In a recent report on Trade Policies of South Asian countries, WB notes that the reforms will require India to abolish its specific tariffs, substantially reduce the general level of ad valorem tariffs on textiles and clothing and avoid use of anti-dumping.
Bangladesh which like India has a protected garment sector, will need to abolish or phase-out the quantitative restrictions on textile products and discontinue the use of supplementary duties and value-added tax (VAT) exemptions for the sector, the report opines.
In addition, the report wants removal of unnecessary controls, access to new technologies and simplification of domestic laws by South Asian countries for seizing the opportunities arising from the MFA phase out.
Textile and clothing exports from the South Asian countries have so far been confined to low to medium range of goods where price was the main determinant. Global competition for these goods is likely to be intense from other low-wage economies which are being increasingly integrated into the world economy. In the Banks opinion, it will therefore be necessary for these countries to diversify into high, value-added textile and apparel products where the labour cost advantage will be significant.
According to the report, the high protection to the fabric segment in India has in turn led to high protection of garment production through the use of specific duties against low-priced garment imports. Although Pakistan does not have QRs and its textile tariffs are lower than India and Bangladesh, they are quite escalated and provide high effective protection rates to yarns and fabrics.