2019. The use of digital facilities, technology, and an increased focus on value addition has done well for the Indian food processing industry. However, there still remains a cap over the potential growth rate of food products as long as things are not improved on the ground level. Chemicals, Fuels, and Metals The chemical industry has historically given high returns to shareholders over the long term. Indian chemical companies have given a CAGR of 15% in total returns to shareholders from December 2006-2019, according to research by Mckinsey and Co. It has been a consistent value creator with upcoming opportunities and a strong long-term growth story. Stricter regulations for Chinese chemical companies, trade conflicts, increasing technology, and consolidation in the sector globally provide an opportunity for Indian companies operating in the industry to scale up their operations and increase global market share from the present 4%. However, chemical trade is dependent on the economic cycle in various countries since it serves as an important raw material/intermediary good for the production of final goods. India has been a net importer in the industry with a trade deficit of approximately $ 15 billion. For the industry to grow and corner more market share, reforms are needed at the ground level since the trade volume is inelastic to change in tariff differentials. Indian companies need to scale up and use technology and analytics to improve margins. Building self-sufficiency in areas like petrochemicals and ramping up export in specialty chemicals (adhesives, agrochemicals, construction chemicals) is a good way forward. Conclusion Out of the product categories analyzed, we see that most of the industries face problems at the ground level which need to be addressed in order to remove the cap from their growth potential in terms of domestic and international trade. We also saw that inverted tariff structures cause problems in India’s trade which is something that needs to be addressed for many industries. Import tariffs do harm export growth and put a cap on their potential which would not exist in the case of free trade between countries. However, there are also problems around the availability of credit, current logistical infrastructure, product quality control, and regulations among others that need to be addressed for India to boost its export growth further.
Source: Economic Times
"The objective of Phase II of the Scheme for Enhancement of Competitiveness of the Capital Goods Sector is to expand and enlarge the impact created by Phase I pilot scheme, thereby providing greater impetus through creation of a strong and globally competitive capital goods sector that contributes at least 25 per cent to the manufacturing sector," the Heavy Industries Ministry said in a statement. The government has notified the second phase of the Scheme on Enhancement of Competitiveness in the Indian Capital Goods Sector for providing assistance for common technology development and services infrastructure, with a financial outlay of Rs 1,207 crore. The outlay includes Budgetary support of Rs 975 crore and industry contribution of Rs 232 crore. The scheme was notified on January 25. "The objective of Phase II of the Scheme for Enhancement of Competitiveness of the Capital Goods Sector is to expand and enlarge the impact created by Phase I pilot scheme, thereby providing greater impetus through creation of a strong and globally competitive capital goods sector that contributes at least 25 per cent to the manufacturing sector," the Heavy Industries Ministry said in a statement. There are six components under the scheme. These include Identification of technologies through technology innovation portals; setting up of four new Advanced Centres of Excellence and augmentation of existing centres; promotion of skilling in capital goods sector; setting up of four Common Engineering Facility Centres and augmentation of existing centres. It also entails augmenting existing Testing and Certification Centres; and setting up of 10 industry accelerators for technology development.
Source: Economic Times
The commerce and industry ministry has proposed a Rs 10,000-crore scheme to develop 700-odd districts of the country as export hubs which will be part of the upcoming foreign trade policy. An announcement to this effect is likely in Budget 2022-23. "The contribution of the Centre will be almost Rs 10,000 crore and the rest would be done by the states. So, the scheme would have a larger outlay," said an official, who did not wish to be identified States' contribution could be Rs 5,000-6,000 crore, according to people aware of the matter. Under the 'Districts as Exports Hub' initiative, products and services with export potential have been identified in all districts of the country, including agricultural and toy clusters and products with geographical indications. In the next three to five years, the government is aiming at a double-digit export growth from 500 districts of the country. India's merchandise exports surged a record 38.91% year-on-year to $37.81 billion in December 2021 and amounted to $301.38 billion in the April-December period. "District as Exports Hub is an initiative right now, but it doesn't have any budgetary support. A proposal has been made to the finance ministry to launch a new scheme," said the official. Under the initiative, an institutional mechanism has been set up in each district in the form of District Export Promotion Committees, whose primary function is to prepare and act on district specific export action plans in collaboration with all the relevant stakeholders from the Centre, state and district levels. Besides developing a database of all potential exporters in each district, work is also on to build an interface with the Indian Missions abroad to provide them access to exporters in each district for them to market outside India and find potential buyers. The Centre also plans to assist states and UTs to prepare an annual 'Export Ranking Index' of districts in the respective state to rank each district on its export competitiveness. Industry executives said the launch of the scheme is timely given the upcoming crucial elections in Uttar Pradesh and Punjab. Uttar Pradesh had implemented One District, One Product programme across its 75 districts. "UP has a large number of districts and such a boost will support agricultural exports from the state and the entire country," said an industry executive, who did not wish to be identified.
