The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 3 JUNE, 2015

NATIONAL

INTERNATIONAL

Textile Raw Material Price 2015-06-02

Item

Price

Unit

Fluctuation

PSF

1272.804

USD/Ton

0%

VSF

2033.2228

USD/Ton

0%

ASF

2492.5745

USD/Ton

0%

Polyester POY

1223.85

USD/Ton

-0.66%

Nylon FDY

3100.42

USD/Ton

-1.04%

40D Spandex

6396.656

USD/Ton

0%

Nylon DTY

5947.911

USD/Ton

0%

Viscose Long Filament

1496.3606

USD/Ton

-0.33%

Polyester DTY

2937.24

USD/Ton

0%

Nylon POY

2687.5746

USD/Ton

0%

Acrylic Top 3D

1444.143

USD/Ton

0%

Polyester FDY

3377.826

USD/Ton

0%

30S Spun Rayon Yarn

2725.106

USD/Ton

0%

32S Polyester Yarn

2007.114

USD/Ton

0%

45S T/C Yarn

2986.194

USD/Ton

0%

45S Polyester Yarn

2888.286

USD/Ton

0%

T/C Yarn 65/35 32S

2757.742

USD/Ton

0%

40S Rayon Yarn

2186.612

USD/Ton

0%

T/R Yarn 65/35 32S

2529.29

USD/Ton

-0.64%

10S Denim Fabric

1.14226

USD/Meter

0%

32S Twill Fabric

0.995398

USD/Meter

0%

40S Combed Poplin

1.354394

USD/Meter

0%

30S Rayon Fabric

0.775105

USD/Meter

0%

45S T/C Fabric

0.783264

USD/Meter

0%

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.16318 USD dtd. 02/06/2015)

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

Exporters seek govt help to arrest textiles export slump

Textile exporters in India are a worried lot after failing to meet the export target for the last financial year, according to media reports. "These declining trends in exports are a matter of deep concern," Texprocil chairman R K Dalmia said in a statement. The 15 per cent growth envisaged this year, can be achieved with ‘timely support’ from the government. It should include cotton textiles under three per cent interest subvention scheme, release funds for the technology upgradation fund scheme (TUFS), and recalibrate the product under the merchandise exports from India scheme. The delay in getting duty drawback amount has further aggravated the situation for the exporters, Dalmia said.

Apart from these measures, much needs to be done towards achieving the objective of "ease of doing business" and "simplification of procedures", he said. He added that despite repeated representations exporters are yet to receive 2 per cent additional duty credit scrips under the MLFPS (market linked focus product scheme) which was announced in February 2014. The withdrawal of focus market scheme for cotton yarns has caused steep decline in exports to non-conventional markets like Peru, Morocco etc, Dalmia said, adding that the delay in getting duty drawback amounts from JNPT customs has further aggravated the situation for exporters.

The country's overall exports of textiles and clothing stood at $41.4 billion in 2014-15 but fell short of the target of $45 billion. In 2013-14, the exports of textiles and clothing stood at USD 39.31 billion against the export target of USD 43 billion. While, exports of cotton textiles (including raw cotton) touched $11,353.15 million as against exports of $13,306 million in 2013-14, registering a steep decline of 14.68 per cent. Exports of cotton textiles (excluding raw cotton) during 2014-15 was $9,452.96 million as against exports of $9,669.05 million in 2013-14, registering a negative growth of 2.23 per cent.

SOURCE:  Fibre2fashion

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Growth push: RBI cuts policy rate by 25 bps

RBI Governor Raghuram Rajan delivered the first policy rate cut of the current financial year on Tuesday, paring the interest rate at which banks borrow from the central bank (repo rate) to 7.25 per cent from 7.50 per cent. Banks heeded the RBI’s call to pass on the rate cut with a few public sector banks cutting lending rates by up to 30 basis points. Loans to housing, auto, small and medium enterprises and large corporates are expected to get a tad cheaper. The widely anticipated policy rate cut, however, brought no cheer to the equity market. The benchmark BSE Sensex fell 661 points due to a slightly upward revision in the retail inflation projection, and the Governor’s comments about the rate cut being frontloaded. Banking and auto sector stocks took a beating. In its second bi-monthly policy statement, the RBI revised the inflation projection upwards to 6 per cent by January 2016 from 5.8 per cent in April 2015. The RBI had kept the repo rate unchanged at 7.5 per cent in its first bi-monthly policy statement in April. Before Tuesday’s cut, the repo rate had been lowered twice this calendar year, by 25 basis points each, in mid-January and early March. Both reductions took place outside the review cycle. On Tuesday, the RBI reasoned there is a case for a rate cut in the backdrop of low domestic capacity utilisation, mixed indicators of a recovery, and subdued investment and credit growth.

CEA reaction

In Delhi, Chief Economic Adviser Arvind Subramanian said the RBI’s move was consistent with the trends in the economy, including declining inflation and strong fiscal discipline. “The government and the RBI agree that these cuts signify that the economy needs policy support as economic growth is recovering while the external environment remains weak,” he said. The CEA added that the government and RBI will work together to ensure the macroeconomic situation remains strong while investment and growth are accelerated. He was hopeful of containing inflation despite the forecast of a poor monsoon. The RBI has marked down the GDP growth projection for 2015-16 to 7.6 per cent from 7.8 per cent to reflect the uncertainty hovering over economic activity. It listed three risks that still cloud the inflation picture: a below normal monsoon, firming crude prices and volatility in the external environment. Pointing out that successive estimates have indicated a worsening of the agriculture situation, Rajan said the Government needed to have contingency plans for food management.

