The Hindu Business Line : Will China's plan to levy tax on textile exports benefit India?

NEW Year could bring in a double cheer for textile exporters. While the phase-out of global textile quotas from January 1 is expected to bring about a four-fold increase in Indian textile exports, China's surprise announcement last week that it would impose a duty on some of its textile exports has raised hopes of Indian exporters cornering a bigger slice of the global textile and clothing market.

Early last week, Chinese authorities had announced that they would slap a tax on some of its textile exports, once the quota phase-out comes into effect.

"The domestic exporting community is definitely upbeat. Any levy that the Chinese impose on their exports would only enhance the competitiveness of Indian exports, as well as of exports from low-cost producers such as Pakistan and Bangladesh," a leading Delhi-based exporter said.

Textiles exporters across the world have feared that they would be crushed by China's highly competitive textiles industry, once the quota regime would be phased out.

Experts, however, advocate caution on the grounds that the announcement could only be a smokescreen.

"It is clear that the move by the Chinese authorities to announce the tax has been made as a safeguard measure to avoid any reprisal from the US and the EU on Chinese imports, once the quotas go. It remains to be seen how seriously the tax is administered," a KSA Technopak executive said.

According to the special textile safeguard provisions, which have been made part of China's accession agreement to the World Trade Organisation signed in 2002, countries such as the US, the EU and other members of the WTO can retain safeguard measures in the form of quantitative restrictions to products where market-disruptive surges of imports have been observed.

"The Chinese announcement to levy a tax on textile exports is clearly in response to a possible reprisal by key markets like the US and EU using the special textile safeguard provisions. By levying the tax, China wants to show that its textile exports are on a level playing field as the exports of Least Developed Countries such as Bangladesh and Mexico," an industry expert said.

He said that since a "huge amount" of subsidies went into Chinese export products, a duty should negate some of the sops that the administration extends to its exporters.

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