MARKET WATCH 07 NOV, 2019

NATIONAL

INTERNATIONAL

RCEP pull-out: India right in sticking to its terms and conditions

Citing “significant outstanding issues, which remain unresolved”, India decided to walk out of the proposed Regional Comprehensive Economic Partnership (RCEP) trade agreement. Had India joined, the trade bloc, comprising ASEAN, Australia, China, Japan, Korea and New Zealand, would have accounted for 25% of global GDP, 30% of global trade, 26% of FDI flows and 45% of the world population. RCEP countries account for almost 27% of India’s total trade. Exports to RCEP account for about 15% of India’s total exports, and imports from RCEP comprise 35% of India’s total imports. Given, the magnitude of numbers involved, India’s decision to not be a part of this deal is brave and warranted to a great extent. The trade deal has been under negotiation for the last eight years. Reciprocity is the key to FTAs. The biggest driver for trading partner countries to sign an FTA with India is access to a big and booming consumer market. So, it was quite logical for India to assess returns from the deal. Many pain points compelled the country to walk out of the China-led trade deal, and rightly so. First, to start with India’s trade deficit with the RCEP bloc of over $100 billion is almost 64% of its total trade deficit, of which China alone accounts for over 60%. China’s manufacturing overcapacity and dumping of goods has compelled countries across the world to take action against its imports. As a result, China is the recipient of the highest number of ADD measures in the world with almost a 1,000 ADD (Anti-Dumping Duty) measures against it since 1995, this amounts to almost a quarter of all ADD measures globally. China’s penetration in the Indian market dominates both in terms of value-added import items as well as labour-intensive industry imports. Overall, India has almost 20% of its non-oil imports from China. Almost 60% of India’s electric machinery imports, 36% of machinery and equipment imports, and 37% of organic chemical imports are from China. Due to its massive overcapacity and financial and non-financial government support, China is able to create a significant edge over its trading partners. Second, appropriate framework against circumvention of rules of origin is still lacking when it comes to trade deals. Under invoicing of imported goods to show higher value addition, re-routing through other FTA partner countries to gain preferential access is quite common. India’s demand for stricter value addition norms in the RCEP received a lot of backlash during negotiations. Lax rules of origin norms would have led to a surge in imports from various trading partners into India. India’s concerns in this regard were not addressed by member nations. Third, India’s concerns on non-tariff barriers were also not delved into during the negotiations. NTBs like complex product certification process, labelling standards, customs clearance, pre-shipment inspection and import licensing have hindered India’s access to other markets. Dealing with NTBs is costly and negates the impact of duty reduction under FTAs. This happens, especially with respect to China, as market access in the country is restricted despite low duty rates. Despite a promised 92% preferential access by China into its market under RCEP, India wouldn’t have really gained access into it. Fourth, as per media reports there have been various other concerns such as lack of appropriate safeguard clauses in case of impact on the domestic market, insignificant attention to the services chapter and reluctance of trading partners to move the base year for MFN from 2014 to a recent one so that recent duty changes could be incorporated. Lastly, India’s not-so-remarkable performance with respect to its previously signed FTAs has also been an eye opener for the policymakers. A NITI Aayog note on Free Trade Agreements and Their Costs, 2018 details that the combined trade deficit with FTA partners like ASEAN, Japan and South Korea has doubled in the last eight years, while the quality of trade has also deteriorated. A case in point is the India-ASEAN FTA where India’s trade balance has worsened (deficit increased or surplus reduced) for 13 out of 21 sectors including value-added sectors like—chemicals and allied, plastics and rubber, minerals, leather, textiles, gems and jewellery, metals, vehicles, medical instruments and miscellaneous manufactured items. These account for approximately 75% of India’s exports to ASEAN.The paper concludes that joining the RCEP could be disastrous for India. Thus, in terms of reciprocity in an FTA, Indian policymakers have rightly assessed that the Indian manufacturing sector will not be able to gain reciprocal access in other markets, specially China due to significant overcapacity, use of NTBs, and other financial and non-financial support available to its domestic industry. As for other RCEP trading partner countries India already has FTAs either in force or under negotiation. However, to be clear, it wasn’t the presence of China that led to India’s walkout from the deal, but the lack of safeguards and reciprocity built in RCEP as well as the current state of the manufacturing industry in the country. Despite India’s commitment to free trade and a more connected world, the decision is right. For the time being, we do miss out on being part of this mega trade block, but the costs of being part of such an agreement could potentially have been disastrous. This also gives us a chance now to concentrate our energies and synergies on propping up the economy. This is the right time to set things in motion with a New Industrial Policy that creates the necessary incentives for MSMEs to be an active part of this process. Going forward, these are necessary complements for ensuring maximum leverage out of our trade deals like RCEP. The doors to trade deals are still open and a New India will be a part of it, but on its own terms and conditions. Saraswat is member, NITI Aayog, Priya is a Mumbai-based economist and Ghosh is a PhD candidate, Johns Hopkins University, USA.

Source: Financial Express

Back to top

India’s decision to stay out of RCEP: what does the future hold?