Banks lower rates

Taking the RBI Governor’s cue, India’s largest bank, State Bank of India, pared its base rate (minimum lending rate) to 9.70 per cent from 9.85 per cent. The new base rate is effective from June 8. Allahabad Bank cut its base rate to 9.95 per cent (from 10.25 per cent), and Dena Bank to 10 per cent (10.25 per cent).

SOURCE: The Hindu Business Line

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FinMin welcomes rate cut, but India Inc wants more

The Finance Ministry said the Reserve Bank’s move to cut repo rate by 25 basis points is consistent with the trend in the economy, but India Inc begged to differ, saying it is not enough to pump up the economy. Welcoming the third rate cut since January, Chief Economic Adviser Arvind Subramanian said the cut is consistent with the trend in the economy, including strongly declining inflation, contained current account deficit and strong fiscal discipline. “The government and the RBI agree that the cut signifies that the economy needs policy support as economic growth is recovering while the external environment remains weak,” he said. He also said that the government and the RBI will work together to ensure that the macroeconomic situation remains strong while investment and growth are accelerated. He was hopeful of containing inflation despite rainfall being estimated to be below normal. “Last year too the monsoon was not very good and through government policy we managed to contain inflation and we intend to do that this time around should the monsoon be as bad as some people fear,” he said.

Industry not excited

FICCI President Jyotsna Suri said given the current situation, the RBI could have considered a deeper cut in repo rate by 50 bps. “As RBI’s own prognosis shows, industrial growth has been recovering, albeit unevenly. The slowdown in consumption demand and the still weak investment cycle has taken a toll on the industrial sector. The same is also reflected in the low credit offtake and the sluggish quarterly corporate results announced recently,” she said. Reminding the government of its effort to better its own fiscal deficit target to 4 per cent from 4.1 per cent, CII Director-General Chandrajit Banerjee said it is important that the monetary levers also work in tandem to support the growth crusade, especially as inflation is very much under control. “We also hope that the banks would transmit the rate cut onwards so that credit offtake in the economy improves,” he said. Echoing similar views, President of Federation of Indian Export Organisations, SC Ralhan, said the RBI has gone for a token rate cut of 25 basis points, the third since January, and “we hope that this would, this time, translate into an actual cut in cost of credit, given the poor offtake which has fallen to 9.9 per cent from 13 per cent in the corresponding period last year.”

SOURCE: The Hindu Business Line

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India to be part of informal WTO trade ministers’ meet in Paris

India will participate in an informal meeting of trade ministers from key World Trade Organisation (WTO) member countries, including the US, the EU, China, Brazil and Australia, that will try to narrow existing differences over the work programme for the ministerial meeting in Nairobi in December. The meeting, hosted by Australian trade minister Andrew Robb, is scheduled on Thursday on the sidelines of the OECD meeting in Paris. “There is a mini-crisis at the WTO at the moment as differences between members over important issues are holding back a consensus on what should be on the agenda for the Nairobi meeting,” a Commerce Ministry official told BusinessLine .New Delhi is trying to ensure that a permanent solution on treatment of its food procurement subsidies that will preclude the danger of these getting categorised as actionable subsidies is part of the deal in December.

Commerce & Industry Minister Nirmala Sitharaman will also try to bring back the services sector to the centre of the negotiations, the official added. Although the services sector was an important part of the on-going Doha Round of talks launched in 2001, it subsequently got sidelined. A number of members, including the US and the EU, want an ambitious outcome in the area of market access for industrial and agriculture products, while agriculture exporting countries like Australia and New Zealand want commitments on paring of farm subsidies.

WTO Director General Roberto Azevedo, who convened a meeting of all WTO members in Geneva on Monday, said he was becoming increasingly concerned that members were not making the progress that is needed in the key areas of agriculture, industrial products and services. “Agreeing on a work programme was never going to be an easy task. But as of today we are still waiting for the necessary convergence on key issues to deliver the outcome we need by July and to help us build towards a successful ministerial meeting in Nairobi,” he said.

Trade facilitation pact

In the previous WTO ministerial meeting in Bali in December 2013, members had agreed to put in a place a trade facilitation agreement to smoothen movement of goods across borders by upgrading infrastructure. Members had also agreed to sort out problems related to treatment of food procurement subsidies given by developing countries such as India and Indonesia so that these do not get subjected to penalties.

SOURCE: The Hindu Business Line

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Indian tariff regime remains complex, average duty rates rising: World Trade Organization

India has made consistent efforts to liberalise and facilitate trade, but its tariff regime remains complex and the average duty rates have gone up over the past four years, the World Trade Organisation has said in a report. The simple average most favoured nation tariff rate rose to 13% in 2014-15, up from 12% in 2010-11, WTO said in the trade policy review report released on Tuesday.  "India's trade policy is largely driven by domestic supply ... this requires constant fine-tuning of policies, for example, through notifications by the Directorate General of Foreign Trade (DGFT) and Customs, rendering the trade regime less predictable and creating additional costs," it said.  The Geneva headquartered organisation also said that while India is a strong advocate of the multilateral trading system it is increasingly getting into a lot of regional trade pacts. "This is evidenced by the 15 agreements currently in force and its involvement in the negotiation of other agreements," the report said.

