CITI-NEWS LETTER · It will help handloom sector in production of handloom products as per market...
Transcript of CITI-NEWS LETTER · It will help handloom sector in production of handloom products as per market...
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Cotlook A Index - Cents/lb (Change from previous day)
04-03-2019 81.90 (+1.05)
01-03-2018 92.40
01-03-2017 85.25
New York Cotton Futures (Cents/lb) As on 06.03.2019 (Change from
previous day)
Mar 2019 72.62 (-0.83)
May 2019 74.45 (-0.16)
July 2019 74.89 (+0.90)
06th March
2019
Textiles Minister Smriti Irani inaugurates Refurbished Handloom Haat
India's apparel exports estimated to de-grow by 4-5% in FY2019
China raises demand for Indian cotton
Manmade textile industry on a cusp of turnaround with a revival in demand
India's import duties not high; within global trade norms of WTO: Govt
AEPC to take up the duty withdrawal benefit under GSP with Commerce ministry
Cotton and Yarn Futures
ZCE - Daily Data (Change from previous day)
MCX (Change from previous day)
Mar 2019 20790 (-40)
Cotton 16080 (-155) Apr 2019 21130 (+20)
Yarn 24855 (0) May 2019 21400 (+200)
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-------------------------------------------------------------------------------------- Textiles Minister Smriti Irani inaugurates Refurbished Handloom
Haat
India's apparel exports estimated to de-grow by 4-5% in FY2019
China raises demand for Indian cotton
Manmade textile industry on a cusp of turnaround with a revival in
demand
India's import duties not high; within global trade norms of WTO: Govt
Govt promised to lower corporate tax as GST mop-up rises: FICCI
AEPC to take up the duty withdrawal benefit under GSP with Commerce
ministry
US to withdraw duty benefits on $5.6 billion exports from India
Why markets should pay attention to the latest India-US trade spat
State unveils new industrial policy
Time for export push
Chinese invasion of Indian industry
EEPC event to showcase India as manufacturing, tech hub
Tamil Nadu plastic ban: How cotton and jute bags are picking up
----------------------------------------------------------------------------------
EU to enact new controls to screen FDIs
FOBAP urges Manila for tax incentives for garments sector
UNECE stresses transparency for garment/footwear sector
US decision to remove Turkey from GSP contradicts $75B trade target
Trade war a boon for Bangladesh: ADB
----------------------------------------------------------------------------------
NATIONAL
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GLOBAL
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NATIONAL:
Textiles Minister Smriti Irani inaugurates Refurbished Handloom Haat
(Source: India Blooms, March 05, 2019)
Union Textiles Minister, Smriti Zubin Irani, inaugurated the renovated Handloom Haat in
New Delhi on Tuesday.
She also launched three projects of NIFT - VisionNXT – Trend Forecasting Initiative,
Indian Textiles and Craft Repository and Design Innovation and Incubation.
The Haat at Janpath in New Delhi has been set up by Ministry of Textiles to provide
marketing opportunities to authentic handloom products from various States, PSUs and
cooperative societies. Its main objective is to provide infrastructure support to handloom
agencies to augment their sales of handloom products and to showcase the exquisite
variety of handloom products produced all over the country.
Textiles Minister also released a booklet - World Handmade Textile Biennales on this
occasion.
Speaking on this occasion, Smriti Zubin Irani said that this is an effort to recreate history
and revive the history of art.
She said the NIFT will accomplish their job through artificial intelligence.
The Textiles Minister further said that the virtual museum will not only help industry and
research scholars but also carry forward the knowledge to the next generation. MoS
Textiles, Ajay Tamta, also spoke on this occasion.
Project related to trend innovation lab ‘VisionNxt’ initiativebeing set up by NIFT in the
building will create an indigenous fashion forecasting service that endeavours to design
seasonal directions for our country.
The trend forecasting service would be aligned to our national and sub-national socio-
cultural constructs and market requirements.
The proposed service is based on the premise that fashion is a dynamic industry,
depending on seasonal trends and forecast to predict its future direction.
It will help handloom sector in production of handloom products as per market
requirement in terms of trends, design and colour forecast.
The project of Indian Textiles and Craft Repository Initiative of NIFT is supported by the
DC Handlooms and the DC Handicrafts, Ministry of Textiles.
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The body of textile and craft knowledge generated through the Craft Cluster Initiative will
be channelled into a national knowledge portal titled Indian Textile & Craft Repository.
This repository will also house the virtual registers of the textiles and crafts resources,
which are available in the Weaver Service Centres, the Crafts Museums, similar
institutions and private collections.
The repository will develop a virtual museum of textiles, and textile crafts, a designer
archive, indigenous case studies, and also act as aggregator of online information on
related research. Virtual museum will be set up having digitised resource of traditional
archived pieces from museums, resource centres, weavers’ service centres. It will also
have contemporary pieces and collections from designers, fashion archives. This will help
in easy sourcing of designs.