Source:Economic Times
According to the council, though there has been a fall in imports of readymade garments (RMG) in Colombia, Indian RMG exports have been able to maintain its share in the Colombian market. While Colombia's RMG import from the world fell from $652 mn in 2019 to $408 mn in 2020, India's share in Colombia's total apparel imports remained the same at 3.2% with $21 mn in 2019 and $13 mn in 2020, it said. The Apparel Export Promotion Council (AEPC) on Friday said that domestic exporters should aim to increase India's share in Colombia's total apparel imports by focusing on high value added products. Speaking at an online event on 'India-Colombia Synergies in Apparel and Textiles', AEPC Chairman Narendra Goenka said that India's share is only 3.2 per cent in Colombia's global apparel imports. "We are looking at escalating this to some respectable figure in double digits. We are focusing on higher value and specialised products like man-made fibre (MMF) apparels, medical and technicaltextiles," he said. According to the council, though there has been a fall in imports of readymade garments (RMG) in Colombia, Indian RMG exports have been able to maintain its share in the Colombian market. While Colombia's RMG import from the world fell from USD 652 million in 2019 to USD 408 million in 2020, India's share in Colombia's total apparel imports remained the same at 3.2 per cent with USD 21 million in 2019 and USD 13 million in 2020, it said. Goenka said that the Indian apparel sector offers a large opportunity for investment. "Colombian investors can also set up manufacturing facilities in India directly or through joint ventures, and partner with us in building R&D, innovation and incubation centres in India," he said. The textiles sector has attracted FDI worth USD 3.75 billion from April 2000 to March 2021. Speaking at the event, Indian Ambassador to Colombia Sanjiv Ranjan said over a period of time, the popularity of Indian garments and textiles in Colombia has been increasing especially among women and this is an added advantage. "Concerted efforts would be required to reach the pre-pandemic level of exports of about USD 22 million," he said. Cristhian Salamanca, Executive Director, Colombia-India Chamber of Commerce and Industry, said that Indian companies are reliable partners with the Colombian firms.
Source: Economic Times
In what could be a win-win for both, the postal department may, from February onwards, offer parcel services to the textile industry in Surat for the supply of its goods across the country. The decision came after a meeting of textile industry traders with the postal department. The Surat Textile Industry delivers Rs 200 crore goods every day across the country. The new tie-up will also help the postal department get some business and revenue. Similar tie-u with rlys The news comes months after a meeting between the textile players in Surat and the Divisional Railway Manager of Western Railway Mumbai Division was held before Diwali. Following the meeting, the railways had shown interest in plying a nonstop goods train from Surat for delivery of parcels. As part of the agreement, in October last year, a special train from Surat to Kolkata and Delhi was also put into service to deliver parcels from the textile industry. The meeting Officials of Surat’s Nanpura post office told Mirror that arrangements will be made to deliver textile parcels, and the department is mulling to provide the service in several destinations. Delhi, Patna and Kolkata are some of the cities that will get delivery of textile parcels via post. The postal department has also sought the input of Surat textile traders in the matter. The Surat Textile industry delivers Rs200 crore of textiles via 300 trucks across the country through the Mumbai-Delhi line. This delivery goes up to Rs350 crore during the festive season. “The department has shown interest in delivering our consignments via post. We have also sought construction of postal warehouses in Surat and other cities as many times the traders are not able to immediately take delivery of the parcels,” said Champalal Bothra, secretary, Federation Of Surat Textile Traders Association (FOSTTA). He said the association has also sought that the postal parcel service is made available daily.