After seven years of negotiations, the 16 participating states in the Regional Comprehensive Economic Partnership (RCEP) agreement issued a statement on 4 November 2019 at Bangkok, conveying that 15 of the participating states had concluded text-based negotiations on 20 chapters of the agreement and will proceed to sign this agreement in 2020. The statement mentioned that India has significant outstanding issues, which remain unresolved and that all RCEP participating countries will work together to resolve these outstanding issues in a mutually satisfactory way. India’s final decision, the statement read” will depend on the satisfactory resolution of these issues”. The Indian delegation issued a separate statement, stating that it had decided not to join the RCEP since it did not receive any “credible assurance on market access and non-tariff barriers”. A statement by the Indian Commerce Minister Piyush Goyal on 5 November revealed that there were at least 70 outstanding issues in the negotiations, of which 50 pertained to India. Prime among these is a proposed import cap for China and a mechanism to raise tariffs on Chinese imports if it crossed a certain threshold through an auto-trigger mechanism. This shows the divergence of positions between India and the rest of the participating states. The Indian concerns stemmed from the large trade deficit with ASEAN and China and fears  that unless issues like rules of origin, provisions to counter sudden surge in imports, particularly from China, and securing better access in the services sector were met, India will become a dumping ground for cheap imports from the rest of the ASEAN partners.  A major concern also was the use of 2014 as the base year for tariffs in the negotiations – India had proposed that the base year being 2019 since it has raised tariffs on as many as 3500 products since then.  Leading up to the negotiations, at least eight different industry sectors had expressed apprehension about the utility of the agreement for India, there was opposition from other political parties, and a division amongst the think tank community in India. The difficult state of the Indian economy and stagnation in Indian exports added to the pessimistic solution.  It does seem that Indian negotiators put forth their points forcefully, but the crucial issues for India kept getting pushed right till the end without resolution. India also brought in additional issues into the negotiations over the last two rounds, after further evaluation of the impact that the RCEP in its current form could have on the Indian economy. It does seem from various reports that the Indian concerns could not be accepted. Given these circumstances, staying out was a logical option for India. While the statement by the Prime Minister at the RCEP meeting merely stated that India will not join the RCEP, Commerce Minister Piyush Goyal, speaking on 5 November noted that “ should the other countries come up with better offers in the interests of India’s industry and people, we will discuss it and do what is good for our farmers, industry, and the services sector. Prima facie, this seems like an option, but in reality, to expect Indian concerns to be resolved within the legal scrubbing phase of the RCEP text seems difficult unless there is a concerted effort made by the rest of the RCEP partners. In the long run, India needs to be part of RCEP. This will facilitate FDI in manufacturing in India as RCEP will allow access to the Chinese and other 14 countries who will be part of RCEP. The fear of being swamped by Chinese goods can only be mitigated by making Indian economy and manufacturing efficient, reforming agriculture, promulgating new labour laws, bringing down the cost of capital, reducing deficit financing, rationalization of indirect taxes and levies, reducing bottlenecks, and improving logistics. India needs a road map and time frame within which to make structural changes and join RCEP, thereby deriving benefit from the agreement. Like the other participating states in the RCEP negotiations, India will need to improve transaction costs and improve its position on indices such as ease of doing business. Participation in RCEP will promote the formation of supply chains and will provide access to mutual recognition agreements. Remaining outside RCEP will have an adverse impact on exports to the RCEP members, who will enjoy lower tariffs within the grouping. It would also mean that RCEP Members will be seen as better investment destinations, being part of a larger grouping with market access within the group. While making these preparations, India will need to focus its attention on FTAs outside the grouping – e.g. Europe, USA or Africa. The CECA negotiations with Australia could be revived given the vast potential of trade and investments with that country. The existing FTAs with ASEAN, South Korea and Japan will need to be reviewed and made to work better to obtain a level playing field and to keep up the momentum in our Act East Policy. Bilateral trade, investment and connectivity projects will have to be concentrated upon. India’s growing role in the Indo Pacific demands that this engagement is maintained and that eventually when India is ready, participation in RCEP reactivated.