India's patents regime, a constant bone of contention between the United States and India, got WTO's backing, with the report stating that India has so far issued just one compulsory licence although two more applications were received between 2012 and 2013.  "In March 2012, India issued its first and only compulsory licence (on certain anti-cancer medicine)," said the report. India has always maintained that its intellectual property rights laws are WTO compliant. On trade secrets protection, the report said that while there is no specific legislation regulating the protection of trade secrets the Indian judiciary has dealt with the issue on a case-by-case basis.  "Courts in India have ordered injunctions against disclosure and use of trade secrets by third parties and ordered the return of such confidential ... information as well as compensation or damages for any losses suffered ...," it said. The US has been pushing India to come up with a separate legislation on trade secrets protection. India has taken several initiatives to modernise its IPR administration and continue its efforts to enforce IPRs, the report said.

SOURCE: The Economic Times

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Maharashtra Cabinet approves policy on renewable energy

Aims of the policy include achieving the installed capacity of 7,500 Mw of solar energy, 5,000 Mw of wind energy and 1,000 Mw of bagasse based co-generation. Maharashtra Cabinet on Tuesday approved the composite policy on renewable energy, in which it has set a target of achieving 14,400 megawatt (Mw) of installed capacity in a period of five years and attracting an investment of Rs 1 lakh crore. "Maharashtra Cabinet approved new and renewable energy policy worth Rs 4,156.43 crore. By implementing this policy, the state will get electricity fee of Rs 3,885 crore and thus the actual expenditure is only Rs 271.43 crore," Chief Minister Devendra Fadnavis said.

"According to the policy, the state can produce 14,400 Mw power through non-conventional resources and will take a step towards becoming self-sustainable," the chief minister said on micro-blogging site Twitter. Talking to reporters, Power Minister Chandrashekar Bawankule said the policy aims at achieving the installed capacity of 7,500 Mw solar energy, 5,000 Mw of wind energy, 1,000 Mw of bagasse based co-generation, 400 Mw small hydro, 200 Mw of industrial waste and 300 Mw of agriculture waste-based products. The current installed capacity of renewable energy is 6,700 MW. "Currently, the share of renewable energy is around nine per cent and we are targetting 15 per cent," Mahesh Khullar, principal secretary of the energy department, said. To promote the installation of new renewable projects, focus has been given on easing the business process and reduces the number of clearances. "The projects will get deemed NA permission, deemed industry status, deemed open access permission. There will be no need for no-objection certificate and consent letter from the Maharashtra Pollution Control Board and method for registration with the Maharashtra Energy Development Agency would be simplified," the minister said. Similarly, procurement process under renewable purchase obligation would be by way of competitive bidding instead of feed in tariff for solar, wing and industrial waste, the minister said, adding, that consumers will benefit in terms of affordable tariff.

In terms of financial incentives, there will be electricity duty exemption for ten years. Capital subsidy and evacuation charges refund upto one crore each for three sources - small hydro, agriculture waste and industrial waste. Cane purchase tax for bagasse based co-generation projects. Bawankule said it was a revenue neutral policy and costs on account of tax exemptions are covered by additional electricity duty from the sale of renewable energy and by incentive grant received from the Finance Commission.

SOURCE: The Business Standard

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Select panel may discuss dispute resolution mechanism in GST Bill

A select committee of the Rajya Sabha might take up the issue of dispute resolution mechanism in the constitution amendment Bill on the goods and services tax (GST). The Bill seeks to entrust the power of dispute resolution to the GST Council, comprising the Centre and states, instead of an independent body, as sought by an earlier draft. K N Balagopal, a Rajya Sabha member of the CPI(M), told Business Standard, "A dispute redressal mechanism is needed as issues are bound to come up between states, or the Centre and states, or even with local bodies. We will raise this issue when we discuss the Bill in detail." The Centre has agreed to fully compensate states for any revenue loss due to GST in the first three years, 75 per cent of any revenue loss in the fourth year and 50 per cent in the fifth year. The Centre and states could, for instance, differ over loss estimates, an issue that had earlier created distrust over phasing out the central sales tax. The Bill presented by the United Progressive Alliance (UPA) government in Parliament had provided for setting up of a Goods and Services Tax Dispute Settlement Authority. However, a standing parliamentary committee had observed the authority would have overriding powers over Parliament and state legislatures, and must be omitted.

Accepting the recommendation, the National Democratic Alliance's (NDA's) Bill states, "The Goods and Services Tax Council may decide the modalities to resolve disputes arising out of its recommendation." During the debate on the Bill in the Lok Sabha, however, Congress MP Veerappa Moily had said, "As regards resolution of disputes arising out of its recommendations, which council will annul its own decisions?" Sumit Dutt Majumder, former chairman of the Central Board of Excise and Customs who had played a crucial role in drafting the UPA Bill, said he favoured resolution by an independent body rather than the GST Council. The GST Council will give the Centre one-third voting power and the states two-thirds. Any decision will need three-fourth of the votes, thus neither the states together or the Centre alone can change the GST. However, the dispute resolution body cannot work on this principle. Rohit Jain, partner at Economic Laws Practice, said any dispute resolution mechanism would need a judicial member. The authority was supposed to have a former Supreme Court judge or chief justice of a high court as its chairman. The two other members were to be experts in law, economics or public affairs. Jain said such an authority could be created later, say, at the time of the GST Bills that are to be drafted by the Centre and states.

SOURCE: The Business Standard

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Global crude oil price of Indian Basket was US$ 63.61 per bbl on 02.06.2015

The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 63.61 per barrel (bbl) on 02.06.2015. This was higher than the price of US$ 61.84 per bbl on previous publishing day of 01.06.2015.