Source: Ahmedabad Mirror
Uzbekistan recently issued a presidential decree on measures to stimulate deep processing, production and export of finished products with high added value by textile and clothing and knitwear enterprises. The decree established the Textile Industry Support Fund. The decree mandates several steps from February 1 this year to January 1, 2025. Enterprises that have implemented projects for the production of dyed fabric, mixed and dyed fabric products in the Republic of Karakalpakstan and regions have been allocated a subsidy of 10 per cent of the cost of equipment purchased under these projects, but not exceeding the equivalent of $500,000. Enterprises that purchase equipment for the production of dyed fabric, mixed and dyed fabric products, as well as yarn, in which man-made fibers account for more than 80 per cent, will be offered loans in foreign currency to pay a 15 per cent initial payment for up to seven years, including a grace period of three years. Enterprises exporting dyed fabric, dyed fabric and ready-made garments and knitwear are provided with loans in foreign currency in the amount not exceeding 3 million US dollars for a period of up to 1 year, including a grace period of up to 9 months; Enterprises that earn from the sale of dyed fabric, finished garments and knitwear, including through a commission agent, and whose share of exports of these products is at least 80 per cent, are granted the right to pay a social tax at a of 1 per cent and deferral of debt repayment on property tax of legal entities for up to three years, according to Uzbek media reports. According to the decree, it is necessary to extend until January 1, 2024, the terms for the State Fund for Support of Entrepreneurship to provide compensation and guarantees for loans received by exporters in commercial banks for pre-export financing, and also to extend this procedure to all exporting enterprises. Until July 1, 2022, the development and launch of the System for Mandatory Automated Accounting for Cotton Fibre will be ensured.
Source: Fibre 2 Fashion
Among economists and health professionals, there’s cautious optimism that the pandemic may recede during 2022 as vaccination rollouts continue. This bodes well for trade relations between the U.S. and Vietnam since the health storm’s arrival, now in its second year, disrupted supply chains, manufacturing, and trade flows between the former enemies and now comprehensive partners. Vietnam’s 98 million citizens have experienced the rising tide of benefits from globalization. Over the past three decades, through its economic reforms and integration with world markets, Vietnam transitioned from one of the poorest nations to a middleincome economy in just one generation. The Communist Party’s shift to a socialistoriented market economy offered the trajectory for this meteoric jump and it was fueled by the jobs created by Vietnam’s booming export market, especially with the U.S. U.S. foreign investment also helped propel Vietnam’s economic engine when the country first opened up its cheap labor market to investors. Over the past decade, Vietnam became a major manufacturing center in Asia and is listed among the top ten trading partners for the U.S. The country is widely recognized as a major exporter of electronics and apparel. For example, Nike, a global brand, now produces almost 50% of their shoes in Vietnam, with Adidas following close behind. Vietnam’s manufacturing base is not limited to just textiles and apparel. Phone and components exports, at $45 billion, already exceed footwear and textile exports combined. Vietnam’s skilled and low-cost workers, good infrastructure, stable government, and taxfree zones are just what U.S. multinational companies are looking for when scouting locations for factories. Vietnam exports to America totaled $77.07 billion during 2020, according to the United Nations COMTRADE database on international trade, with mobile phones at $18 billion and integrated circuits rounding up at $15.5 billion. This expansion of bilateral trade has resulted in a major increase in America’s trade deficit with Vietnam. That deficit rose to $56.6 billion in 2020, while a decade earlier it was only $9.4 billion. One year ago, when the Biden administration moved into 1600 Pennsylvania Avenue, Vietnam had been accused of unfair trade practices, including an allegation of currency manipulation. By the summer 2021, Washington determined that no tariff action against Vietnam was warranted after its Central Bank agreed with the U.S. Treasury not to manipulate its currency for an export advantage. Michael Martin, adjunct fellow at the Center for Strategic & International Studies (CSIS) an Asia economics and trade policy expert, sees opportunities for improved trade relations. “I see a common ground in developing a framework for trade relations between the two nations, and in the region, that moves international trade beyond the archaic Bretton-Woods System while offering an alternative Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or the Regional Comprehensive Economic Partnership (RCEP). Whether that is done via a bilateral trade agreement or by a regional agreement, the status quo seems inherently unstable.” The CPTPP is comprised of 11 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. All pledged to uphold free trade in the Asia-Pacific region amid the US-China trade wars. A CSIS report confirms that Vietnam has benefited and scored new