Hike in EU customs duty to hit Indian exports

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EU has decided to 'graduate' exports of several items including textiles and motor vehicles from India out of its GSP scheme. EU has decided to 'graduate' exports of several items including textiles and motor vehicles from India out of its GSP scheme.
SummaryNew Delhi will request Brussels to retain preferential status.

idea is to exclude advanced developing economies that have integrated into the world trade and to focus on the needs of those that are lagging. Textile exports from India are being phased out of GSP as they exceed 14.5% in value of textile imports into the EU from all beneficiary countries, going by a three-year average up to 2012. For other products the threshold for exclusion is 14.5% as per the EU regulation.

The European parliamentary committee’s vote to grant for GSP Plus status to textile imports from Pakistan and nine other countries is aimed at promoting international conventions on core human and labour rights, environment and good governance. According to overseas reports, a GSP Plus tag for Pakistan would help it create a million new jobs, boost its exports to EU by $500 million and facilitate capital flow to the sector because of the competitive edge from tariff removal.

Ajay Sahai, director general and CEO, Federation of Indian Export Organisations, said the EC’s decision would affect the competitiveness of the country’s exports. “Even though the EC has suspended this preference for both India and China, we would be hit more since China is more competitive," Sahai said.

Indian officials are also worried about the prospect of a decline in forex inflows in a year in which they had to take harsh steps like curbing gold imports to contain the current account deficit to below $70 billion or 3.8% of GDP. "It is important for affected industries to prepare themselves for the change. The cost of specified Indian exports to the EU shall, as a result of the proposed changes, increase and accordingly will impact their competitiveness," said Saloni Roy, senior director, Deloitte in India.

"The US has already given many advantages to Pakistan due to various political reasons and with this suspension from the EU, we might see a shortfall of 2-5% in exports," said Vishwanath, joint managing director of Nath Brothers Exim International, a Noida-based firm exporting garments.

To get broader preferential access to the EU market, India is now negotiating a free trade pact with the EU, which already has such arrangements with about 34 other countries. Talks on the proposed India-EU pact are progressing slowly due to a lack of agreement on areas of market access and its extent.

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