The Hindu Business Line : India still weighing EU offer of textile quota hike

INDIA is still considering the European Union's latest offer of 30 per cent increase in quota of textiles and clothing, particularly if the exceptional flexibilities are extended to use the increased quota in any of the categories of New Delhi's choice.

Sources in the Government told Business Line here that the EU's offer of enhanced quota for India is still being studied and denied any report of it having rejected the offer.

"Indian mission in Brussels is staying constantly in touch with us to give the feedback to the initial impression that the EU offer did not appear of great interest as New Delhi might not be able to use the 30 per cent increase in quota in most of the categories and that it is only in a few categories that the quota increase could be useful to India", the sources added.

New Delhi has already told Brussels that India has bound roughly 520 tariff lines at six-digit level of commodity classification. As part of the proposed pact, EU expects India to reduce its bindings to 20 per cent only on these already bound lines and not insist on binding the unbound tariff lines.

EU is understood to have discussed India's perceptions on the new quota offer with its Member States on March 24 and that if India accepts conditional response, demanding exceptional flexibilitiesto the extent of total increase in quotas, it might be possible for EU to agree to give India full exceptional flexibilities so as to use the entire 30 per cent quota increase as would be given by its side.

This would actually mean India would get exceptional flexibilities to the extent of about 96,000 tonnes or so on the assumption that its ceiling is to be about 3.2 lakh tonnes as of now for the year 2004.

The EU side is understood to have indicated that India could also make a plea for giving carry-forward facility as well as growth-on-growth and recalculation of compensatory quota due to addition of five more members to it from May 1. The carry-forward facility would provide a further increase to overall quota and there would be increase due to hike in compensatory enlargement quota.

All these together would render the total EU offer quite attractive with such an offer having a value of over Euro one billion, taking the overall Indian exports of textiles and clothing to EU to Euro 5 billion this year. This would also provide a higher threshold for India to quota-free textiles and clothing regime beginning from January 1, 2005.

However, all these additional flexibilities and enhancement in quota to India would hinge on how quick a response is sent to Brussels, the sources said. EU has also hinted that out of the various categories of interest, Category-1 (mostly fabrics) is the most sensitive category from EU's point of view and if India could limit its demand for the use of exceptional flexibility to a certain level for Category-1 depending on its requirement, it would give the requisite comfort to the EU side.

EU has also expressed its keenness that it would give further cushion to its side, if New Delhi could also reduce the applied duties in the case of tariff lines under this category by a few percentage points even below 20 per cent, though it need not be bound below 20 per cent.

The only hitch, the sources said, would be as to what extent India's negotiating stance in WTO is going to be compromised due to the country's binding the already bound tariff lines in textiles and clothing at 20 per cent as demanded by the EU in its conditional offer of additional textiles and clothing quota with exceptional flexibilities.

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