In 2013, the Bangladesh textile industry faced one of its toughest tests. Two mishaps at different textile units within a span of five months could have led to Dhaka losing markets abroad for its garments. In November 2012, a fire in one of the garment factories had killed 117 workers. Five months later, in April 2013, a huge garment unit collapsed, leaving over 1,100 dead. This led to Western buyers, particularly brands that source garments from Bangladesh, to threaten that they wouldn’t buy from the country until manufacturers adhered to stringent fire and building safety regulations. Consequently, over 1,250 units were shut down but nearly 350 new ones have come up since then. Currently, Bangladesh has 4,560 garment factories involved in exports. To Bangladesh’s credit, the mishaps of 2012 and 2013 have not bogged down its garment exports. In the last couple of years, it has emerged as the second-largest exporter of garments in the world, only behind China. In 2017, Bangladesh exported $27 billion (up at $32.92 billion in 2018) worth of garments and enjoyed a 6 per cent share in the global clothing market. In contrast, India exported only $18 billion (down to $16.14 billion in 2018) worth of garments with a 4.1 per cent market share. A study of how Indian and Bangladeshi apparel sectors have progressed since 2000 throws up some interesting data. In 2000, India enjoyed 3 per cent of the global market share compared with Bangladesh’s 2.6 per cent. Since then, Dhaka has more than doubled its share in the world market, while India has gone up by only 1.1 percentage points. It is another story that global buyers used the 2012 and 2013 mishaps to arm-twist their Bangladeshi suppliers to cut the prices of their products. However, all of this doesn’t mean that the Indian apparel or clothing sector is faring poorly. India’s apparel market size has increased from Rs 2.4 lakh crore in 2009-10 to Rs 6.5 lakh crore during 2017-18. Which means that India has a huge captive domestic apparel market going by the above statistics. According to Care Ratings, the domestic market has witnessed a 13.8 per cent compounded annual growth rate compared to 9.8 per cent of the export market. Nonetheless, Bangladesh enjoys a huge advantage over India in the global apparel market, on three counts. As does Vietnam. The first advantage is the cost of labour. The World Bank — quoting Japan’s External Trade Organisation survey — put the monthly labour wage of a Bangladesh worker at $101 — the lowest in Asia. In comparison, an Indian garment worker earns $257, while a Chinese worker gets $470. The monthly wage of a worker in Vietnam is $216, while that of a Sri Lankan worker is $148. An interesting feature of the wage data is that the productivity of a Bangladeshi worker is better than that of his Indian counterpart. The second advantage is the preferential duty treatment accorded to garments from Bangladesh, an LDC (least developed country), by the European Union (EU) and other developed countries. Under the World Trade Organisation (WTO) agreement, LDCs are given preferential treatment in trade so as to help their economies to improve. Vietnam and Sri Lanka also enjoy the same treatment for respectively signing a free trade pact and meeting some of the EU’s expectations on sustainable development. As a result, while Indian garments exports to the EU attract 9-10 per cent import duty, similar goods from Bangladesh, Vietnam, and Sri Lanka are allowed to be imported duty-free. The third advantage that Bangladesh enjoys — as a consequence of the first two advantages — is increasing foreign direct investment (FDI). In the last few years, the Bangladeshi garment sector has been able to attract $2.15 billion FDI compared to the $3.2 billion that India has attracted from April 2000 to March 2018. In fact, from 2008 to June 2015, FDI investment in India was just $230 million. Though India has slipped behind Bangladesh in garment exports, it does not mean that the sector is facing problems. No doubt, its garment exports have not topped $17.5 billion yet but overall exports of textile products are around $35 billion. The Indian textile industry’s market size is worth $150 billion. The garment sector — the second largest employer after agriculture — provides employment to 45 million people directly and another 65 million indirectly. According to the World Bank, India exports $2.25 billion-worth textile and clothing products to Bangladesh. In turn, it imports $336 million-worth textile and clothing products from Dhaka. India is one of the major raw material suppliers to Bangladesh; Dhaka depends on New Delhi for ginned cotton (pressed raw cotton), yarns and fabrics. South Asia is seen as a big player in the