Source: Financial Express

Back to top

RCEP: No competition please, this is India

The vision of making India a global manufacturing hub depends on getting access to global and regional production networks. For that, it needs FTAs like RCEP India’s backing off from RCEP is not surprising. What is surprising is that it took it so long to do so. As a reluctant participator, India hardly had a constructive strategy for the talks. For several years, and most of the early rounds, it relied on the old strategy of lingering the process. But, as other countries started piling up pressure for concluding talks from about a couple of years ago, India realised it was being pushed into a corner. The deal was to be concluded in the last ASEAN Summit itself, in 2018. But, India’s general election, as well as those in other RCEP members like Indonesia, Thailand, and Australia, came to India’s rescue. The group decided to defer the conclusion to this year’s ASEAN Summit at Bangkok. It is only during the last one year or so that India got serious about RCEP. Elaborate consultations took place in the past few months, along with extensive engagements with other members. The deal, though, was already at a substantially advanced stage. Other countries were not sympathetic to reopening discussions on India’s ‘core’ demands: bringing up the base year for cutting tariffs to 2019 from 2014, automatic safeguard trigger for stopping surge in imports, and the insistence on greater market access for its professionals. At the end, India was left with little choice but to back out. India’s opportunity to return to RCEP remains. The joint statement of RCEP ministers mentions other members working with India for resolving outstanding issues. But, this would require India being realistic about its ‘own terms,’ and ‘core demands’. It has been excessively reliant on its large economic size, and the hope that size matters so much that it can demand and obtain the impossible. It must note that RCEP is a multi-country, regional trade agreement, where interests of individual members can be accommodated only up to certain extents. It must also note that its paranoia over Chinese imports is not shared by other members. The rest are unlikely to be overtly sympathetic to India’s insistence on special protection against Chinese imports. Why is the Indian industry, and other stakeholders, so defensive on RCEP? It is interesting that the same defensiveness is hardly visible with respect to efforts of an FTA with the US. The answer is obvious. RCEP includes Southeast Asia, China, Japan, and Korea—countries that are miles ahead of Indian producers on competitiveness in manufacturing. The gaps are so much that even with high customs duties, Indian consumers, in many cases, prefer imports from these countries as opposed to domestic substitutes. The same lack of competitiveness prevents Indian exporters from penetrating deep in Asia-Pacific markets in spite of zero or low tariffs. Exports from Vietnam, Philippines, and Malaysia would be more competitive in larger RCEP consumer markets like Japan, Australia, and Korea, compared with those from India. The competitiveness problem doesn’t arise for the US. Indian industry is confident of diving deep in the US market. The post-GSP scenario might be different though, since other GSP-receiving competitors from Asia and Africa are getting their act together by reducing business costs. The US imports also don’t threaten Indian manufacturers, except in high-end pharma, and automobiles. The shock, though, will be in dairy and other agricultural products. If Indian dairy producers prefer being hit by American milk imports as opposed to those from Australia and New Zealand, then one needs to see what logic supports such preference! The overarching sentiment in pulling out of RCEP is Indian industry’s fear of imports. But, will a longer phase-out period, and painfully slower cut in tariffs—as India is demanding—get rid of this fear? It won’t. For most of Indian industry, the urge to become competitive doesn’t exist as long as it is protected. Growth of exports requires being competitive and matching up to better quality standards. From an industry perspective, rather than export, it is better to focus on the protected domestic market, where the miserable Indian consumer will have to accept whatever is cheaply available, regardless of quality and price. The vision of making India a global manufacturing hub depends on getting access to global and regional production networks. For that, it needs FTAs like RCEP. The logic of engaging in such FTAs only after domestic industry is competitive is fallacious. It will never be competitive unless exposed to competition, which it won’t be. RCEP members might concede more to India if they really value India’s economic and geo-strategic might. There is talk of India pursuing bilateral FTAs with some RCEP members like Australia. Unfortunately, rubbing shoulders on the security platform of Quad won’t guarantee special visas for Indian professionals through a bilateral FTA with Australia. The dairy sector would need to be stripped of protection, as would more of agriculture. That, though, might be more than a handful to handle. Getting shallow FTAs, as India has done in the past with Bhutan and Sri Lanka on geopolitical grounds, is very different from working out deep, modern, comprehensive FTAs with advanced economies. Even if India gets FTAs with the US and the EU, getting higher shares of these markets would mean competing with beneficiaries of deep non-reciprocal preferences like EBA. Competitiveness would matter there—a parameter where Indian producers would fall short. The commerce minister’s recent lament on FTAs not needing to create a fear psychosis is unlikely to serve its purpose. However supportive the government is, industry is unlikely to act towards becoming more competitive. Once protected, always protected. No wonder, the relief is so palpable after the pullout from RCEP!

Source: Financial Express

Back to top

FM to review state of economy at FSDC meeting on Thursday

Finance Minister Nirmala Sitharaman will review the state of economy at a meeting of the Financial Stability and Development Council (FSDC) on Thursday to be attended by sectoral regulators, including RBI Governor Shaktikanta Das. The FSDC is the apex body of sectoral regulators, headed by the finance minister. According to sources, the meeting will take stock of various measures taken by the government to boost the sagging growth which hit a six-year low of 5 per cent in the first quarter of the current fiscal. The meeting will review the current global and domestic economic situation and financial stability issues, including those concerning banking and NBFCs, sources added. Besides RBI Governor, Securities and Exchange Board of India chairman Ajay Tyagi, Insurance Regulatory and Development Authority of India(IRDAI) chairman Subhash Chandra Khuntia, Insolvency and Bankruptcy Board of India (IBBI) chairman M S Sahoo and Pension Fund Regulatory and Development Authority Ravi Mittal will attend the meeting. This would be the second meeting of the FSDC after the Modi 2.0 government assumed office. The government has announced several short and long-term measures to boost the economy in three phases between August 23 and September 14. Out of the total 44 measures announced, 16 have been fulfilled while the rest of the announcements are under consideration by relevant ministries. Further, it said action on one out of three announcements made for the housing sector has been completed and the other two are being taken up. According to experts the slowdown is primarily due to moderation in demand and steps are being taken to infuse liquidity in the financial system to aid loan growth. Sources said the FSDC meeting will also be attended by Minister of State for Finance Anurag Singh Thakur, Finance Secretary Rajiv Kumar, Economic Affairs Secretary Atanu Chakraborty, Revenue Secretary Ajay Bhushan Pandey and other top officials of the finance ministry.

Source: Economic Times

Back to top

Finance ministry now notifying authority for any change in FDI policy

The government has notified a new rules framework for investments through nondebt instruments making it clear that finance ministry will be the notifying authority for any change to foreign direct investment policy instead of the Reserve Bank of India. Four years after the Foreign Exchange Management Act, 1999 (Fema) was amended to switch control on equity inflows from the central bank to the North Block, the finance ministry has finally notified Foreign Exchange Management (Non-debt Instruments) Rules, 2019 that deals with all forms of non-debt investments, including equity, mutual funds that are dominantly equity oriented, depository receipts issued based on equity instruments, and immovable property. “RBI and the finance ministry had reached an agreement after which the rules have been issued,” said a person privy to the development. The latest set of rules under Fema, notified on October 17, lists in detail permitted sectors for foreign investment, countries allowed, and also various entities and instruments covered. The finance ministry will consult RBI on any changes to the rules in future, people familiar with the development said. Experts said it needs to be ensured that the consultation process between RBI and the government does not impede the process timelines. “Government will have the responsibility of drafting rules for non-debt investments and RBI shall be responsible for granting approvals in consultation with government,” said Akash Gupt, partner at PwC. “Further, coherence in approach and policy interpretation would be required between RBI and government, since one will be responsible for policy making and the other for monitoring and adjudication.”

