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Textiles and clothing -- It's time Delhi renegotiated
A Goel & P Anchaiya
With the Seattle Ministerial Conference of WTO round the corner, trade experts in developed and developing nations, would be busy finalising their agenda for multilateral negotiations. Given its ambitious target of achieving double-digit economic growth, which is not possible without a robust export performance, India should approach talks in textiles and clothing carefully as it not only constitutes about 4 per cent of GDP, 35 per cent of the export basket and 14 per cent of the total industrial output but also provides employment to 30 million people.In addition, a thorough restructuring of the domestic textile industry should be undertaken, should be undertaken, to gain maximum benefit from future trade liberalisation. India's stand during the millennium round should be based on the understanding that merely cutting trade barriers will not suffice, as there are many other ways of limiting international trade. Member countries still have the option of imposing non-tariff barriers as safeguardmeasures. India needs to negotiate on the following points. Industrial tariffs in developed markets will drop from a pre-Uruguay Round average of 6.3 per cent to an average of 3.8 per cent by 2000. However, averages do not reveal the true picture. There will be above average tariff cuts in capital-intensive industries and below average cuts in labour-intensive industries like textile and clothing. Further, US has not addressed the problems of tariff peaks and escalations. The US average tariff of 12.5 per cent on garment imports conceals the peak duty of 18.5 per cent. US authorities impose user fees on the arrival of merchandise, thereby increasing the landed cost of imported goods and rendering them uncompetitive. US has made prolific use of various types of contingency measures, including countervailing and anti-dumping duties and safeguard mechanisms. The original intention with which anti-dumping measures got enacted in GATT was to save domestic industry from the brunt ofpredatory pricing. Unfortunately, now anti-dumping is used as a protectionist barrier. From 1991, about 28 anti-dumping investigations have been initiated against Indian exports, many of which came at the behest of our largest trading partners, namely the US and the EU. US rules of origin lack consistency and clarity, and determination of country of origin on a case-by-case basis, is inconsistent with WTO regulations. US maintains more stringent inspection standards than the international norms, which act as barriers to trade. The West has linked trade to labour and environment issues as a protectionist ploy. India should argue that these issues cannot be dealt in WTO alone, but also bring in organisations like ILO and UN.Concerns should also be raised on the issue of non quota countries benefiting at cost of quota countries. In 1997, there were three times as many embargoes for WTO members as there were in 1994. Countries with unrestrained trade, such as Mexico, Canada and the Caribbean,are experiencing grater trade expansion than restrained countries like India.India's attempt to seek concessions on these issues makes sense only if it is matched by a thorough restructuring of its textile and apparel sector,because when the sector is further liberalised, opportunities would be opened for everyone. China's formal entry into WTO is going to pose fresh challenges for India. Just how unprepared we are can be seen from the following figures: The average annual investment on machinery per factory unit in India's apparel sector is a mere $2,790 - compared to Hong Kong's $2.5 million and China's $1 million. The yearly average of new machinery installed in South Korea for pre-cutting machines for any given apparel unit is 2.9, China's 2.3, Thailand's 2.0 while India's is almost nil. It is likewise in cutting and sewing machines. In 1994 ratio of Chinese labour cost to India's labour cost was 2:3. Therefore, despite numerous strengths like cheap labour, educated supervisory staff, technical andmanagerial skills, some of the finest varieties of raw cotton and one of the largest acreage under cotton, India lacks long-term advantages in both labour and capital. This reality must be changed to move up in the value chain. To begin with: Instead of exporting a whole gamut of textiles, India should focus on products in which it has greater comparative advantage and future potential. The Centre needs to unburden mills by amending land and labour laws. State level controls on sale and utilisation of mill land remain even though the Urban Land Ceiling Act stands repealed by the Union. India should take the membership of the Hague Convention since it protects designs (including textile designs) from plagiarism. This protection can help India's centuries-old handicraft and artisan industry, whose ornamental and aesthetic aspects add to their commercial value and marketability. India should develop a synthetic fabric be to help provide synthetic fabrics to garment exporters atinternationally competitive prices in order to increase production and export of high value garments. Machinery required to set up world-class modern processing houses and knitting facilities to produce value-added products, should be allowed to be imported duty-free. It is difficult for small-scale industries to raise funds required to compete with global suppliers in terms of quality, prices and delivery schedule. Foreign JV partners could bring in the requisite capital and technology to make the sector globally competitive. In view of these facts, the SSI reservation and the Foreign Direct Investment policies should be reviewed.Trade negotiations are essentially "give and take" in nature. Development nations complain that most clothing imports are banned and despite continuous promises, India has failed to present a concrete plan to lower the trade barriers. India should be ready to give concessions on these issues if it wants its voice to be heard seriously on the negotiation table.Tosummarise, India requires not only a forceful presentation of its case at the meet, but also an exercise on war-footing to put its own house in order. The earlier discussions on these issues have resulted in procrastination of decisions, both at the international and national fronts. The Seattle conference has presented an excellent opportunity to settle the issues before we enter the new millennium. Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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