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EU-India FTA will create level-playing field

22 Aug '12
3 min read

A Free Trade Agreement (FTA) between India and the European Union is in the offing. This could prove to be a big morale booster for the Indian textile and apparel industry and help boost exports. But can it help under the backdrop of the European debt crisis.

“We are looking at the long term and not the short term. Right now Indian exporters are out-priced by countries like Bangladesh. But once the FTA is signed, Indian textile exporters will have a level playing field”, says Mr Ajay Sahai, Director General of the Federation of Indian Exporters Organisation (FIEO).

He adds, “Indian textiles and garments are competitively priced and since the Indian industry is larger in size than in say Bangladesh, Cambodia or Vietnam, we can hope to garner additional market share in the European Union on our inherent strengths”

Mr Sahai informs, “Even if there is an overall drop of 10 percent in imports of textiles and clothing by the European Union, there is still the rest, which India can hope to capture on the strength of the FTA even in the short term”.

Two regions – US and EU account for a majority chunk of Indian exports of textiles and clothing. The EU has granted duty-free access to Bangladeshi goods, since it is a least developed country (LDC). This makes textile and apparel exports from countries like India uncompetitive, due to the 16 percent tariff imposed by the EU.

Japan too has granted the same status to Bangladesh and has signed FTA’s with other textile and garment exporting countries like Vietnam, Thailand and Indonesia. Though current exports from the sector to Japan are negligible, a market dominated by Chinese textiles and garments, the FTA could pave the pay for hiking the figures.

The EU imports around $174.7 billion worth clothing, of which, share of India is a mere four percent at $7.4 billion. India’s share in the US apparel import basket is just four percent or $3.3 billion of the almost $77.7 billion garments that it imports and that to Japan is a mere 0.9 percent compared to above 80 percent share of China.

When quizzed about increasing exports to non-traditional markets like Russia, Latin America, ASEAN, Africa, Japan etc, he said, “Diversifying exports is a not something that can be done overnight. Even if there are incentives, exporters first study markets and then step in after making proper assessments.

“It is too early to conclude if incentives for exports to these regions have helped. But data reveals that shipments to Russia, Japan, Israel, etc have risen. But incentives will definitely help in hiking exports to non-traditional markets as we cannot depend only on traditional markets”, he concluded by saying. 

Fibre2fashion News Desk - India

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