In rupee terms, the price of Indian Basket increased to Rs 4060.23 per bbl on 02.06.2015 as compared to Rs 3933.64 per bbl on 01.06.2015. Rupee closed weaker at Rs 63.83 per US$ on 02.06.2015 as against Rs 63.61 per US$ on 01.06.2015. The table below gives details in this regard: 

Particulars

Unit

Price on June 02, 2015 (Previous trading day i.e. 01.06.2015)

Pricing Fortnight for 01.06.2015

(May 14 to May 27, 2015)

Crude Oil (Indian Basket)

($/bbl)

63.61              (61.84)

63.49

(Rs/bbl

4060.23          (3933.64)

4045.58

Exchange Rate

(Rs/$)

63.83              (63.61)

63.72

SOURCE: PIB

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The National Assembly Standing Committee on Textile Industry recommends two percent sales tax on textile exports: Pakistan

The National Assembly Standing Committee on Textile Industry recommended on Tuesday two percent sales tax against the proposed five percent by the Federal Board of Revenue (FBR) on the value added textile export sector for fiscal year 2015-16. The Ministry of Textile Industry proposed the existing two percent sales tax, however, the value added textile sector demanded the revival of zero-rate regime. The committee and the national food security and research minister agreed to fix the intervention price of cotton at Rs3,200 per 40kg for the financial year 2015-16 after considering the cost of production. It was further decided to take the provincial Sindh and Punjab governments on board over the mechanism for implementation.

The Textile Ministry informed the committee - which met with Khawaja Ghulam Rasool Koreja in the chair - that SRO 1125 pertaining to five export-oriented sectors including textiles and carpet by the Federal Board of Revenue (FBR) has proposed to increase the sales tax to 5% from current 2%, 3% & 5%. Further electricity and gas sales tax currently at 0% is proposed to be increased to 5% by FBR. The ministry reiterated that the textile sector is the main export earner with 54% share in total exports and 40% share in industrial employment. To remain competitive and at par with regional competitors, the rate of sales tax on supply chain and utilities for the textile and carpet sector may remain the same. FBR Inland Revenue Operations Member Mohammad Ashraf Khan rejected the notion that imposition of sales tax resulted in hampering exports. The increase in the rate of sales tax is under consideration, he said, however no final decision has yet been taken. He admitted the flaws and issues related to the refund system and said that efforts are being made for improvement. He further said that refunds to the tune of about Rs16 billion have been stuck up which would be cleared up by August-end. The committee members also opposed the increase in the sales tax rate, saying that it will result in increasing the cost of doing business. They further said that in other countries sales tax was not being charged on exports.

Pakistan Apparel Forum Chairman Javed Balvani said that the textile export sector is battling for its survival in the global market against severe competition from neighbouring competing countries due to high costs of doing business in Pakistan. He added that textile exports are declining due to high costs, imposition of 2% Sales Tax, billions of rupees stuck up with the government in Sales Tax refund claims and customs rebate and DLTL claims. He said that instead of coming to help and provide incentives and level playing field as compared to other competing countries, the government is bent on crushing and ruining this vital export sector by proposing further harsh measures including the increase in Sales Tax from 2% to 5% and imposition of GIDC at Rs100 per MMBTU. He demanded revival of zero-rate status for the textile sector. He asked for “No Payment, No Refund Regime” for the five export-oriented sectors by restoring 1125(1)/2011 to its original status in order to make exports truly zero-rated.

Balvani further said that pragmatic policies in consultation with stakeholders need to be formulated to reduce the cost of doing business. He said rates of all essential raw material inputs - gas, electricity, water etc – be fixed in line with the practice in the competing countries to create a level playing field for exports from Pakistan. The committee endorsed the proposals of Balvani. The sub-committee submitted its report about fixation of cotton price and recommended to fix the minimum guaranteed price of cotton at Rs2,700 per 40kg for the financial year 2015-16 after considering the cost of production. The Trading Corporation of Pakistan (TCP) would be made bound to procure at least two million cotton bales this year. It was recommended that like the Indian model of cotton procurement, the government may also procure seed cotton instead of lint cotton on experimental basis. The sub-committee was of the view that the cotton price may be fixed in-between the import and export parity prices. Moreover, it was also observed that the lint cotton is exported as well as imported by Pakistan and during this course of business activity a lot of revenue is being spent which may be avoided through the import of only long staple cotton, which is required for fine quality cotton in certain textile sectors.

The Ministry of Textile Industry secretary apprised the committee that Pakistan is not giving any subsidy on cotton so the cotton growers have to compete with other countries’ subsidised prices at international level. The committee and the national food security and research minister after having detailed discussion unanimously agreed to fix the intervention price of cotton at Rs3,200 per 40kg for the financial year 201 5-16 after considering the cost of production. In this respect, it was agreed, the provincial government would be taken on board over the mechanism for implementation. The committee also recommended that TCP should be made bound to procure at least two million cotton bales this year. It was further recommended that TCP should hire ginning units for cotton seasons in order to protect small farmers.

SOURCE: The Daliy Times

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New North East trade route: Lipulekh Pass opened for this year's India-China trade

The 17,500-feet high Lipulekh Pass here has been opened for this year's India-China trade and Kailash Mansarovar Yatra.  A trade office has been set-up at Gunji base camp and a control room established at the Indo-Tibetan Border Police (ITBP) battalion headquarter at Mithi for the annual trade practice which officialy starts from today through the Pass which connects India, Nepal and China. "We have started distributing trade passes, received from Ministry of External Affairs, Government of India for this years' Indo-China border trade from Lipulekh pass from today and have so far received applications from 188 traders against the availability of over 405 trade passes for this year," Deputy Trade Officer P S Kutiyal said.  He said the allotment of trade passes to traders will finish by June 5.  The first base camp has been opened at Dharchula, in Uttarakhand's Kumaon region to facilitate the border trade.  Tribal traders have started ferrying their exportable goods at Gunji mart, the officer added.