THE TRIGGER

The amendment was carried out in the 2015-16 budget, putting the government in charge of all capital flows after differences widened between the central bank and the finance ministry over pricing regime governing exits in quasi-equity instruments in the backdrop of the Tata-DoCoMo case. In this particular case, DoCoMo had sought to exit its joint venture with Tata Group at predetermined price stated in the contract, which was not permitted by the policy. Besides, there were instances of delays in notification of changes in the FDI policy by RBI after issuance of press notes. “Capital Account Controls is a policy, rather than a regulatory, matter,” the then finance minister Arun Jaitley had said in his budget speech in 2015. “I, therefore, propose to amend, through the Finance Bill, Section 6 of Fema to clearly provide that control on capital flows as equity will be exercised by the government in consultation with the RBI.” Foreign investment policy is managed by three entities — the finance ministry, RBI and the Department for Promotion of Industry and Internal Trade. RBI has been notifying the FDI policy changes under Fema, operationalising it. But now this would be done by the finance ministry.

Source: Economic Times

Back to top

Govt likely to extend 15th Finance Commision's term by six months

Officials say there have been discussions on whether the treatment given to J&K will be unfair to Delhi and Puducherry. The term of the Fifteenth Finance Commission (15th FC) could be extended by around six months, primarily due to uncertainty regarding how to treat any devolution of resources to the newly formed union territories of Jammu and Kashmir (J&K) and Ladakh, Business Standard has learnt. This implies that the 15th FC could submit an interim report before the Union Budget 2020-21 to enable Finance Minister Nirmala Sitharaman and her officials to prepare the Budget. The final report could be submitted at a later date. If the Union Cabinet, headed by Prime Minister Narendra Modi, approves the ...

Source: Business Standard

Back to top

Export and reform: If RCEP failed, look to other trading blocs. Isolationism is not an option

India’s long negotiations over Regional Comprehensive Economic Partnership (RCEP) may be over for the moment. But the search for a fruitful conclusion to other long standing negotiations such as the proposed free trade agreement with EU must continue. Isolationism is not an option. From a practical standpoint, it’s not realistic to turn inwards in the search for efficiency before opening up again. Being plugged into the global economy through trade agreements and enhancing domestic competitiveness are interrelated. Therefore, government must pursue domestic reforms simultaneously with negotiations to expand India’s basket of trade agreements. India has trade agreements of some sort with about 54 countries. This is the global norm. Of the 164 WTO members, most are members of one regional trade agreement or the other. These trade agreements cover more than half of international trade. Given this backdrop, India’s decision making should be guided by a major feature of international trade: regional trade agreements can lead to trade diversion. To illustrate, even if India is the most efficient exporter of a certain kind of apparel, a new regional trade agreement which excludes India can lead to a diversion of our exports to a less efficient producer. Consequently, sitting on the sidelines is not an option. Thus, if Indian manufacturing is weak compared to China and east Asian countries, there is greater economic complementarity with the EU, or the US, or Australia – and this deserves to be explored. Moreover there is greater strategic complementarity with the latter than with China, and better trade ties could cement this. For example, rules and decision making in China are opaque and it tends to offer market access based on strategic considerations. As long as it continues to consider India a systemic rival in Asia, it will never offer unimpeded access to Indian goods and services. However, the bottomline is that India needs to shore up its sagging competitiveness through domestic reform, which has been neglected for far too long. Prime Minister Narendra Modi may have acted in India’s immediate interest by refraining from joining RCEP now. But he should enhance India’s long term economic strength by unshackling rigid markets and simultaneously accelerate negotiation of other trade agreements. With a clear majority in Parliament, nothing prevents the government from taking decisions that are in India’s medium- and long-term economic interest.

Source: Times of India

Back to top

RCEP members keen to sort out India’s issues: New Zealand Minister

New Zealand’s Minister of State for Trade Damien O’Connor has said that his country would love to see India as part of the Regional Comprehensive Economic Partnership (RCEP) agreement and all 15 countries had agreed to work with New Delhi to sort out its sensitivities before a final agreement is reached. “We understand sensitivities of India (on RCEP) domestically. All 15 RCEP countries are committed to work with India through those (sensitivities) before final agreement can be reached,” he said talking to the media following an interaction organised by CII on Wednesday. India announced on Monday, after the RCEP Leaders Summit in Bangkok, that it had exited the RCEP agreement being worked out by 16 countries as its core concerns were not being addressed. The RCEP includes the ASEAN, India, China, Japan, South Korea, Australia and New Zealand. India’s External Affairs Ministry’s statement came as a surprise as the RCEP Leaders joint statement, endorsed by the leaders of all 16 countries including Prime Minister Narendra Modi, stated that other members would continue discussions with India to sort out its differences. A decision can be taken later based on the results of the talks, it said. Explaining the statement, Commerce and Industry Minister Piyush Goyal at a press conference on Tuesday said that while India’s decision to quit RCEP was final at the moment, India was open to further discussions if its problems are addressed.

Dairy sector

O’Connor assured that New Zealand’s dairy industry would not pose a direct challenge to India’s dairy sector. The proposed opening up of the dairy sector to New Zealand by lowering/eliminating tariffs was one of the issues strongly opposed by Indian farmers and the dairy industry. “India’s dairy industry is larger than New Zealand’s. We have exported dairy products to India only to complement Indian dairy sector in times of drought and times when our products were needed,” he said. The biggest challenge to Indian industry and farmers from the RCEP pact comes from China which runs a trade surplus of over $50 billion with India annually. India wants adequate rules of origin and safeguard duties in place to protect the domestic sector from import surges. The 15 RCEP countries (not counting India) have agreed to sign the pact sometime next year. All 16 members together account for 39 per cent of global GDP, 30 per cent of global trade, 26 per cent of global foreign direct investment flows and 45 per cent of the total population. “India’s dairy industry is larger than New Zealand’s. We have exported dairy products to India only to complement Indian dairy sector in times of drought and times when our products were needed.”