Design Innovation and Incubation (DII) is intended to support young entrepreneurs,
artisans, start-ups, NIFT alumni and students.The DII would also facilitate collaborations
relevant for business development. The target beneficiaries include NIFT alumni and
students who would like to start entrepreneurial ventures as well as candidates who have
not been a part of NIFT but wish to take up NIFT incubation support.
Home
India's apparel exports estimated to de-grow by 4-5% in FY2019
(Source: Sutanuka Ghosal, Economic Times, March 05, 2019)
Going forward, steps taken by the Government of India to address the challenges will
remain crucial for a broad-based recovery across the sector.
India’s apparel exports are estimated to degrow by 4-5% in FY2019, following a similar
de-growth of 4% in FY 2018 and modest growth rates of 1% and 3% in FY2016 and FY2017
respectively, says an ICRA NSE -1.00 % report.
While a reversal in trend has been witnessed in the recent months with a 14% Y-o-Y
growth in India’s apparel exports in Q3 FY2019, the growth is overstated considering a
sharp decline reported during Q3 FY2018, amid downward revision in export incentives
under the GST regime. As a result, India’s apparel exports in Q3 FY2019 remained lower
than the average quarterly exports during the past five years. Having said that, ICRA
expects the trend to have bottomed out and recovery to set in with internal challenges and
abrupt pressures subsiding, though the pace of recovery is likely to remain muted
considering the challenging environment.
Commenting on the subdued industry trend, Mr. Jayanta Roy, Senior Vice-President and
Group Head, ICRA, says, “The decline in India’s apparel exports in FY2019 so far has been
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primarily driven by a sharp inexplicable decline witnessed in shipments to the United
Arab Emirates (UAE) from July 2017 onwards. Yet, the trend otherwise also has not been
encouraging. If the trade with UAE is excluded, India’s apparel exports stood flat (vis-à-
vis a 7% decline in India’s overall apparel exports) in 10M FY2019. As this weakness
coincides with a time when the global apparel trade has shown signs of positive
momentum, it remains a cause of concern.”
As for the global apparel trade, the same expanded for the second consecutive year in
CY2018 (refers to Calendar Year) with a Y-o-Y growth of ~3%, following a 2% growth in
CY2017 in US$ terms and contractions reported earlier in CY2015 and CY2016. The
positive trend during the last two years has been led by the strong recovery in apparel
imports by the European Union (EU), which accounts for almost two-fifth of the global
apparel trade (including the trade within EU) and reported a growth of 5.8% in CY2018.
Unlike the EU, apparel imports by the United States of America (US) remain muted 2%
growth in CY2018, though the trend has improved during the past two years.
As per ICRA note, India continues to experience headwinds in the form of intense
competitive pressures from nations having a cost advantage over India, which seem to be
constraining the overall momentum of the apparel export sector of India.
“While China – the world’s largest apparel manufacturer and exporter, continues to shed
market share in the global trade, India has not been able to capitalise on the opportunity.
Instead, a large chunk has been garnered by Bangladesh and Vietnam, the second and the
third largest apparel exporting nations globally. While Bangladesh has been the key
beneficiary in the EU, Vietnam has maintained growth in its stronghold market of the
US.”, adds Roy.
Home
China raises demand for Indian cotton
(Source: Jayashree Bhosale, Economic Times, March 06, 2019)
There has been uncertainty in global cotton trade due to the ongoing
trade war between the US and China.
Indian cotton exporters are upbeat due to a spurt in demand for cotton
from China, especially at a time when cotton exports to Pakistan have
come to a halt due to the tensions between the two neighbours.
According to trade estimates, Indian traders have contracted for export
5 lakh bales to China for shipments in the next two months.
“Though there will be no trade now with Pakistan for a few months,
there’s good export demand for Indian cotton from many other
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6 CITI-NEWS LETTER
countries like Bangladesh, China, Vietnam, Indonesia and many more,” said Atul
Ganatra, president, Cotton Association of India (CAI).
“During the past couple of weeks, around 4/5 lakh bales (of 170 kg each) of cotton have
been sold by Indian exporters to China for March-April shipments. The demand from
China is robust even now at 78/79 cent,” he said.
There has been uncertainty in global cotton trade due to the ongoing trade war between
the US and China.
CAI had estimated exports for the 2018-19 season to decline by 27 per cent to 50 lakh
bales, compared with the estimated exports of 69 lakh bales during last year. India’s total
cotton exports shipment is around 32 lakh bales up to February 2019.
The spot market prices of CAI for cotton of staple length 30 mm have dropped to ?42,100
per bale on March 1 from ?43,400 per bale on January 1.
Prices of raw cotton are ruling below the minimum support price levels.
“The decline in the domestic prices has brought export parity,” said a Ganatra said that
India has already exported 6.5 lakh bales of cotton to Pakistan, which accounts for 10 per
cent of India’s cotton exports. Traders were expecting to export another 4-5 lakh bales to
Pakistan, but things have turned hostile at the border. However, increase in export
demand from other countries is likely to compensate for the loss of trade with Pakistan.
Mumbai-based trader, requesting anonymity.
The CAI has cut India’s cotton production estimate for January by 1.5 per cent to 330 lakh
bales from 335 lakh bales.
