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Readymade garments exporters have asked the government to expedite free trade agreements with high potential markets such as the EU, the UK, the US, Australia and Canada which could lead to exports doubling in three years’ time.
In a letter to Prime Minister Narendra Modi, the Apparel Export Promotion Council (AEPC) pointed out that due to the pandemic, India’s principal export markets, including the US, the UK and Europe, were badly impacted.
“An important area that can supplement your efforts in this direction is improving export competitiveness through a comprehensive review of India’s trade agreements, through a fast-tracked mechanism, with EU, UK, US, Australia and Canada,” A Sakthivel, Chairman, AEPC, wrote in the letter.
Access issues
Interestingly, India has been negotiating bilateral free trade pacts with the EU, Australia and Canada for the past many years, but the deals are nowhere near conclusion because of differences over market access issues for key products. Both India and the UK are keen to start talks on a bilateral FTA as soon as the latter has found its feet as a nation independent of the EU.
The Council pointed out that Indian apparel exports have a duty disadvantage of 9.6 per cent in the EU market as compared to competitors like Bangladesh, Cambodia, Sri Lanka and Pakistan. Most of these countries get duty concessions under schemes such as Generalised System of Preferences (GSP).
It further said that recently, Vietnam, too, concluded a FTA with the EU and most competitors were leveraging such FTAs in a big way to enhance their cost competitiveness.
Level-playing field
“There is an urgent need to have a level playing field in terms of market access and margin of preference in our biggest global market (the EU) and to rectify the distortion that we are suffering,” the letter said making a case for a similar or even better FTA with the UK as well.
An FTA with the US, which has a 27 per cent share in India’s total garments exports, may have a significant impact on India’s apparel exports to the country as on certain items like MMF-based apparel, which India is promoting, there is a peak tariff of 28 per cent.
The council also sought Comprehensive Economic Partnership Agreements (CEPA) with Canada and Australia. “Canada was earlier a very large market for India. We lost a substantial share of our exports because our competitors entered into trade agreements with Canada. With a CEPA in place we will be able to easily recapture the lost ground,” the letter said.
Garments is one of the top export items from India and is a labour-intensive sector, but AEPC has estimated that exports have plummeted 91 per cent and 66 per cent in April and May respectively due to the pandemic.
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