Source: Business Line

Back to top

India may be looking at a dry spell for FTAs if RCEP falls through: Experts

Talks with major economies like the EU and US, among others, on trade and investment deals are stuck on similar issues. The government’s strategy to secure bilateral deals with the United States, the European Union (EU) and other economies may be a difficult exercise if talks with the Regional Comprehensive Economic Partnership (RCEP) fall through, say experts. Commerce and Industry Minister Piyush Goyal has batted for a bilateral deal with the US, while also stressing that India is keen to restart free-trade agreement (FTA) talks with the EU. But with institutional reform being a slow process and domestic industry unwilling to adjust to foreign players in the domestic market, India may be looking at a long dry spell for these FTAs, experts contend. “The RCEP drama may lead to many déjà vu experiences for the government if the domestic scenario doesn’t change drastically, as the same issues have and will continue to creep up,” trade expert and Jawaharlal Nehru University professor Biswajit Dhar, said. Even if domestic industry is brought on board, the government has to deal with the unenviable task of deciding which exports can be leveraged to boost outbound trade with so few sectors commanding an export advantage, he added. Case in point, traditionally strong export sectors such as textiles, gems and jewellery and leather continue to face sectoral challenges and low competitiveness because of competition from emerging economies such as Vietnam and Bangladesh, he added. A full FTA — one of the key demands of the Donald Trump administration — has seen Washington DC pushing for lower duties for high-value US goods such as electronics, wine and motorcycles. It also wants fewer restrictions on American medical devices and solar panels. The talks with the EU on a trade and investment pact are also stuck on similar issues.

Bilateral talks with trade partners such as China have also hit roadblocks on Beijing’s demand to open up India’s lucrative consumer market.

Slow pace

The government has clarified that India will remain out of the RCEP pact for now, until it gets better offers from other participating nations that safeguards its national interest. This includes protection for domestic industry from import shocks, and gradual tariff reduction. But experts point out that foreign partners have pushed for tariff reduction aggressively in all current trade negotiations. On the other hand, in all its engagements India has pushed for more market access for a narrow category of products. In the first term of the Modi government, New Delhi has initiated FTA talks with only a single economy, the small nation of Georgia. Situated in the Caucasus region, the nation had a total trade of only $132 million in 2018-19. Even then, discussions had stalled more than three years since the beginning. On the other hand, export promotion councils as well as industry bodies like Swadeshi Jagran Manch have repeatedly objected to new FTA engagements arguing that existing pacts haven’t helped India. They have pointed to a NITI Aayog report which showed that the utilization rate of current trade deals by Indian exporters remain very low (between 5 per cent and 25 per cent). As a result, the trade deficit with the proposed RCEP nations has increased from $7 billion in 2004 to $78 billion in 2014. In July, the Finance Ministry started assessing the shortcomings of each existing FTA deal, which have led to revenue being foregone due to spiraling trade deficit. India’s major FTAs constituted only 11 per cent of the total trade and up to 23 per cent of trade deficit.

Good or bad

But this view has been countered by experts.

“The current narrative that FTAs are inherently disadvantageous for India’s exports is false. The fact remains that India’s trade (and exports) have gone up with every FTA partner, albeit at a slower pace than imports,” Sachin Chaturvedi, director general at the Research and Information System for Developing Countries (RIS), a foreign trade think tank, said. The RCEP experience may lead to lower appetite for trade talks, he said. “Negotiations don’t only focus on tariff reduction. They also talk about market access, non tariff barriers and standard, all of which are guided by institutions which need to back reforms in the domestic space as well,” Chaturvedi added. The question remains whether India can effectively counter the might of Chinese exports independently or by being a part of a bloc like RCEP, he stressed.