State Bank of India and the Customs department have started the process to open their make shift offices at the second base camp in Gunji, where medical facilities will be provided by ITBP doctors, he said. "The Indo-China border trade, which runs between June 1 to October 31 every year facilitates the tribal community traders to import Tibetan wool and other materials which are essential parts of their traditional crafts which form their traditional economy," Pithoragarh District Magistrate Shusheel Kumar said. Meanwhile, district administration has also started preparations for the annual Kailash Mansarovar pilgrimage by deputing women ITBP jawans for safe passage of women travellers. "We have deputed 25 women jawans from ITBP this year for women pilgrims between Gunji to Lipulekh pass for the Yatra. The first batch of pilgrims will reach the base camp at Dharchula on June 13 this year," ITBP officer Kedar Singh Rawat said.

SOURCE: The Economic Times

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FTAs demand trade rule awareness: Vietnam

The need for businesses to learn the import and export regulations in different markets has only become more important as Viet Nam signs a slew of free trade agreements (FTAs), experts say. So far, the nation has inked nine FTAs, most recently with the Republic of Korea and the Eurasia Economic Union. Other new-generation FTAs are also under negotiation, including one with the European Union and the Trans-Pacific Partnership treaty with 11 other nations. FTAs offer a host of opportunities for Viet Nam's economic sectors, especially trading, given many tax and investment incentives, said Nguyen Thi Thu Trang, Director of the WTO Centre at the Vietnam Chamber of Commerce and Industry (VCCI). She said at a workshop in HCM City yesterday that the new trade pacts also require the Vietnamese Government to comply strictly with commitments on support policies for domestic industries.

Nguyen Anh Duong of the Central Institute for Economic Management said the FTAs will pose major challenges for local companies. Citing the food processing industry as an example, he noted that partner countries may levy stricter anti-dumping measures, while local firms' struggle to remain competitive amidst several problems including inadequate access to credit. The country will be required to increase the proportion of foreign ownership of electronics companies as promised in the FTAs, putting more pressure on domestic firms, he said.

Huynh Van Hanh, Vice Chairman of the HCM City Handicraft and Wood Industry Association, said agriculture was more vulnerable to FTA impacts since it uses a majority Vietnamese workforce. Market fluctuations and inclement weather were also risks that the sector faces, he said. Besides encouraging scientific and technological applications and market expansion, relevant agencies should enhance communication on both advantages and challenges brought about by FTAs, he said. Tran Huu Huynh, Head of the VCCI's Advisory Committee on International Trade Policies, said companies had been active in FTA negotiations after Prime Minister Nguyen Tan Dung ordered Vietnamese negotiators to consult organisations, associations and businesses before engaging in FTA talks.

SOURCE: The Vietnam News

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New Zealand Customs to spend $6.2m to help exporters take advantage of FTAs

Extra funding in last month's Budget will help more exporters take advantage of Free Trade Agreements (FTAs) and lessen the risk of costly delays at overseas borders. Customs Minister Nicky Wagner visited Lower Hutt automated fire detection system designer and manufacturer Pertronic Industries today (June 3) to explain how $6.2 million will be used over the next four years  to smooth access to international markets.  Wagner said exports to China and ASEAN countries have increased significantly since 2011 but with it has come a rise in the number of administrative "glitches" at border security posts. "Customs requirements are not always simple and our companies don't necessarily pick up what they need to do," she said. "Targeted technical expertise will be provided to exporters so they are in a better position to take full advantage of trade agreements, and claim FTA duty preferences."

Auditing and intelligence work will identify exports at higher risk of being help up, and improve product assurance documentation, particularly certificates of origin. Establishment of an electronic system of assurance with China is being worked on so that when there is a question mark over a certificate of origin, Chinese officials "always on the look out for a fake one trying to come in under the FTA" will have more confidence which is the genuine article.

Wagner said on her first day as Customs Minister, the fact a certificate of origin was printed on a different sized sheet of paper than a Chinese official was used to resulted in 40 containers of NZ goods being held up at the border.  "We had guys in China running back and foward, [Senior Customs officer] John McLeod was in the office until midnight...an electronic system for sharing certificate data would make a difference."Another aim is to increase the number of exporters using the 'trusted trader' scheme.  "It streamlines quite a few of the processes and it means we can pre-think things so that if there is a glitch we can iron it out a bit quicker."Additional NZ Customs staff will be hired in Beijing, and one additional position established in Asia.

As well, a business analysis unit will be set up in Wellington to identify exporters who could take advantage of FTAs but currently are not."We've discovered something like $22 million is left sitting on the table by people exporting without doing it under the FTA," Wagner said.Pertronics founder David Percy welcomed the announcements.   He said one time his company sent a shipment of equipment via a Kuala Lumpur distributor and because it wasn't recognised by a Chinese official as NZ-made goods, the non-preferential tarrif had to be paid, adding 10 per cent to the landed cost."You can't afford to leave the stuff sitting on the wharf while you argue," Percy said.

SOURCE: The Dominion Post

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Chinese Counterfeits Plague Ghana Textile Sector

Nigeria is not the only African nation struggling with smuggled Chinese textiles. Stephen Badu, marketing director of Ghanaian fabric company Premium African Textiles, recently told the Christian Science Monitor that pirated designs—predominantly from China—make up about 60 percent of all textiles sold in Ghana and often retail for half the price of authentic product, forcing several local manufacturers to close in recent years. Because the government does not accrue industry data outside of import and export numbers, there are no official figures for how much counterfeiting takes place, but the employment stats speak for themselves: an industry that once paid 30,000 workers to craft the colorful wax-printed fabric the country is known for has watched its numbers dwindle to 3,000 jobs.