global textiles market. Yet, interestingly, the nations in the sub-continent don’t compete with one another. According to an ICRIER (Indian Council for Research on International Economic Relations) study, Sri Lanka specialises in swimwear and ladies undergarments, while Pakistan ships out denims, bed linen and household apparels. Bangladesh caters to the lower segment of the market, exporting T-shirts and shirts in bulk, while India has emerged as the supplier of superior woven and knit products. Since India supplies to the upper end of the market, it will likely begin to earn more for its products once the global market stabilises from the current problems it is facing. The Indian textile industry, however, has been irked by issues such as Goods and Services Tax (GST), pruning of export concessions by the government and the credit squeeze. While the centre can look at addressing these issues, it can also look at a few other things too to help textile exports. One, India should sign the long-pending Free Trade Agreement with the EU. Two, it can also look at signing a similar agreement with Russia, which will help it access the European market better. Once signed, the agreements can help India take advantage of lower import duty rates that could be agreed upon bilaterally, and which could become nil in due course of time. Third, India could sign the Regional Comprehensive Economic Partnership Agreement with China and Australia. This will help Indian exporters to tap the huge markets in both those countries. The industry and government should join hands to look at other markets such as Japan, Israel, South Africa, and Hong Kong. All these measures could help India meet its $82 billion textile exports target for 2021, although it has already missed its $45 billion target set for the 2017-18 fiscal.
India is in talks with the US to resolve bilateral trade differences, including restoration of GSP. India is in talks with the US for restoration of Generalised System of Preferences (GSP), mutual withdrawal of their disputes at the World Trade Organization and removal of higher tariffs on steel and aluminium by Washington, as the two sides work to resolve their bilateral trade differences. “We have been discussing various issues with the US such as GSP restoration, and withdrawal of their Section 232 tariffs and our retaliatory duties,” said an official. The two sides have been engaged in talks to iron out the differences, which began last year when the US levied global additional tariffs of 25% and 10% on the import of steel and aluminium products, respectively. India responded by levying retaliatory tariffs on 28 products originating or exported from the US with effect from June 16, for which Washington dragged it to dispute at WTO. Talks collapsed after the US withdrew incentives to $6.3 billion of Indian exports under the GSP programme effective June 5. Prime Minister Narendra Modi is travelling to the US later this month to attend the UN General Assembly. Commerce minister Piyush Goyal is also likely to visit Washington soon. Officials said while the economic impact of GSP withdrawal on India’s exports is not significant, these issues have longterm strategic implications and should not become deal breakers. “The economic impact of GSP is not significant and industry is not unhappy with its withdrawal but it has implication on our bilateral relations. Some sectors have been hurt and these issues should not become sticking points,” the official added. Argentina, Liberia and Myanmar are a few countries where the US reinstated the benefits after they made “sufficient progress” to be eligible for them. Indian exporters of chemicals, engineering goods, leather, and gems & jewellery have been impacted by the withdrawal. But some exporters said the impact was not much. “We understand that GSP is given to developing countries, which meet eligibility norms, and it was a benefit for us,” a Mumbai-based exporter of chemicals said. “However, with the US also raising tariffs on Chinese chemicals, the withdrawal has not impacted us much.” The preferential tariffs under the GSP on Indian exports range between 1% and 6%. Trade experts said while GSP can not be completely ignored, New Delhi must be cautious of what can be given in return. “The GSP withdrawal may be hurting some sectors but, at the same time, it is not worth giving concessions on intellectual property rights and ecommerce because that would do long-term damage,” said a Delhi-based expert on trade issues. Another expert explained that the absence of GSP is a blow to India’s competitive advantage at a time when US-China trade war has thrown open more opportunity to increase trade but India must carefully weigh its options.