Source: Business Standard

Back to top

India gained $755 mn in additional exports to US: UNCTAD

United Nations: India gained about $755 million in additional exports, mainly of chemicals, metals and ore, to the US in the first half of 2019 due to the trade diversion effects of Washington's tariff war with China, a study by the UN trade and investment body has said. The study named 'Trade and Trade Diversion Effects of United States Tariffs on China' shows that the ongoing US-China trade war has resulted in a sharp decline in bilateral trade, higher prices for consumers and trade diversion effects - increased imports from countries not directly involved in the trade war. The study puts the trade diversion effects of the US-China tariff war for the first half of 2019 at about $21 billion, implying that the amount of net trade losses corresponds to about $14 billion. The US tariffs on China have made other players more competitive in the US market and led to a trade diversion effect. These trade diversion effects have brought substantial benefits for Taiwan (province of China), Mexico, and the European Union. "Trade diversion benefits to Korea, Canada and India were smaller but still substantial, ranging from $0.9 billion to $1.5 billion," it said. The remainder of the benefits were largely to the advantage of other South East Asian countries. The US tariffs on China resulted in India gaining $755 million in additional exports to the US in the first half of 2019 by selling more chemicals ($243 million), metals and ore (USD181 million), electrical machinery ($83 million) and various machinery ($68 million) as well as increased exports in areas such as agri-food, furniture, office machinery, precision instruments, textiles and apparel and transport equipment, UNCTAD said. While it does not consider the impact of Chinese tariffs on US imports, the study indicates that qualitative results are most likely to be analogous: higher prices for Chinese consumers, losses for US exporters and trade gains for other countries. Of the $35 billion Chinese export losses in the US market, about $21 billion (or 62 per cent) was diverted to other countries, while the remainder of USD14 billion was either lost or captured by the US producers. The study found that tariffs imposed by the United States on China are economically hurting both countries and that consumers in the US are bearing the heaviest brunt of Washington's tariffs on Beijing, as their associated costs have largely been passed down to them and importing firms in the form of higher prices. However, the study also finds that Chinese firms have recently started absorbing part of the costs of the tariffs by reducing the prices of their exports. "The results of the study serve as a global warning. A lose-lose trade war is not only harming the main contenders, it also compromises the stability of the global economy and future growth," UNCTAD's director of international trade and commodities Pamela Coke Hamilton said. "We hope a potential trade agreement between the US and China can de-escalate trade tensions." The analysis shows that US tariffs caused a 25 per cent export loss, inflicting a $35 billion blow to Chinese exports in the US market for tariffed goods in the first half of 2019. This figure also shows the competitiveness of Chinese firms which, despite the substantial tariffs, maintained 75 per cent of their exports to the US. The office machinery and communication equipment sectors were hit the hardest, suffering a $15 billion reduction of US imports from China as trade in tariffed goods in those sectors fell by an average of 55 per cent. Though the study does not examine the impact of the most recent phase of the trade war, it warns that the escalation in summer of 2019 is likely to have added to the existing losses, UNCTAD said. "US consumers are paying for the tariffs in terms of higher prices," said Alessandro Nicita, an economist at UNCTAD. "Not only final consumers like us, but importers of intermediate products firms which import parts and components from China. "Since mid-2018, the US and China have been locked in a trade confrontation that has resulted in several rounds of retaliatory tariffs. Over the course of 2018, the US administration started implementing a series of trade measures to curtail imports, first targeting specific products (steel, aluminum, solar panels and washing machines) and then specifically targeting imports from China.

Source: Millenium Post

Back to top

'Manipur International Textile Expo' begins in Imphal

Imphal (Manipur): A 10-day long 'Manipur International Textile Expo' began in Imphal with great fervour on Nov 05. State Governor Dr Najma Heptulla inaugurated the event. Textile expo has a total of 333 stalls, including stalls from Thailand, Bangladesh and Myanmar. It displayed various types of handloom and antique items.  'Manipur International Textile Expo' will conclude on Nov 14.

Source : Business Standard

Back to top

Rupee dives 28 paise to 70.97 against dollar

Mumbai: Snapping its three-session winning streak, the Indian rupee tumbled 28 paise to close at 70.97 against the US dollar on Wednesday as continuing uncertainty over the US-China trade deal affected currency market sentiment worldwide. However, robust foreign fund inflows and easing crude oil prices restricted the fall for the domestic unit, forex brokers said. At the interbank foreign exchange market, the rupee opened at 70.80 and skidded to 71.01 against the greenback intra-day. The local unit finally settled at 70.97, down 28 paise over its previous close. Rahul Gupta, Emkay Global Financial Services' Head of Currency, said the rupee-dollar spot market has been in a depreciating mode for the past three weeks as US and China have been hinting at a ‘phase one' trade deal anytime this month. "Depreciation is getting capped as market has started getting doubtful of the silence amid China's attempts to push the US to remove more tariffs," Gupta added. The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.14 per cent to 97.84. Meanwhile, foreign institutional investors bought equities worth a net Rs 1,011.49 crore on Wednesday, provisional exchange data showed. "Indian rupee under-performed the most amongst the Asian basket by plunging more than 30 paise against the dollar to trade at 71," said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities. Sharma further said the "rupee did not react negatively towards spike in crude prices and Dollar index in the recent past and perhaps today it has restored the parity with the dollar." Brent futures, the global oil benchmark, slipped 0.30 per cent to USD 62.77 per barrel. The 10-year government bond yield was at 6.49 per cent. On the domestic market front, the BSE Sensex rallied 221.55 points to close at its new lifetime high of 40,469.78. Similarly, the broader NSE Nifty briefly reclaimed the 12,000 level, before finishing at 11,966.05, showing a gain of 48.85 points, or 0.41 per cent. The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.7283 and for rupee/euro at 78.7046. The reference rate for rupee/British pound was fixed at 91.1113 and for rupee/100 Japanese yen at 65.01.