In order to quell the tide of counterfeit textiles smuggled from overseas, technology company mPedigree has devised a system called GoldKeys that it claims can help tell a genuine Ghanaian fabric from a fake. Backed by Premium African Textiles, a scratch-off panel on a fabric label contains a 12-digit code that can be texted to a toll-free service, which responds almost instantly to verify whether the garment is authentic or not. Some textile traders believe this mobile technology is the answer to the country’s counterfeit problem, not the government’s 16-member Task Force on the Seizure of Pirated Ghanaian Textile Designs. The group, reconstituted in July, comprises the police, the customs division of the Ghana Revenue Authority, the Ministry of Trade and Industry and representatives from textile companies, and marks the government’s third attempt in four years to fight piracy in the Ghanaian textile industry: a task force was first set up in 2010 and reintroduced in 2013 before being temporarily suspended later that year. Every few months the group raids markets all over the country and burns bootlegged fabric, a move that’s in line with World Trade Organization regulations. In January, for instance, the task force scorched 3,500 pieces of counterfeit cloth estimated to be worth tens of thousands of dollars. But local business leaders say this approach has done little to curb the flow of illegal imports.

SOURCE: The Sourcing  Journal Online

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Time to Revisit an ASEAN-EU FTA

On May 19, 2015, the European Union (EU) adopted a Joint Communication: The EU and ASEAN: a partnership with a strategic purpose. The communication calls for taking “trade relations with ASEAN to a different level and working towards an ambitious region-to-region free trade agreement (FTA) building on bilateral agreements between the EU and ASEAN Member States.” Senior officials of ASEAN and the EU will gather towards the end of 2015 to take stock and explore the way forward after identifying the advantages and pitfalls that a ASEAN-EU free trade initiative might entail. In fact, ASEAN and the EU began negotiating a similar arrangement in 2007, but the talks quietly broke off two years and seven rounds later, primarily over the troubled human rights record of Myanmar, a country that had been internationally isolated since the early 1960s. As a normative power, the EU has a legal obligation under the Lisbon Treaty to incorporate human rights issues into external trade and investment frameworks, to ensure that the economic benefits do not come at the expense of human rights abroad. It therefore baulked at including Myanmar in the talks. With a region-to-region FTA on ice, the EU shifted its approach to forging closer bilateral trade ties with four individual ASEAN member states: Singapore, Malaysia, Vietnam and Thailand. The EU-Singapore FTA has been concluded in 2012 and is in the process of being ratified.

And indeed, despite the fruitless attempts at the regional level, bilateral economic ties have gone from strength to strength. ASEAN is the EU’s third largest trading partner outside Europe, after the U.S. and China, with more than €179.2 billion ($195.7 billion) in trade in goods and services in 2014. The EU was ASEAN’s second largest trading partner, behind only China, in 2013. Accounting for 22 percent of foreign direct investment (FDI) inflows to ASEAN, the EU is the region’s largest foreign investor, with more than 10,000 European companies operating in Southeast Asia. The EU is also the most generous donor to the ASEAN Secretariat, with plans to more than double financial assistance in support of ASEAN integration to €170 million over the period to 2020.

Changing Environment

At a joint conference in Malaysia on the sidelines of the 26th ASEAN Summit where the rekindled interest in an inter-regional FTA was announced, European Trade Commissioner Cecilia Malmström reckoned that “many things have changed in Europe and here (in ASEAN),” adding that now is the right time to consider a resumption of ASEAN-EU trade talks. So what major developments have taken place since 2007 that might pave the way for a revived trade accord between the two blocs?

First, Myanmar has improved its human rights scorecard since it emerged at last from repressive military rule in 2011. Under the presidency of Thein Sein, and leaving aside the notorious humanitarian and human rights crisis in Rakhine state – admittedly very much at the forefront of public awareness right now – there have been significant decreases in systemic human rights abuses and violations committed by the central government against ethnic minorities and political dissidents within its majority Burmese population. Myanmar’s government has also taken concrete steps to combat corruption and strengthen rule of law. Between 2005 and 2013, its Control of Corruption and Rule of Law indices in the World Bank Governance Indicators improved impressively from -1.6 for both to -1.1 and -1.2, respectively. In response, the EU has lifted economic sanctions and re-granted Myanmar preferred trading status through the Generalised System of Preferences in 2013. While much remains to be done, a normalized EU-Myanmar relationship is gaining momentum in the economic sphere and the “Myanmar problem” is arguably no longer the stumbling block to a potential ASEAN-EU FTA that it once was.

Also muddying the water last time around were the difficulties posed by the enormous economic developmental disparities and trade policy peculiarities among the ten states of Southeast Asia. However, in the past decade ASEAN has made significant strides in economic development and income distribution. Nominal GDP for the bloc has risen from $1.3 trillion in 2007 to $2.4 trillion in 2013, while GDP per capita has climbed from $2249 to $3832 over the same period. The income gap among ASEAN countries is also closing rapidly: GDP per capita of the richest economy was 105 times larger than that of the poorest in 2007; in 2013, that gap had been reduced to 62 times, and by 2018 it is projected to be 47 times. The higher growth rates of smaller economies, especially of the CLMV (Cambodia, Laos, Myanmar and Vietnam) group, will continue to drive economic convergence in the region. The CLMV’s share of ASEAN GDP in 2007 stood at 7 percent; by 2013, it had advanced steadily to more than 10 percent. Moreover, macroeconomic policies in ASEAN are more coordinated and harmonized compared to those in 2007.