Home
Manmade textile industry on a cusp of turnaround with a revival in demand
(Source: Business Standard, Dilip Kumar Jha, March 05, 2019)
Stabilising crude oil prices help companies fix their product prices for long term contracts
Manmade textile industry is on the cusp of turnaround with a revival in its demand in the
last few weeks following producers’ ability to fix prices of their products in the wake of
stabilizing crude oil prices.
Trading at $85.10 a barrel in the world market, crude oil price gradually slipped to the
level of $49.79 a barrel towards the end of December and gradually picked up again to
trade currently at $65.05 a barrel. Most importantly, crude oil price is holding above $60
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a barrel since February 1 which allowed synthetic yarn, fabric and textile manufacturers
to fix their product prices for long term. Prices of synthetic yarn and fabric moved in
tandem with crude oil prices, being the latter the sole raw material of the former.
Stabilizing crude oil prices have come as a major relief for manmade fibre and yarn
manufacturers that were reeling under pressure since demonetizing of high value
currency notes of Rs 500 and Rs 1000 denominations in November 2016 followed by
implementation of the goods and services tax (GST) in July 2017. Before these two
revolutionary steps, a large portion of manmade yarn and fabric business used to get
transacted in cash which disappeared on their implementations.
“With the revival in demand, manmade fibre and yarn business is on a turnaround path.
December quarter was highly volatile due to huge volatility in crude oil prices. After that,
crude oil prices stabilized which brought stability to manmade fibre and yarn business as
well,” said Madhu Sudhan Bhageria, Chairman and Managing Director, Filatex India Ltd,
one of the country’s largest manufacturers of manmade fibre and yarn.
The revival in demand also percolated to the share price movement of manmade fibre and
yarn manufacturers which rose upto 10 per cent in the last two weeks.
Indian manmade fibre and yarn manufacturers are betting big to grab the market share
of the China, the world’s largest producer of these products, due to rising labour
cost. Industry sources said that the labour cost in China has risen to $1100 per month as
compared to $200 per month in India.
Sensing this opportunity, however, leading manmade fibre and yarn players have chalked
out massive investment plans to expand their capacity and grab large share in the world
market. Filatex India, for example, has envisaged Rs 275 crore expansion plan to raise
their production capacity of yarn and power to reduce its production cost and improve its
EBIDTA margins for this year.
According to Sanjay Jain, Chairman of the Confederation of
Indian Textile Industry (CITI) and managing director of TT brand garments, globally the
fibre consumption is dominated by manmade fibres having 70 per cent of share in total
fibre consumption while natural fibres constitute only 30 per cent. “Contrary to the global
trend, fibre consumption in India is skewed towards natural fibres, especially cotton. The
growth of cotton is limited owing to limited agricultural land availability and price
volatility. Hence, in order to achieve the desired growth target of $300 billion market by
2025 it has become important for India to focus on manmade textiles along with cotton
textiles,” he added.
“The downstream industries in the manmade fibre textile value chain – spinning and
weaving, which is the largest employment generator in the entire value chain are facing
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8 CITI-NEWS LETTER
acute stress due to high prices of domestic staple fibre relative to what our competitors
get in other countries. This affects the export competitiveness of the domestic
downstream MMF textile industry and also makes the industry venerable to imports of
value added MMF products,” said Rakesh Mehra, a senior industry official.
Anti-dumping duties in the beginning of the textile manufacturing chain hurt the down-
stream industry. Presently, anti-dumping duty on purified terephthalic (PTA) is Rs 4 - 6
per kg and on VSF (Viscose Staple Fibre) at Rs 12 per kg.
India has huge and efficient capacities in the manufacturing of polyester staple fibre and
also viscose staple fibre. Rising import due to the free trade agreement (FTA) signed by
the government, however, needs to be curbed, Jain said.
Home
India's import duties not high; within global trade norms of WTO: Govt
(Source: Business Standard, March 05, 2019)
Rejecting US claims of imposing "tremendously high" tariffs, India Tuesday said its
import duties are not high and are within the norms of the World Trade
Organisation (WTO).
"We do not agree with that at all. Our tariffs (import duties) are very consistent with the
bound rates that we are entitled to in the WTO," Commerce Secretary Anup
Wadhawan told reporters here.
"Our tariffs are very comparable to more liberal developing economies and some
developed economies," he added.
He said India's tariffs are within its bound rates under the WTO commitments, and on
the average are well below those rates.
Duties which are imposed on imported goods are called applied rates and the extent to
which a country can increase those duties are known as bound rates.
India's trade weighted average tariffs are 7.6 per cent, which is comparable with the most
open developing economies, and some developed economies.
The commerce ministry, in a statement, said on developmental considerations, there may
be a few tariff peaks, which is true for almost all economies.
US President Donald Trump had claimed that India is a "tariff king" and imposes
"tremendously high" tariffs on American products like Harley Davidson motorcycles.
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The bilateral trade has increased to USD 74.5 billion in 2017-18 from USD 64.5 billion in
2016-17. India has a trade surplus with the US. America has also raised this issue.