Source: Economic Times

Back to top

Global Textile Raw Material Price 06-11-2019

Item

Price

Unit

Fluctuation

Date

PSF

979.59

USD/Ton

0%

11/6/2019

VSF

1511.45

USD/Ton

0%

11/6/2019

ASF

2188.04

USD/Ton

0%

11/6/2019

Polyester    POY

983.87

USD/Ton

0.44%

11/6/2019

Nylon    FDY

2267.18

USD/Ton

-0.62%

11/6/2019

40D    Spandex

4106.59

USD/Ton

0%

11/6/2019

Nylon    POY

2324.22

USD/Ton

0%

11/6/2019

Acrylic    Top 3D

1105.07

USD/Ton

-0.64%

11/6/2019

Polyester    FDY

2502.45

USD/Ton

-0.85%

11/6/2019

Nylon    DTY

5389.90

USD/Ton

0%

11/6/2019

Viscose    Long Filament

1233.40

USD/Ton

-0.23%

11/6/2019

Polyester    DTY

2138.85

USD/Ton

-0.33%

11/6/2019

30S    Spun Rayon Yarn

2124.59

USD/Ton

-0.33%

11/6/2019

32S    Polyester Yarn

1618.40

USD/Ton

0%

11/6/2019

45S    T/C Yarn

2438.29

USD/Ton

0%

11/6/2019

40S    Rayon Yarn

1782.38

USD/Ton

0%

11/6/2019

T/R    Yarn 65/35 32S

2295.70

USD/Ton

0%

11/6/2019

45S    Polyester Yarn

2395.51

USD/Ton

0%

11/6/2019

T/C    Yarn 65/35 32S

1974.87

USD/Ton

0%

11/6/2019

10S    Denim Fabric

1.26

USD/Meter

0%

11/6/2019

32S    Twill Fabric

0.69

USD/Meter

0%

11/6/2019

40S    Combed Poplin

0.97

USD/Meter

0%

11/6/2019

30S    Rayon Fabric

0.56

USD/Meter

0%

11/6/2019

45S    T/C Fabric

0.67

USD/Meter

0%

11/6/2019

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14259 USD dtd. 06/11/2019). The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

 

Back to top

Sri Lanka turns eyes to Ethiopia's Industrial Parks

In his exclusive interview with Walta TV, Sri Lanka’s Ambassador to Ethiopia, Sumith Dassanayake, said that Sri Lanka is already participating in Hawassa Industrial Park in apparel textile industries. He noted that Sri Lanka is keen to build strong relations with many nations, and Ethiopia comes in the forefront.  At present, over 800 Sri Lankans are working in Ethiopia. Issabella and Hydramani Sri Lankan companies have established their operations in Hawassa Industrial Park in textile sector.  Currently, Sri Lanka’s textile companies have created job opportunities for 4,000 Ethiopians. "This cordial relation of Sri Lanka and Ethiopia has now become more advanced in political and economic cooperations symbiotically," he added.  According to him, Sri Lanka has comprehensive experiences in textile, agro-processing, tea production and tourism industries; in this regard, he has planned to arrange a visit to Ethiopian delegates to Sri Lanaka so that they can draw lessons and bear fruits from these sectors as Ethiopia has untapped potential. Ambassador Sumith has called up on Africans and others to visit and enjoy in Sri Lanka and in turn use the possible and favorable opportunities that Ethiopia has offered to investors.  The Embassy of Sri Lanka in Addis Ababa held its first ever Mobile Consular Service for about 400 Sri Lankan community members living and working in Hawassa to create conducive, successful atmosphere in Ethiopia and make life easier during their time in Ethiopia.  The 2019 Nobel Peace Prize that Prime Minister Abiy Ahmed won is a huge boost to contribute to consolidate peace initiatives in the African continent, according to Ambassador Sumith Dassanayake. The prize is for Ethiopians, Africans and the entire peace devotees of the world. The award is a recognition to the Prime Minister’s commitment to maintain peace and sustain prosperity in the region. It is also a prize of trust and hope to the outstanding role he played in ending decades of Ethio-Eritrea border conflict and efforts to realize multifaceted regional cooperation, he added. Sri Lanka is to conduct presidential election on 16th November 2019; meanwhile, Ethiopia is set to conduct national election in 2020, this is a coincidence that the two countries are at a great ambition to realize and experience democracy. He wished a successful election for both countries. He is also thankful for Ethiopians for their hospitality at large. Walta has learnt that diplomatic relation between Ethiopia and Sri Lanka was commenced in 1972. The Embassy was officially established in February, 2017 in Addis Ababa.

Source : Waltainfo

Back to top

China says RCEP countries committed to work with India to resolve trade deal issues

Prime Minister Narendra Modi on Monday conveyed India's decision not to join the China-backed RCEP deal at a summit meeting of the 16-nation bloc, effectively wrecking its aim to create the world's largest free trade area having half of the world's population. China on Wednesday played down India’s decision not to join the mega Regional Comprehensive Economic Partnership (RCEP) trade deal, saying the members of the grouping are prepared to work together to address New Delhi’s concerns. Chinese Vice-Commerce Minister and top trade negotiator Wang Shouwen also expressed confidence that the differences would be resolved by the end of this year. Fifteen nations from the Asia-Pacific region – the 10 ASEAN nations plus Japan, China, South Korea, Australia and New Zealand – agreed on the outline of the trade pact on Monday. Prime Minister Narendra Modi on Monday conveyed India’s decision not to join the China-backed RCEP deal at a summit meeting of the 16-nation bloc, effectively wrecking its aim to create the world’s largest free trade area having half of the world’s population. Commenting on India’s decision, Wang said that China and the 14 other member states respected India’s outstanding concerns and they are prepared to work together to address them. “We must, together with India, work hard to solve these problems. India must decide on the basis of this resolution whether to enter into the agreement,” Wang was quoted as saying by the Hong Kong-based South China Morning Post. Wang did not elaborate on India’s points of contention, but said they were not just with China alone. The current member states would settle the “very few remaining questions” around market access before the end of the year, he added. The Chinese Foreign Ministry on Tuesday said that Beijing will follow the principle of “mutual understanding and accommodation” to resolve the outstanding issues raised by India for not joining the RCEP. On India’s concerns that Chinese products potentially harming its domestic industry, Foreign Ministry spokesman Geng Shuang told the media here on Tuesday that China welcomes India joining the deal at an early date. “The RCEP is open. We will follow the principle of mutual understanding and accommodation to negotiate and resolve those outstanding problems raised by India and we welcome an early joining by India,” Geng said. He said the RCEP is a regional trade agreement and mutually beneficial in nature. “We welcome India joining at an early date,” he said. Wang said the RCEP will boost the confidence of the world economy and investors. The agreement will forge a unified system of rules within the region, thus reducing operating costs and uncertain risks, and bringing huge convenience to import and export companies in the region, said Wang, who is also China’s Deputy International Trade Representative. Considering its diversified membership structure including both the most developed countries and the least developed ones, Wang said the RCEP would have profound significance for the future formation of global trade rules. Once signed, the RCEP will help advance China’s efforts in stabilising foreign trade and foreign capital, as well as promote the development of sound, sustainable and stable foreign trade, state-run Xinhua news agency quoted him as saying. Data from the ministry showed that China’s trade with the other 14 countries participating in the RCEP surpassed USD 1.3 trillion last year, around one-third of its aggregate foreign trade. Do you know What is Long Term Capital Gains Tax, Repo Rate, Repo Linked Lending Rate (RLLR), Wholesale Price Index (WPI), Public Debt? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool

Source: Financial Express

Back to top

Legislative leaders of Vietnam, Armenia vow to boost cooperation

Vice Chairwoman of the National Assembly Tong Thi Phong and her Armenian counterpart Vahe Enfiajyan agreed that the two countries should bolster collaboration through party, state, parliamentary, business and people-to-people exchange channels. The two reached the consensus during their talks in Hanoi on November 5 on the occasion of a working visit by the Vice President of the Armenian National Assembly and Chairman of the Armenia-Vietnam Parliamentary Friendship Group. Phong expressed her delight over the thriving political relations between the two countries, as seen in their close coordination at multilateral forums. She recalled that during an official visit to Vietnam in July this year, Armenian Prime Minister Nikol Pashinyan and Vietnam’s NA Chairwoman Nguyen Thi Kim Ngan had shared the determination to develop the two countries’ relations in a more effective, practical and sustainable fashion in various sectors. Phong took the occasion to thank the Armenian State and people for their whole-hearted support for Vietnam during the cause of national liberation in the past and construction and development nowadays. She described it as a valuable asset and a solid foundation for the cooperative ties between the two countries. Regarding economy-trade cooperation, Phong said both sides need to take advantage of tariff incentives in the Free Trade Agreement between Vietnam and the Eurasian Economic Union so as to increase bilateral trade. Vietnam has strengths to export garment and textiles, telephones, coffee, farm produce and processed food, among others, to Armenia, and also wants to import more from the South Caucasus country, she added. She stressed that the Vietnamese National Assembly always supports, and create favourable conditions for Armenian enterprises to branch out their business in Vietnam, and hopes the Armenian side will enhance trade promotion activities to connect businesses of both nations. Vahe Enfiajyan, for his part, believed that his visit to Vietnam will make contributions to enhancing the traditional friendship and all-round cooperation between the two legislative bodies, states and peoples. He wished that both National Assemblies will enhance the exchange of visits to share legislative experience and inform each other of their parliamentary activities in the coming time.

Source: Nhan Dhan Online

Back to top

Tough times for Bangla apparel sector: BGMEA

Fifty-nine garment factories closed and 25,900 workers lost their jobs in the last seven months, according to Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Rubana Huq, who said most of these were small and medium enterprises that failed to strictly maintain compliance strictly and pay their workers under the new wage structure. Bangladesh’s apparel export has declined in recent months whereas its competitors have seen a rise in the field, she said. In the first quarter of the current fiscal, garment export from Bangladesh dropped 1.64 per cent year-on-year to $8.05 billion when earnings from the sector fell 11.52 per cent short of the quarter’s target of $9.10 billion. On the other hand, garment shipment from Vietnam increased by 10.54 per cent between July and September. It was 2.2 per cent for India and 4.74 per cent for Pakistan. “The inflow of investment in the garment sector is also slow both in terms of new entrepreneurship and expansion as the buyers are not paying good prices,” Rubana told journalists. Buyers are now trying to cash in on the presence of an unhealthy price competition among the local garment makers and less production of value-added items in Bangladesh, Bangla media reports quoted her as saying. “We think the sector will continue to show negative growth in the coming months. At the end of this fiscal year, we may lose our second position to Vietnam in the global apparel market, if we cannot turn around soon from this declining trend,” she said. Poor product diversification, rising online businesses, closure of retail outlets in the western world, and a 1.2 per cent fall in global apparel consumption as predicted by the World Trade Organisation (WTO) are primarily responsible for the declining trend in Bangladesh, Rubana said. Moreover, Bangladesh is more dependent on cotton fibre whereas the demand for the garment items made from the man-made fibre is increasing worldwide. The BGMEA chief said small and medium-sized factories are getting closed due to a lack of assistance from banks. BGMEA’s analysis showed that garment export declined 17.68 per cent year-on-year to $572 million in the first quarter while prices increased only by 2.54 per cent. On the US-China trade war, Rubana said Bangladesh is yet to benefit from the global dispute, while others are using it on the back of their diversified products. On the other hand, Bangladesh is losing its basic garment business and Vietnam, Myanmar, and Ethiopia are getting those work orders now. BGMEA has submitted a set of proposals to the Bangladesh Bank for the revival of the garment sector, she added. The BGMEA demanded the government devalue the local currency by Tk 2, implementation of which will cost the country nearly Tk 1,850 crore. It also called for 1 per cent incentive on exports with immediate effect, retrospective effect of 0.25 per cent source tax from July, doubling the loan rescheduling period for the existing 133 sick garment factories, and fund allocation for modernisation and tech upgrade of factories. The association will soon meet with the government high-ups to place its demands, Rubana said.

Source: Fibre2Fashion

Back to top

 

Subscribe to SRTEPC mailing list

Exchange Rates