export gains of 6 percent during this global recession. Of course, while Vietnam has integrated deeply into the world economy, challenges remain. The nation has struggled to address lengthy shutdowns of major economic centers, namely Ho Chi Minh City and Hanoi, which led to its GDP contracting over 6 percent in the third quarter of 2021. As a result, the World Bank estimated that overall Vietnam’s GDP increased by only 2.58 in 2021. According to Congressional Record Service reports, the U.S. bilateral trade deficit with Vietnam will likely continue to increase, particularly as the effects of the CPTPP and RCEP alter regional trade flows. The Bilateral Trade Agreement (BTA) requires updating and that process would serve to address outstanding bilateral issues. There’s also the option of launching a new bilateral initiative by strengthening the 2007 Trade Investment Framework Agreement (TIFA) that would serve to establish common goals and stimulate further commercial engagement. Meanwhile, Vietnam’s relationship with China remains complex and troubled. Beijing makes it clear by its actions and rhetoric, that it finds the current global trade framework unacceptable. Since their efforts to make reforms were rejected by the U.S. and others, they are actively developing an alternative that it finds preferable. Although China has introduced major economic reforms, many policy observers, question Beijing’s support for liberal economic development. Jennifer Lind, a Dartmouth Associate Professor of Government in a Foreign Affairs article, suggests that China stands outside the liberal international system and the rulesbased transparent order in several respects despite its ascendant role as a major trading partner of many countries. Vietnam has so far called for peaceful responses to China’s failures to adhere to the international arbitral ruling on the South China Sea, or what they call the East Sea, and to the illegal incursions in their own waters. However, with the U.S. promise to continue their freedom of navigation exercises and the Biden administration’s calling out China’s reckless actions on the sea, this may serve to bolster Hanoi’s position as a fulcrum to oppose China’s assertive stance in the region, particularly in the South China Sea. This China challenge creates an opportunity for Hanoi and Washington to discuss options. On both economic and security relationships, Vietnam is poised to better position itself with Washington. The U.S. trade war with China and coupled with Beijing’s continued assertive and illegal claims in the South China Sea, provide new possibilities for expanding bilateral cooperation between Washington and Hanoi.
Source: Eurasia Review
Changes in shipping markets indicate a different future for textile and retail markets. Mark Williams, founder of consulting firm Shipping Strategy, explains why. Most manufactured goods such as clothing and footwear are shipped in containers, each a standard size of 8 ft wide by 8 ft 6 inches high and 20 ft or 40 ft long. These boxes are easy to load, lift and place on ships, trains or trucks to move their contents securely around the world. The global logistics business is now so sophisticated that big box retailers can tell to the half-day when a box loaded in China will arrive in Milton Keynes or Minneapolis. Or at least they could, until the pandemic forced truckers off the roads and dockers off the quaysides, causing mayhem in the system and driving up costs for everyone. The ships that move these boxes have grown ever larger to achieve economies of scale. In the year 2000, the biggest ships could carry just over 4,000 containers. Today, they carry 23,000. One container can hold 10,000 pairs of jeans, so the cost per retail item is very small. Until the Covid-19 pandemic, freight rates had been on a 10-year downward trend when adjusted for inflation. Most people don’t give any thought to shipping until there is an accident, like when the Ever Given, a 23,000-box capacity ship, got stuck sideways in the Suez Canal in March 2021. This caused havoc to the 18,000 transits of the canal every year by ships passing between the Mediterranean and the Indian Ocean and vice-versa – they were forced to sail around the Cape of Good Hope in South Africa, adding thousands of miles and days to their journeys. The international shipping industry currently emits 2.4% of global greenhouse gas emissions while transporting 90% of world trade The accident highlighted the fragility of global supply chains, which include several choke points. The Panama Canal allows ships to pass from the Atlantic to the Pacific (and vice versa) without having to sail all the way around Cape Horn at the southern tip of the Americas. The Malacca Straits pass by Singapore, allowing ships to sail from the Indian Ocean to the South China Sea (and vice versa) without having to navigate through the Indonesian archipelago or go all the way around Australia. These short-cut routes are all vulnerable to an Ever Given-style incident. Geopolitical tension is also forcing manufacturers to split supply chains up – one for China and its sphere of influence, one for the US and its allies – as the post-war global order disintegrates to be replaced by something that more resembles the Great Power division of the planet in the 19th century. The supply chains of the textile and retail industries are global and complex. In the last half-century, shipping has enabled globalisation by providing ever