The ministry also said due to various initiatives resulting in enhanced purchase of US
goods like oil and natural gas and coal, the US trade deficit with India has substantially
reduced in 2017 and 2018.
"The reduction is estimated to be over USD 4 billion in 2018, with further reduction
expected in future years on account of factors like the growing demand for energy and
civilian aircraft in India," it said.
This reduction, it added, has happened in the face of a rising overall US trade deficit,
including with some other major economies.
"India is also a thriving market for US services and e-commerce companies like Amazon,
Uber, Google and Facebook with billions of dollars of revenue," it said.
Home
Govt promised to lower corporate tax as GST mop-up rises: FICCI
(Source: Business Standard, March 05, 2019)
The Government in the next budget of 2018-19 extended the reduced tax rate of 25 per
cent to companies with turnover of up to Rs 250 crore
The Government has promised to lower corporate tax rate to 25 per cent for all companies
once Goods and Services Tax (GST) mop-up improves, FICCI President Sandip Somany
said Tuesday.
Speaking to reporters after meeting Finance Minister Arun Jaitley, Somany said the
discussions revolved around a wide range of issues, including taxation, job creation and
boosting industrial output.
“He (Jaitley) has promised that as the revenue collections from GST go up over a period
of time, he will rationalise the taxes for the rest of the corporate sector over the next few
years,” Somany said.
In 2015-16 budget, the Government had announced that the corporate tax rate would be
gradually lowered to 25 per cent from 30 per cent over the next four years and exemptions
available to companies would be phased out.
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10 CITI-NEWS LETTER
In the budget 2017, the Government had reduced corporate tax rate to 25 per cent for
companies whose turnover was less than Rs 50 crore in financial year 2015-16. This
benefitted 96 per cent of the total companies filing tax returns.
The Government in the next budget of 2018-19 extended the reduced tax rate of 25 per
cent to companies with turnover of up to Rs 250 crore, a move which benefited the micro,
small and medium enterprises. After this, out of about 7 lakh companies filing returns,
about 7,000 companies which file returns of income and whose turnover is above Rs 250
crores remains in 30 per cent slab.
With regard to United States (US) decision to withdraw duty benefits on Indian products
under the Generalized System of Preferences (GSP) programme, Somany said it will make
Indian industry less competitive.
“I’m sure the Government will take appropriate action and there will be dialogue between
the two governments to make sure that this is not withdrawn in case of India,” Somany
added.
US President Donald Trump has said he intends to end the preferential trade status
granted to India and Turkey, asserting that New Delhi has failed to assure America of
“equitable and reasonable” access to its markets, an announcement that could be seen as
a major setback to bilateral trade ties.
Home
AEPC to take up the duty withdrawal benefit under GSP with Commerce
ministry
(Source: L N Revathy, The Hindu Businessline, March 05, 2019)
Our Coimbatore Bureau adds: While withdrawal of duty benefit on Indian products
under GSP (Generalised System of Preference) by the US will not have a big impact on the
ready-made garment (RMG) category, it will erode the trade, said Vice-Chairman of the
Apparel Export Promotion Council, A Sakthivel.
The Council plans to take up the issue with the Ministry of Commerce to continue to
provide the US GSP benefits to India, Sakthivel said adding that the trade would be
impacted to the extent of $17 million as the product cost for the buyer will increase by 7
per cent, given that China is the main competitor in these categories.
With the loss of trade, proportionate loss of employment cannot be ruled out as these
products are manufactured by SMEs.
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He further explained that there were 15 products under HSN 61 and 62 in RMG category,
and these contributed to imports worth $17.97 million from India.
The MFN tariff on the 15 products varied from 0.86 per cent to 14.60 per cent, on which
India got duty access with 100 per cent Margin of Preference.
(It may be noted that these 15 products contribute to less than 0.5 per cent of India’s
apparel exports.
On the basis of current trade with the US, AEPC has figured that 11 products would have
negligible impact on the country’s apparel exports to the US.
The impact would be high on women and girls dresses (not knitted or crocheted),
containing 70 per cent or more by weight of silk or silk waste. “This therefore should be
retained,” the AEPC Vice Chairman said, citing some more products such as gloves,
mittens for sports use (including ski and snow mobile gloves) of synthetic fibre, shawls,
scarves, mufflers, mantillas, veils - containing 70 per cent or more of silk or silk waste,
where the impact could be moderate and hence be considered to retain.
Home
US to withdraw duty benefits on $5.6 billion exports from India
(Source: Asit Ranjan Sinha, Live Mint, March 05, 2019)
The GSP programme allows duty-free entry of 1,784 products from India into the
US
Exporters of textiles, engineering, gems and jewellery and chemical products
benefit the most from this programme
The US has decided to withdraw duty benefits on $5.6 billion worth of exports from India
by May this year, blaming the trade barriers created by the Indian government, after
negotiations for a trade package fell through.
The GSP programme allows duty-free entry of 1,784 products from India into the US,
benefitting exporters of textiles, engineering, gems and jewellery and chemical products.
