The highly competitive nature of the Indian TextileIndustry has made the US concerned, regarding the preferences, and subsidiesextended by the WTO.
Indian textile industry is currently receiving certainsubsidies from the global market to aid itself to ride the tide of globaleconomic crisis. Earlier in 2008, Indias exports of textile and apparel were$21 billion forming 3.4% of the global trade worth $612 billion. Due to globalmeltdown, during 2009, the countrys exports to EU and US fell due to a slowdownin demand in these countries. Concessions were given in the form of discountson interest for loans, and incentives to help the textile and apparel sector. IndianGovernment has contributed subsidies and other measures, which has helped thecountry to enhance its production, making it to surpass the US, and becoming the worlds largest producer of cotton.
Given that Indias textile industry is highly competitiveand subsidized, US remains concerned about the preferences extended to it. Asper the WTO review, Indian textile and apparel exports worth of billions ofdollars which are currently receiving export subsidies might no longer qualifyfor the same. US has asked WTO to review the possibilities for India to get qualified for concessions regarding export subsidies in the textile andapparel sector. It asserts that there are reasons to believe that India has met with export competitiveness as defined in the SCM (Subsidies andCountervailing Measures) agreement for certain products. But, India believes that it cannot be challenged as most of the subsidies of textile exporters are shortterm.
The SCM agreement exempts developing countries which have aper capita income below $1000 from prohibiting on export subsidies as long asthe exports are lesser than 3.25% of the world trade for two consecutive years.Present subsidies given to India including carpets and handicrafts consist of adiscount on interest on loans and incentives for exporting to specific marketsin the form of duty-free imports. Some industry analysts optimistically believethat even if the textile and clothing exports exceed 3.25%, India would easily continue to get subsidies under other flexibilities allowed by the WTO.They believe that most of the subsidies given to textile exporters are on ashort term basis, and hence there is very less chances for US asking WTOagainst sops to textile exporters.
Special and Differential Treatment (S&DT):
There is yet another Special and Differential Treatment(S&DT) under which India can facilitate support to its exporters. Thisagreement contains provisions that help developing countries some specialrights. They include longer periods for implementing Agreements, andcommitments or measures to increase the trading opportunities for developingcountries. Thus, even if the textile exports exceed 3.25%, India has the opportunity to receive subsidies under other concessions allowed by the WTO.
Indian textile industry contributes to 20% of the totalindustrial output, and 18% of the industrial workforce. With much strategicimportance, it is necessary for the country to regulate the exports. A rightstrategy should be formulated to improve productivity level, quality andefficiency.
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