cheaper, ever safer and ever more reliable transport of energy, raw materials, semi-finished goods and manufactures all around the planet. But charterers (the owners of cargo who hire space on ships, or entire ships, to move their cargo) have not had to pay the full environmental cost of moving their goods over ever-longer distances as they sought out the cheapest manufacturing locations. Until now. In future, ship operators will only be able to move goods on ships that burn low or zero carbon fuels, all of which cost considerably more than fuel oil. In 2023, the European Union will begin to tax ships on their carbon output, which will add hundreds of thousands of dollars to the cost of sailing from, say, Vietnam to Germany. The international shipping industry currently emits 2.4% of global greenhouse gas emissions while transporting 90% of world trade on a fleet of 64,000 ocean-going cargo ships and 34,000 inland waterway, passenger and offshore vessels. Less than 2% of these vessels run on low-carbon or zero-carbon alternatives to fuel oil. Each tonne of fuel oil burned in a ship’s engine emits 3.14 tonnes of carbon dioxide. Shipping consumes about 250 million tonnes of fuel oil a year and the biggest ships can consume 60 tonnes of fuel oil every day they are at sea. This becomes relevant to fashion retailers as they increasingly look to measure and cut their "Scope 3" emissions – the greenhouse gases emitted along their supply chains. In shipping, we talk about the regionalisation or deglobalisation of trade: items moving shorter distances, on smaller ships, more slowly and emitting less greenhouse gas. Supply chains are being replicated for different regions, instead of standardised globally. And “just in time” delivery is being replaced by “just in case”, which builds replication and resilience into supply chains. The world is deglobalising to decarbonise. Ships last 25 to 30 years. When we plan them, we have to think about the world in which they will operate, and in 30 years it will be a very different world from today. Less globalised, more regional. Older and less inclined to spend on items with short lifespans. Our grandchildren will travel less far, less frequently, and more slowly than today, to manage their personal carbon budgets and to maintain their social credits. They will lease, not own, capital goods. They will interact virtually in the metaverse. The global supply chain crisis and new environmental regulations are forcing retailers to think differently about their manufacturing base, and about pricing. A smaller global shipping industry with a smaller carbon footprint is on the horizon, and this will shape the future clothing market in more ways than one.
Source: Drapers Online
Supply chain disruptions will continue to roil the global economy in 2022, with new challenges for companies and adding to inflation, according to IHS Markit, which said port congestion, severely constrained manufacturing output, rising prices of crude oil, coal and natural gas, and geopolitical risks will add to further disruptions in supply chains worldwide. The company released a report titled The Great Supply Chain Disruption: Why It Continues in 2022’ recently. Port congestion continues to significantly slow the circulatory movement of ships, containers and other transport assets including chassis—removing capacity, lengthening transit times and forcing shipping rates much higher, wrote Peter Tirschwell, the company’s vice president for maritime and trade, in the report. As 2022 begins, the container shipping supply chain remains in the deepest crisis it has ever seen, and unwinding the disruption will take months, he wrote. Exacerbating the crisis in container supply chains is capacity. Ocean carriers and freight forwarders report that there are enough ships and containers to handle even the elevated demand. The problem is that so much of that capacity is idled or circulating more slowly. The result has been to take significant capacity off the table, he wrote. Estimates are that 10-15 per cent of capacity has been removed due to congestion. This is evident in the freight rates, where spot container freight rates are up three to five times versus just a year ago, depending on the trade lane. “The 2022 outlook remains one for continuing disruption with no guarantee of a quick return to pre-pandemic system fluidity at least through the first half of the year,” Tirschwell added. Businesses in 2022 will be forced to pay more for labour, especially to service workers who were some of the lowest paid workers and most in danger of getting COVID-19, and have been most hesitant to return to work, wrote John Anton, director, pricing and purchasing service, at the company. Political decisions will play a much more significant role in supply chains in 2022 as governments seek to control strategic resources and secure competitive advantage, wrote Nathalie Wlodarczyk, vice president of risk intelligence solutions. Entering 2022, crude oil prices are up about 55 per cent from a year ago at this time. Internationally traded coal prices recently were up 100 per cent, wrote Jim Burkhard, vice president, oil markets, energy and mobility. And spot prices for gas in Europe and Asia in early January are 350 per cent higher than a year ago. That can change by the day or the hour, but that provides a sense of the magnitude of the increase in prices and volatility we’ve seen over the last year, he added.
Source: Fibre 2 Fashion