In contrast, the EU economy is again struggling with deflation in 2015, underscoring the anemic recovery efforts of the eurozone and the failure of conventional policy instruments. Clearly, the EU needs to embrace a wider range of economic stimulus tools; quantitative easing alone is insufficient and carries a catastrophic inflation risk for future generations if tapering is delayed. Using an FTA to open up otherwise heavily regulated markets in rapidly growing Southeast Asia is a risk-free option in tough economic times. The proposed FTA would boost inter-regional commerce and promote growth and job creation in Europe. Malmström made no secret of the economic motivation behind the ASEAN-EU deal, viewing it as a way for the EU “to come out of the current crisis.” More than ever before, the EU needs an ASEAN-EU FTA.

In addition, ASEAN is at the heart of two high-profile mega-FTAs: the Trans-Pacific Partnership (TPP) around the Pacific Rim and the Regional Comprehensive Economic Partnership (RCEP) between ASEAN and its six FTA partners, including China, Japan and India. These two giant trade initiatives will inevitably draw ever more economic activities and FDI to the region and away from the transatlantic community, to the detriment of the EU. Home to a number of a populous, lower-income developing countries, from a supply chain point of view, ASEAN is set to absorb the majority of the labor-intensive manufacturing industries that are relocating from China. For the EU, a future ASEAN-EU trade deal is an opportunity to dock with the two major trade accords and retain its economic prominence.

Why post-2015?

From the ASEAN perspective, resuming free trade talks this year works for two reasons. First, as ASEAN Deputy Secretary General for ASEAN Economic Community, Lim Hong Hin, has put it, it is “good timing to revisit the region-to-region FTA will be after the realization of the AEC at the end of 2015.” Back in 2007, there was a lack of genuine interest in the region, as the prevailing view in policy circles was that the objectives of the ASEAN Community and ASEAN-EU FTA were incompatible, given that the former prioritized inward-looking regional community building while the latter encouraged the region to be more outward-looking. Indeed, ASEAN has been preoccupied with the AEC agenda for more than a decade since 2003. After 2015, though, trade talks with the EU could become a new priority for ASEAN leaders.

Second, the RCEP agreement is on course to be concluded by the end of 2015. With the conclusion of RCEP, attention could well switch to an ASEAN-EU FTA. The negotiating skills and technical expertise ASEAN trade negotiators and lawyers have picked up in dealing with large and savvy trading powers such as China and Japan will prove beneficial. The RCEP negotiation itself is a consensus-building process through which economically diverse ASEAN countries identify and work together toward common external positions on numerous trade-related matters, particularly the intractable “Singapore issues” that have plagued the multilateral Doha Development Round under the WTO. In light of this, RCEP negotiation could be appreciated as a capacity-building, preparatory process preceding the potentially more contentious free trade talk with the EU for ASEAN.

Rejuvenating ASEAN-EU FTA talks after 2015 would be a win-win scenario. With the launch of the AEC and conclusion of RCEP, a consolidated ASEAN will be a more cohesive, strategic and symmetric FTA partner. Moreover, the EU’s commercial interests would be served by synergies between the proposed FTA, the AEC, which aspires to transform a diverse Southeast Asia into an integrated market and a production base of 625 million people, and RCEP, which would indirectly link the EU and its top trading partner, China. Thirty-five years after the EU and ASEAN signed their inaugural inter-regional cooperation agreement; it is time to consider upgrading the relationship from an Enhanced Partnership to a Strategic Partnership. An ASEAN-EU FTA could well be the stepping stone to do that.

SOURCE: The Diplomat

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EU-Japan FTA: Basic Agreement to Be Reached by End 2015

Japan’s Prime Minister Shinzo Abe, European Council President Donald Tusk, and EU President Jean-Claude Juncker agreed on Friday (29 May) to accelerate negotiations over a long-deadlocked Free Trade Agreement between the European Union and Japan. The leaders gathered on the occasion of the latest annual meeting between both parties. Prime Minister Abe said that “in the area of economy, we agreed to accelerate the Japan-EU EPA (Economic Partnership Agreement) negotiations, aiming to reach a basic agreement within this year while stressing both speed and quality”. Both economic powers have agreed to finalize a giant free trade deal connecting their economies but talks have been stalled for a long time mainly due to disagreements over tariffs and trade barriers. While Brussels wants to include non-tariff barriers in selected areas, Tokyo wants to push through customs duties on Japanese cars, which is a very thorny issue for Europe’s major carmakers and exporters such as Germany. Japan is moreover involved in negotiations over TPP, a Pacific Free Trade Agreement, which is currently also facing a deadlock due to domestic issues in the United States.

Both parties also jointly express their concerns over China’s recent aggressive moves in the South China Sea. In a joint statement, they said that they “continue to observe the situation in the East and South China Sea and are concerned by any unilateral actions that change the status quo and increase tensions”. China has started to accelerate the construction of artificial islands in the disputed waters, which raised concerns both in Washington and among China’s neighbours. On top of discussing the FTA and China concerns, Japanese and European leaders also pointed out that they continued to cooperate on other issues, such as the conflict in Crimea. Prime Minister Abe is reportedly planning to visit Ukraine next month after he has attended the Group of Seven (G7) Summit in Germany.