Source: The Economic times
The Association of Southeast Asian Nations (Asean) has agreed to India’s long-pending demand to review the free trade agreement (FTA) between the two sides. The exercise could help address India’s concerns that it has not benefitted from the agreement and its goods trade deficit with the 10-member grouping has widened. The trade gap was $22 billion in FY19, up from $13 billion in FY18. On Tuesday, the two sides agreed to “make it more user-friendly, simple and trade facilitative for businesses,” according to a joint statement. This was agreed during a meeting between the grouping’s economic ministers and commerce minister Piyush Goyal in Bangkok on Tuesday at the 16th Asean Economic Ministers (AEM)-India consultations. This will be the first review of the pact that came into force in 2010. The services component, in which India has a greater interest, and the investment chapter are yet to be ratified. The two sides also decided to constitute a joint committee for the review. Goyal has tasked officials to work on the details of the review and submit an update at the next ministerial meeting. Policymakers hold the view that FTAs have adversely impacted India’s manufacturing, which the government is trying to boost through its Make in India initiative in order to generate jobs. The finance ministry has begun a review of India’s FTA framework to assess the impact of such pacts on the overall economy. The country’s premier think tank Niti Aayog has said that India’s quality of trade has not improved after the FTA. It said that liberalisation under the India-Asean FTA covers 75% of the two-way trade. India kept around 10% of tariff lines in exclusion. These included motor vehicles, textiles, petroleum products, sugar, wheat, vegetable oil dairy products and other food products. However, Thailand, Philippines, Myanmar, Brunei and Vietnam kept a higher number of tariff lines under exclusion. The two sides have agreed to open their respective markets by progressively reducing and eliminating duties on 76.4% coverage of goods. India told Asean Troika Trade Ministers in July that the promise of commensurate offers in services subsequently made by the grouping’s member countries hasn’t come to fruition. Moreover, the surge in goods imports into India is accentuated by instances of non-adherence to origin norms and lack of full cooperation in investigating and addressing such breaches. In contrast, the utilisation of preferential tariffs by India under the India-Asean FTA is below 30% because of standards, regulatory measures and other non-tariff barriers in the region. Ships, boats, floating structures, mineral fuels, mineral oils and meat are India’s largest exports to the grouping while telecom equipment, electrical machinery, mineral fuels, mineral oils and animal or vegetable fats and oils are the biggest imports. “The review will help bring back manufacturing and it will also go a long way towards Make in India, helping our agriculture and bring more manufacturing and jobs to India,” said Ashwani Mahajan, All India co-convenor, Swadeshi Jagaran Manch, adding that the pact doesn’t have an exit clause. Noting that steel, glass, telecom and various other industries are the worst hit, he said that the review would definitely help in creating a more equitable trade agreement that would help in the revival of these sectors. The 10 Asean members are Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam. Both Asean and India are part of the proposed Regional Comprehensive Economic Partnership (RCEP). "If RCEP comes into force, then the member countries will have to offer steeper tariff concessions. So, India may have to recalibrate its approach there," said a Delhibased expert on trade issues
Source: The Economic times
India on Monday said it has reservations on joining the proposed Regional Comprehensive Economic Partnership with the ASEAN countries and its six FTA partners, due to concerns, including the "enormous" trade deficit with China, which has ballooned to over $57 billion.The Regional Comprehensive Economic Partnership (RCEP) agreement is being negotiated among 10 ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and their six trade partners -- Australia, China, India, Japan, Korea and New Zealand to create a free trade pact covering a third of the world's economy. External Affairs Minister S Jaishankar, speaking during a panel discussion at the inaugural session of India-Singapore Business & Innovation Summit here, said India remained concerned over the unfair" market access to Indian products and the "protectionist policies" of Beijing that have created a significant trade deficit between the two nations. The trade deficit with India in 2018, according to official Chinese data, climbed to $57.86 billion from $51.72 billion in 2017 in about $95.54 total bilateral trade. The Indian industry has raised concerns over the presence of China in the grouping with which India has a huge trade. Various sectors, including dairy, metals, electronics, chemicals, and textiles, have urged the government to not agree on duty cut in these segments. "The big concerns of India are of course, one, its relationship with China because we have an enormous trade deficit with China," Jaishankar said in response to a question on the ongoing negotiations for the RCEP. At the session, also attended by his Singaporean counterpart Vivian Balakrishnan, Jaishankar said India fears that the RECP deal, which would call for a lowering of tariffs, would lead to a flood of goods from China while not assuring India of an equal access to the Chinese markets, thereby widening its large trade deficit. On Sunday, the 16 RCEP participating nations that are negotiating a mega free trade agreement have agreed to work together to iron out outstanding issues which are fundamental to conclude the talks this year, a joint statement said. The statement was issued after the 7th RCEP ministerial meeting in Bangkok. Negotiators