"India has implemented a wide array of trade barriers that create serious negative effects
on United States commerce. Despite intensive engagement, India has failed to take the
necessary steps to meet the GSP criterion," the office of the United States Trade
Representative said in a statement late on Monday.
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US commerce secretary Wilbur Ross recently raised concerns regarding new trade
barriers created by India, hinting at the stringent e-commerce rules that affected US
companies such as Amazon and Walmart-owned Flipkart.
In a hurriedly called press briefing, India's Commerce secretary Anup Wadhawan said
disproportionate demands from the US led to the collapse of talks even though India was
ready for greater market access in agricultural products to the US.
In April last year, the USTR announced that it was reviewing the GSP eligibility of India,
after the US dairy industry and the US medical devices industry requested a review of
India’s GSP benefits, given India’s alleged trade barriers affecting US exports in these
sectors. Total US imports under GSP in 2017 was $21.2 billion, of which India was the
biggest beneficiary with $5.6 billion, followed by Thailand ($4.2 billion) and Brazil ($2.5
billion).
Home
Why markets should pay attention to the latest India-US trade spat
(Source: Harsha Jethmalani, Mobis Philipose, The Live Mint, March 06, 2019)
There is a trade conflict brewing between India and the US. But it did not seem to matter
for India’s financial markets; both the rupee and the stock markets rallied on Tuesday. Of
course, the financial markets aren’t always the best barometer to assess the impact of
policy decisions, especially those with long-term implications.
The Indian government, too, has played down the impact of the US move to withdraw
duty benefits on Indian products under the Generalized System of Preferences (GSP)
scheme. But experts disagreed.
“According to some media reports, the government is saying there will be a minimal
impact of about $190 million. It looks like they are downplaying the issue. We don’t know
the basis of this calculation. Since the US is a key export market for India, any impact is
sure to have adverse implications, especially on small firms," said Biswajit Dhar, professor
of economics at Jawaharlal Nehru University, Delhi (JNU).
To be sure, the macro impact of this development cannot be ignored. At a time
when India’s export growth remains sluggish, and trade deficit remains a concern, any
impact on exports can only worsen the scenario.
It could also translate into loss of employment, since the predominant share of exports
under the GSP scheme is from small and medium enterprises, which are typically labour-
intensive. An Indian government official had said at a US government hearing that “the
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13 CITI-NEWS LETTER
predominant share of GSP beneficiary items exported from India are intermediaries and
semi-manufactured goods".
As far as the impact on overall exports go, it may be fair to conclude that the loss may not
be very high. After all, total exports of around $5.6 billion under the GSP scheme
amounted to around 12% of total exports to the US in 2017, and a far smaller proportion
compared to India’s total exports.
But even if there is a $1-2 billion impact as a result of the withdrawal of GSP scheme, the
eventual impact on the country’s balance of payments will be greater, said the head of
research at a multinational brokerage firm, requesting anonymity. The gap would need to
be made up through higher capital flows, increasing other exports or by reducing imports,
none of which can be taken as a given.
As the chart above shows, India’s trade relations with the UShave only grown in size over
the years. But recent developments could mean a reversal in trend. The withdrawal of the
GSP scheme for Indian companies comes on the back of far greater restrictions on visa
issuances for Indian firms under the Donald Trump administration. While Indian IT
companies have adapted by increasing local hiring, this comes at the cost of lower
margins. “Visa issuances are at about a fifth of what they used to be a few years ago," said
an analyst at a multinational brokerage firm.
Coming back to the trade spat, it must be noted that India had challenged a similar move
by the European Union (EU). “In 2002, EU rewrote their GSP preferences that
discriminated against India. One of the sectors that got severely hit was textiles and
clothing. India had then approached the Dispute Settlement Body of the WTO (World
Trade Organization) contesting the case of discrimination against us, which was a
violation of GSP rules. And considering the slowdown in the global economy, it will be
challenging for Indian exporters to compensate for the potential losses in the US," added
Dhar.
India has had a part to play in the strained trade relations as well, point out analysts, with
its new restrictions in the e-commerce space, which have curtailed activities of US
companies such as Walmart Inc. and Amazon.com Inc.
Indeed, the US review of GSP preferences for India was conducted after complaints by a
body of US dairy product makers and a medical devices manufacturer, both of whom said
that the country hasn’t reciprocated, and has instead created barriers for entry in these
segments.
But the blanket removal of the GSP scheme for India means that about 1,900 products
exported by the country to the US will be hit. “Popular items that India exports to the US
under the GSP programme includes many intermediary products such as mechanical
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spare parts, ferro alloys, food products, gems and jewellery, textile products, electronic
products like motors, wires etc.," said Rahul Khurana, associate partner at Economic
Laws Practice, a law firm.
Interestingly, one of the reasons the financial markets are doing well lately is the prospect
of an end to the US-China trade war. While that would be an event to celebrate, the trade
tension between the US and India clearly does not bode well.
Home
State unveils new industrial policy
(Source: Sharad Vyas, The Hindu, March 05, 2019)
Aims to attract investments of over ₹10 lakh crore, create 40 lakh jobs by 2023-24
Maharashtra’s new Industrial Policy aims to promote a walk-to-work culture to enhance
productivity for the urban working class. The Industrial Policy 2019, approved by State
Cabinet on Tuesday promises additional floor space index (FSI) to industries opting to
construct residential complexes for the workforce on the same land, thereby making it
easy to walk to work.