SOURCE: The EU Bulletin

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Taiwan President urges faster review of FTA monitoring bill

President Ma Ying-jeou urged the Legislature Tuesday to speed up review of a bill on monitoring pacts Taiwan signs with China, saying that Taiwan's trade could be at risk because of a free trade agreement (FTA) signed between China and South Korea. Addressing the opening of Computex Taipei, Ma called on lawmakers to speed up review of the bill and a trade-in-services agreement with China, a day after China and South Korea signed an FTA that covers services, goods and investment. Taipei signed a trade-in-services agreement with Beijing in June 2013, but it remains stalled in the Legislature because of opposition from the Democratic Progressive Party, as well as labor and student activists. The bill was created at the height of a movement against the trade-in-services deal last April, but has yet to have been reviewed by a legislative committee, with ruling and opposition lawmakers scrambling to prevent the other camp from chairing the review.

Currently, the FTAs Taiwan has signed with other countries cover just 10 percent of its trade, compared with more than 30 percent for South Korea, Ma said. If the China-South Korea FTA takes effect at the end of this year, a bigger share of South Korean trade is expected to enjoy tariff cuts, which presents a huge risk to Taiwan, he warned. When Taiwan and China signed the Economic Cooperation Framework Agreement (ECFA), which includes services, goods, investment and dispute settlement, five years ago, an emergency meeting was called in South Korea to address concerns about intensifying competition. While it has been five years since the the ECFA was signed, with the services deal still stuck in the Legislature, South Korea sealed its FTA with China in only three years, Ma noted. "Taiwan cannot afford to lag behind again," Ma warned. As Taiwan relies on exports for economic growth, all sectors should face up to the difficulties and find a way out of them as soon as possible, he said.

SOURCE: Focus Taiwan

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Chabahar Port to help India circumvent Pakistan

On May 6, India and Iran signed a memorandum of understanding to develop Chabahar Port in Iran. Located on the confluence of the Indian Ocean and the Sea of Oman in southeastern Iran, it provides India access to Afghanistan, Central Asia and beyond. The agreement entails an investment of $85.21 million from India to construct a container terminal and a multi-purpose cargo terminal. The formalisation of the agreement, presided over by Union Road Transport & Highways and Shipping Minister Nitin Gadkari and Iranian President Hassan Rouhani, was long overdue. While the construction of Chabahar Port augurs well for India and Iran, opening the trade routes to Afghanistan and Central Asia will also bolster economic ties with other nations. Moreover, the trade route reduces India's dependence on Pakistan, a volatile neighbour, for trade with Afghanistan. The deal in many ways is also a natural progression of India's long-standing relationship with Iran. India's history has been heavily influenced by the Mughal rule - with its West Asian provenance - and it shares cultural ties with the country. Over the years, as India-Pakistan relationship descended into internecine wars and prolonged periods of avowed mistrust, Iran's relationship with India has managed to retain diplomatic pragmatism and strategic partnership, at least on paper. "We can trace linguistic, cultural and even culinary similarities between the two nations. In contemporary times, however, we have not been too close politically. While significant joint ventures with Iran had been carried out during the Shah's times, it gave way to a lull as Iran grappled with its internal turmoil post-revolution," says Lalit Mansingh, former foreign secretary, Ambassador to the US and the high commissioner to the United Kingdom.

Iran was India's second-largest supplier of crude oil up until 2006 but it dropped to number seven by the end of 2013-14. Although India has reduced its oil imports from Iran, it has continued to maintain good relations with the West Asian nation, which has been reeling under economic sanctions imposed by the US and European Union. There are other factors at play too in India's interest in Chabahar Port. One is that China recently won the right to operate Pakistan's Gwadar Port, which is believed to have strong military possibilities. Chinese President Xi Jinping's two-day visit to Pakistan last month yielded a $46 billion infrastructure investment promise. Pakistan's Gwadar Port, around 70 km east of Chabahar, was developed by China Harbour Engineering Company, with the Port of Singapore Authority as a minority partner. To counter the ubiquitous Chinese influence in infrastructure development in the neighbourhood, Chabahar's development provides a necessary route. "With a promised investment of over $40 billion, China will require return on investments on the infrastructure that it will create. The infrastructure's management, be it the port, road or rail, by Chinese would need pragmatism and that dictates that India be allowed access. In case it is not, India will still have access to Afghanistan, Central Asia and the Caucasus through Chabahar," says Mansingh. 

Pakistan has restricted the movement of Indian goods to land-locked Afghanistan, hampering trade relations between the two countries. The Afghanistan-Pakistan Trade and Transit Agreement allows Afghan trucks to carry cargo to Pakistan ports and the Wagah border but the trucks have to go back empty. This increases the cost of goods.  "Chabahar's development will reduce costs by almost a third and increase the potential transaction value between India, Afghanistan and Central Asia. Moreover, by circumventing Pakistan's current hold on access to Afghanistan, India's geo-strategic sway will be further enhanced," says Brigadier (retd) Rumel Dahiya, deputy director general at the Institute for Defence Studies and Analyses.

Chabahar's development will also render worthless Pakistan's fervent refusal to allow India-Afghanistan trade through its territory. Afghanistan's nodal location provides it the unique ability to provide access to South, Central and West Asia. According to the US Geological Survey, Afghanistan is believed to be sitting on a geological gold mine containing around 60 million tonnes of copper, 2.2 billion tonnes of iron ore and 1.4 million tonnes of rare earth elements. That gives Afghanistan a unique opportunity to become the hub of economic activity in the region. There will be a need for capital-rich countries to step in and help extract minerals. India has already committed to an investment of over $11 billion to develop the iron-ore rich Hajigak mines. "India's potential investment will necessitate developing the necessary infrastructure like roads and railways for the evacuation of iron ore. The port's development will be an asset to India's investment for evacuation," says Mansingh.

SOURCE: The Business Standard

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