have expressed hope that the RCEP would be delivered by the end of the year. India has registered trade deficit in 2018-19 with as many as 11 RCEP countries, including China, South Korea and Australia. Jaishankar also raised concerns that India's forte, its trade in services, was less well enforced through regulations than the trade in goods. The deal had the geo-strategic objective of holding the line against protectionist and unilateral policies, he agreed. Even so, it had to make economic sense, he said. RCEP, at the end of the day, is an economic negotiation. It has a strategic implication but the merits... have to be economic," he said. Balakrishnan called the deal a "game-changer" that had the potential to secure the prosperity of its members in the face of a push-back against trade and globalisation. "For India, China and Southeast Asia, the key political question is, can we arrive at a formula that would expand a rising middle class and give their children a sense of optimism," he was quoted as saying by The Straits Times newspaper. Balakrishnan said Singapore, the largest foreign investor in both India and China, hoped the two Asian countries would eventually tide over their differences. "In the next decade or two, China and India are going to be in significant trading relationship. This is something they will have to sort out. In due course, bilateral arrangements will be made," he said. But even as this rapprochement occurs, what we are trying to offer with RCEP is a multilateral model, a pan-regional model, the centre of gravity in the Indo-Pacific. And if we can sort out the fair rules which will promote trade and economic integration between India, China and South-east Asia, there is enormous opportunity."I say all this without trying to trivialise or gloss over the difficulties in negotiations," he said. "It is worth making an effort because this will be a gamechanger... the mother of all trade agreements," he said. The Indian-origin Singaporean foreign minister, also expressed confidence on the Indian economy and noted that the government of Prime Minister Narendra Modi has set the goal of doubling India's GDP to $5 trillion by 2024. "I remain optimistic that because of the nature of the Indian economy and the transformation which Mr Modi is implementing, India can deal with this from a position of confidence," he said.
Source: Live Mint
The rupee opened on a cautious note and fell 13 paise to 71.84 against the US dollar in early trade on Wednesday amid rising crude oil prices and unabated foreign fund outflows. At the Interbank Foreign Exchange, the rupee opened at 71.82 then fell to 71.84 against the US dollar, showing a decline of 13 paise over its previous closing. The Indian rupee had closed at 71.71 against the US dollar on Monday. Forex market was closed on Tuesday on account of Muharram. Forex traders said rising brent crude prices and foreign fund inflows weighed on the domestic currency. Brent crude futures, the global oil benchmark, rose 0.87 per cent to $ 62.92 per barrel. Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 188.08 crore on Monday, as per provisional data. Market participants however said positive opening in domestic equities added support to the local unit and restricted the downfall. The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose marginally by 0.01 per cent to 98.33. The 10-year government bond yield was at 6.61 per cent in morning trade. Meanwhile on the global front, US President Donald Trump has claimed that China had lost trillions of dollars and three-million jobs due the tariffs his administration had imposed against the country. Trump asserted that the United States was doing very well against China, adding that the Chinese wanted to negotiate a trade deal “very badly“.
Source: The Hindu Business Line
Development Minister Gerd Müller has said the new initiative guarantees a responsible supply chain. But critics say it is too weak to make a difference. German Development Minister Gerd Müller (above right) presented the country's new "Green Button" seal for sustainable textiles on Monday. The new scheme is meant to ensure that consumers can purchase clothing that has achieved certain social and environmental standards, including a minimum wage for textile workers and a ban on child labor, as well as the use of certain chemicals and air pollutants. "Everyone said that there was no way you could certify an entire supply chain right up into the storefront," Muller told the Augsburger Allgemeine newspaper. "But we have shown that is indeed possible with the example of textiles." Müller has said that he was inspired to ensure the social responsibility and safety of the clothing industry after being moved by the 2013 Rana Plaza disaster in Bangladesh. About 1,130 people were killed and 2,5000 injured when a garment factory collapsed in the capital Dhaka, affecting workers who made clothes for major chains like Benetton, Primark, Walmart, and Mango. The seal has already been applied to products from some smaller German brands, but also large chains like Lidl and Tchibo. However, the new scheme has been heavily criticized by the textile industry, which says it is superfluous and has created duplicate structures to those that already exist. They also pointed out that if only Germany was taking part, it wouldn't make any real difference in a globalized sector. "The initiative is good, but the implentation is not," said Uwe Wötzel of the "Clean Clothes Campaign." Wötzel told the news organization RedaktionsNetwerk Deutschland that "the criteria are simply too weak" to make a difference with regards to sustainability and ensuring that textile workers are employed in fair and safe conditions. For example, he said, the minimum wage laid out in the framework is "so low that no one could live off it." Germany's office for consumer protection said that they would have to wait and see what effects, if any, the seal had on the clothing industry in the country.