Unveiled by Chief Minister Devendra Fadnavis and Shiv Sena chief Uddhav Thackeray
days before the code of conduct for the Lok Sabha polls kicks in, the policy comes into
effect from April 1. It aims to attract investments of over ₹10 lakh crore and creating
around 40 lakh jobs by 2023-24, Minister for Industries and Mining Subhash Desai said
while reiterating the goal to turn Maharastra into a trillion dollar (₹1 lakh crore)
economy.
“The focus of this policy is creation of jobs, it is not the capital but the prospect and
promise of 40 lakh jobs that will be the success story. Maharashtra is where you can have
both consumption and growth, while the massive plus factor is the ease of doing business
growth, which draws industries,” said Piruz Khambatta, chairman of the Confederation
of Indian Industry, Western Region.
The policy offers special incentives for underdeveloped areas — Vidarbha, Marathwada
and Naxal-affected zones. It gives special emphasis to emerging technologies and other
vital ‘thrust areas’. “The aim of the policy is to create a conducive business environment
while promoting micro, small and medium enterprises (MSMEs) through public funding,
fiscal incentives, cluster promotions and institutional support. During the last four years,
Maharashtra’s growth has been spectacular. I want to tell investors to come invest in
Maharashtra and that it will give you most returns in the future,” Mr. Desai said.
The thrust areas the policy identifies are defence and aerospace, bio-tech, medical
equipments, information technology, textile machinery and electric vehicles.
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The policy also offers incentives for futuristic technologies like Industries 4.0 and
startups.
“The objective is to give priority in land development to MSMEs, women entrepreneurs
and ST/SC entrepreneurs,” the new policy documents stated. Among the key highlights
of the policy are promotions of MSMEs, new Chief Minister Employment Programme,
incentive for large and mega projects, creation of land bank, a critical infrastructure fund
of ₹1,000 crore, creation of commerce and trade councils, and additional incentives for
agro and food processing industries.
Home
Time for export push
(Source: Sitharam Gurumurthi, The Hindu Business Line, March 05, 2019)
India must capitalise on US-China trade war
On February 21, the US and China resumed high-level talks in Washington DC to resolve
the long-pending frictions in bilateral trade. The message from US President Donald
Trump to China was loud and clear: if the matter was not resolved by March 2, the US
would impose taxes on $200 billion worth of Chinese goods. The very next day, a
triumphant Trump announced, “We are making a lot of progress, I think there is a very
good chance that a deal can be made.”
The magnitude of the trade war between China and the US could be appreciated from the
following figures: in the first 11 months of 2018, exports from the US to China were only
$111.16 billion while Chinese exports to the US amounted to $493.49 billion. Trump’s
prescription to resolve the trade war is simple: China should restrict its exports to the US
to the same level as its imports from the US.
Earlier, Trump had imposed tariffs on Chinese goods worth hundreds of billions of dollars
to which China retaliated by imposing tariffs on $110 billion of imports from the US, soya
beans in particular.
Mounting pressure
In fact, none of the former Presidents — from George HW Bush and Bill Clinton to George
W Bush and Barack Obama — was able to resolve the matter. During his election
campaign, Trump had promised to fix “China’s long-time abuse of the broken
international system and unfair practices.” Trump had even branded China as “the grand
champion of currency manipulation.”
In August 2017, the US instituted a formal investigation into attacks on its intellectual
property. For the US alone, the losses amounted to up to $600 billion a year. At the same
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16 CITI-NEWS LETTER
time, China had a trade surplus of $323 billion. In a nutshell, the US-China trade war is
focussed on intellectual property in China, especially technology.
Trump has offered a three-point solution to China: protection of intellectual property;
outlawing of forced technology; and cessation of illegal, market-distorting industry
subsidies.
While China has refuted all charges, none can deny that several years of intellectual
property theft and forced technology transfers were responsible for the rapid economic
and industrial development of China.
In all likelihood, the ongoing trade talks will culminate in a deal between the Chinese
President Xi Jinping and Trump next month at Florida. Reduction of bilateral trade
surplus between China and the US is bound to be one of the key elements of the proposed
settlement. Once the deal comes through, there is bound to be a substantial reduction of
exports from China to the US from the current $493 billion; Trump will like to peg it at
$110 billion.
Such a reduction in imports from China has to be made good by imports from other
countries. Some analysts suggest that India’s exports to the US market will increase when
China loses out. Apart from manufactured goods, the US also imports food-related items
on a very large scale from China.
The US curbs on these Chinese items should throw up a huge opportunity for Indian
exporters. But it is not going to be a cake walk.
The Commerce Ministry has to act swiftly and play a lead role. All the export houses have
to work overtime to explore every possibility to promote Indian exports to the US, which
thus far have been muted mainly on account unfair trade practices and currency
manipulation by China.
The author is a former Staff Member of the IMF.
