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Peru-Mexico FTA may hurt Indian cotton yarn exports
Feb '12
The Peru-Mexico free trade agreement (FTA) that came into force this month is likely to harm cotton yarn exports from India to Peru.

Currently, around 80 percent of Peruvian cotton yarn imports are from India. In 2011, Peru imported US$ 81.389 million worth of Indian cotton yarn, while its imports of cotton yarn from other countries amounted to US$ 15.976 million, according to the data prepared by the Textile Committee of Peru's National Society of Industries.

Peruvian cotton yarn imports from India have increased from a mere US$ 1.672 million in 2004 to about US$ 84.779 million in 2010. In comparison, Peru's cotton yarn imports from other countries have shown a marginal increase to US$ 8.367 million in 2010 from US$ 7.996 million in 2004.

Under the Peru-Mexico FTA, duty-free export facility will not be available for Peruvian textile and clothing items that are made using raw materials imported from third countries like India. The yarn forward rule, however, has some exceptions in certain types of elastomeric filament yarns.

To export textiles and clothing items to Mexico at zero-duty, all the textile inputs have to be made in Peru or Mexico. This principle is likely to negatively impact Indian yarn exports to Peru in view of its high volume.

Peru has FTA's in place with other countries such as the US, Canada, Chile, South Korea, Japan, Mexico and the Mercosur region. All these FTA's impose heavy penalty for using yarns from third countries.

Fibre2fashion News Desk - India

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