The Chinese economy witnessed an unexpected rocky trade in August with the exports dropping by 1 percent on-year, against the market expectation of a 2 per cent growth. The surprise fall in China’s exports last month, contrary to predictions, shows the extent of a global economic slowdown, but may spell some relief for India, which is grappling with its own slowing economy. The Chinese economy witnessed an unexpected rocky trade in August with the exports dropping by 1 percent on-year, against the market expectation of a 2 per cent growth. At the same time, its imports fell too, by 5.6% for the month. Amid the ongoing trade war with the US, the sales for many major commodities from China such as unwrought aluminium and its products, coal, coke and semi-coke, steel products, refined products, and rice fell up to 44 per cent, according to the General Administration of Customs, China. On the import side, since China is the largest importer of metals, a slowdown there shows its impact at global levels. The declining demand for commodities in China and the global market is likely to bring down the prices of major commodities, which in turn would cut India’s import bill, say experts. As far as trade is concerned, India is not immune to the global slowdown. “The global slowdown has several channels of contagion. For India, export volumes moderated in spite of a modest real depreciation, showing that it is external demand that is the key determinant of export performance,” says RBI’s latest annual report. However, economists believe that apart from maintaining the current account and the balance of payment, turbulent global factors add only a little worry to India. “Indian economy is mostly driven by domestic demand and the global demand has a minor role to play,” Madan Sabnavis, Chief Economist, Care Ratings, told Financial Express Online. He added that the weakness in demand for commodities such as steel, aluminium in China is likely to bring down the commodities prices in the global market and this can reduce India’s imports bill too. However, oil-driven imports form bulk of Indian purchases from overseas, and thus the relief on the overall import bill will be small. “China has cut its RRR by 50 basis points last week and has given hint for further reduction to boost the growth. Looking at the recent changes in the fundamentals, a further fall in the base metal prices will be capped,” Manoj Jain, Director-Commodities and Forex banking, India Nivesh, told Financial Express Online. As far as the Indian scenario is concerned, the import bill is already reduced due to slower domestic demand as automobile and other manufacturing sectors are highly stressed. China and the US have agreed to hold the 13th round of China-US high-level economic and trade consultations in Washington in early October. Before that, the two sides have decided to maintain close communication this month, according to the Ministry of Commerce, China. The move has given hopes that the global slowdown will gradually improve. Meanwhile, Chinese exports to the US fell by 16 per cent and Australia by 17 per cent.
Source: Financial Express
Treasury and Finance Minister Berat Albayrak exchanged views with U.S. Secretary of Commerce Wilbur Ross Monday during a meeting. The two ministers discussed bilateral economic and commercial relations in great detail, Albayrak said in a tweet. "We have once again emphasized our resolution to reach $100 billion in bilateral trade volume," the minister said. As part of his four-day visit to Turkey, the U.S. secretary of commerce also met with Trade Minister Ruhsar Pekcan on Saturday and representatives of the Turkish business world. Turkey and U.S. have ramped up efforts to reach their goal for bilateral trade volume, which was set at $100 billion by President Recep Tayyip Erdoğan and his U.S. counterpart Donald Trump during a G20 meeting in late June. Turkish exports to the largest economy in the world were $8.3 billion, while it imports totaled $12.3 billion, according to data from the Turkish Statistical Institute (TurkStat). In the January to July period of this year, the sale of Turkish goods and products to the U.S. was $4.6 billion and U.S. exports to Turkey were $6.6 billion. During Ross' visit, Turkish and American officials have discussed ways to unleash Turkey's export capacity to the U.S., particularly in the sectors of civil aviation, automotive, sub-automotive, jewelry, furniture and textiles, Pekcan previously said.
Source: Daily Sabah