Home
Chinese invasion of Indian industry
(Source: Paran Balakrishnan, The Hindu Business Line, March 05, 2019)
Chinese investments in electronics, home-appliance, automobile and tech sectors are
rising like never before
It’s been a huge coup for Andhra Pradesh Chief Minister N Chandrababu Naidu. Chinese
firm TCL, which is looking to expand its presence in the Indian market hugely, has
selected Naidu’s showpiece electronics hub at Tirupati to make a ₹2,200-crore
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investment in two plants that will turn out mobile phones and television screens. TCL
grew 120 per cent in the last year and has major plans for the Indian market.
Cut to Delhi where Taiwanese company KYMCO has just picked up an undisclosed stake
in an ambitious electric two-wheeler start-up Twenty Two Motors. KYMCO brings with it
a new, lightweight 5 kg battery that can be swapped quickly. Twenty Two is now looking
at setting up charging infrastructure at 2-km intervals in six Indian cities where vehicle-
owners can stop and change these lightweight batteries. Strictly speaking, KYMCO isn’t a
Chinese company but the investment in India has come from its Hangzhou-based fund.
Says Parveen Kharb, Twenty Two’s co-founder: “India’s the fastest-growing market in the
world for two-wheelers so they saw it as a very attractive place to be.”
Muscling their way
The Chinese have been muscling their way into the Indian business arena for some time.
But now the scale of the invasion is changing. Already India’s largest trading partner,
China’s now a fast-growing source of foreign direct investment. The Chinese are
dominating industries like mobile phones and are about to grab the lion’s share of the
television and home-appliances industries.
These are companies like Haier, TCL and Midea Group, which are Chinese but sell
Toshiba-branded products, drawn by the fact India is the last major market where the
population is still growing and vast swathes of consumers haven’t got basics like
smartphones, fridges and kitchen ranges.
Haier is investing over ₹3,000 crore to build a new plant in Greater Noida that will make
two million refrigerators and a million each of washing machines, air-conditioners and
televisions. Midea, too, announced in November it’s investing some ₹1,300 crore to make
air-conditioners in partnership with Carrier and a range of other household appliances.
Earlier, in 2017, the Midea Group invested ₹800 crore in a new plant in Pune.
In considering these huge numbers, here’s something more to ponder: this may only be
the first wave of the Chinese invasion of Indian industry.
Over the last one year, China’s top businesses have seen their well-laid plans being tossed
for a six by Donald Trump’s maverick anti-trade moves. The jarring jolts have forced a
number of them to relook their blueprints for the future.
Many are convinced even if the trade war ends, the Western world — both the US and
Europe — will still be determined to put roadblocks in their way. Says Santosh Pai,
Partner, Link Legal India Law Services which helps Chinese investors enter India’s
market: “Companies sitting on the fence said we have to move quickly. As the trade war
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18 CITI-NEWS LETTER
dragged on, Chinese companies which hadn’t considered India decided to start factories
here.” Pai is also a member of CII’s core group on China.
The new Chinese interest in India is visible in places like Sri City, Andhra Pradesh, where
two Chinese industrial products companies have recently signed to open plants. Last
month, a 20-member Chinese delegation from electronics firms visited Sri City to check
out the possibility of investing there. Also, the township is in contact with 10-15 major
Chinese conglomerates that are showing interest in making large investments.
One player already entrenched in the Indian market is Xiaomi, which after slightly less
than five years here, boasts revenues of ₹23,000 crore and is the leader in mobile phones
with a 29 per cent market-share.
Xiaomi's revenue grew by around 150 per cent last year and it has also captured a large
share of the television industry by slashing prices on what it says are quality products.
Now, Xiaomi has entered multiple new segments like powerbanks in which it’s again the
market leader. Other newer products include a range of smart devices, including air-
purifiers, soundbars for televisions and accessories that connect to smartphones like
bluetooth headphones.
Overcoming reservations
Indians, in earlier years, had reservations about Chinese brands but that seems to have
been overcome by the new wave of products from companies like Xiaomi, TCL and Haier.
In the auto industry, though, it’s a different story. Companies like Shanghai-based SAIC
Motor are using the MG (Morris Garage) badge to overcome customer reservations.
The company’s ads stress the MG name and its vintage British heritage. Similarly, the
company that makes Volvo vehicles that sell in India is owned by Hangzhou-based
Zhejiang Geely. Again, the company globally stresses its original Swedish parentage.
One automobile company that’s happy to come to India using its own distinctly Chinese
brand name is bus company BYD Auto Industry, the world’s largest electric vehicle
company in partnership with a local company. It has already won contracts in several
cities for its electric buses. Crucially, but unsurprisingly, the three automobile companies
have brought also a large clutch of Chinese automobile component companies.
Still, coming into India under cover of a Swedish or Japanese brand name, is a ploy that
many Chinese companies are using successfully.
Take a look at Miniso, a Chinese retail chain that uses the name of a Japanese retailer that
it bought some years ago. Miniso is in the fast-track when it comes to growth and has
established its popularity with youngsters who are attracted by its products that offer a
combination of good quality at affordable prices.
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19 CITI-NEWS LETTER
When it comes to manufacturing, the Chinese may still have reservations about
inefficiencies of the Indian market. But tech companies have no such issues. It’s reckoned
Chinese tech companies and funds have taken big bets and invested about $3 billion in
India in 2018.
There are highly publicised investments like Alibaba’s several round of financing Paytm.
Similarly, travel portal C-Trip took a key stake in MakeMyTrip.
More recently, Alicloud is building its second cloud-storage centre in India. At a different
level, ShareChat has large investments from Xiaomi Singapore and Shunwei Capital. In
fact, the Chinese have invested in almost every large Indian tech start-up, including big
names like Zomato and Swiggy. And, in the last one year, 44 Chinese apps have made it
to the top 100 most downloaded apps in the country.
China’s long been cast as the “factory of the world.” But it seems as Western markets’
appeal diminishes, India — despite the traditional friction between the neighbours — is
looking like an ever-smarter investment option to Chinese players. Call it win-win.
Home
EEPC event to showcase India as manufacturing, tech hub
(Source: The Hindu Business Line, March 05, 2019)
Trade and investment promotion council EEPC India has been actively working on
creating the right ecosystem in the area of Industry 4.0 for the benefit of SMEs, said the
council’s Senior Vice-Chairman Mahesh K Desai.
“At EEPC we have been working on Industry 4.0 for last two years. Industry 4.0 is our top
most agenda and we have been working on helping the SMEs to equip themselves and
overcome the challenges in terms of technology upgradation. Simultaneously, we are also
focussing on skill development in order to have the right ecosystem,” he said while
announcing the details about the 8th edition of EEPC India’s International Engineering
Sourcing Show (IESS).
IESS will be held in Chennai during March 14-16 with the theme – Smart Engineering –
to showcase India as a global hub for manufacturing and technology.
This time Malaysia is participating in a big way as a partner country and is keen on
working with India to take Indian expertise in Industry 4.0 for adoption in its country.
Malaysia is looking for a value generation of about $50 million from IESS 2019 and has
identified two core areas for long term sustainable interest – automobile and auto
components and ICT part of India where Malaysia feels India could be a big brother in
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20 CITI-NEWS LETTER
teaching the new technologies, said Sooraj Dhawan of Falcon Capital Advisors, which is
advising MARii (Malaysia Automotive Robotics and IoT Institute).
C H Nadiger, Regional Director, EEPC India, explained that the primary objective of the
IESS is to reduce dependence on traditional markets in exports. “About 72 per cent of our
exports are accounted by just 25 countries in the world. We want to expand our export
base. Of course, we are providing a platform for Indian engineering industry to target the
domestic market also as a derisking strategy,” he added.
Elaborating on the outcomes of IESS, he said the interaction and the follow-up deals could
result in business traction worth ₹500-600 crore in the following couple of years.
IESS 2019 will have about 400 exhibitors, of which 130 will be from Tamil Nadu. Five
countries – Malaysia, Belgium, Hong Kong, Ukraine and Czech Republic — will be partner
countries. More than 400 overseas delegates are expected to participate in the event.
Home
Tamil Nadu plastic ban: How cotton and jute bags are picking up
(Source: The Hindu, March 05, 2019)
Cotton and jute bags are becoming popular as Tamil Nadu says ‘no’ to plastic
The ban on single-use disposable plastic products in Tamil Nadu has led to a new ‘cloth
wave’ in the State. Vendors are asking customers, ‘do you have a bag or would you like to
buy one?’ It’s a question that has spawned a thousand reactions.
As bag-stitching workshops are held in cities like Tiruchi and women’s self-help groups
in villages like Thottiyam get mobilised into contractual production, textile
manufacturers in hubs like Karur and Madurai are repurposing their inventory to include
cotton and jute shopping totes. For agencies involved in social enterprise, the resurgent
interest in natural fibre products is an impetus to change the mindset from ‘use-and-
throw’ to ‘mend-and-reuse’.
But how easy is it to produce the bags and how do they compare with their plastic
counterparts? “Price-wise, plastic is always cheaper, say only 50 paise to ₹1 per bag. A
small cloth manjappai (yellow cotton bag traditionally used in South India) costs ₹15-
18,” says N Babu, of SN Rao and Sons, Chennai. The family-run business has been dealing
in bags made of cloth, paper and plastic for the past four decades. “Because of its cost,
customers think twice about investing in cloth bags for bulk orders like weddings but,
with the ban on plastic, they have no other option,” he says. “We also stock biodegradable
plastic bags (made from bamboo fibre), but they have a shelf life of only six months and
are less sturdy than regular plastic. Customers aren’t interested in such experimental
ideas.”
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Tailoring boom
Home-based tailors (mostly women) are now making cotton bags for bigger
manufacturers at rates as low as one rupee apiece in places like Madurai and Karur.
S Parthasarathy of Sri Sai Garments in Karur supplies the ‘grey fabric’ or ‘gaada’ cloth to
companies that are capitalising on the bag boom in Tamil Nadu. “If customers are getting
a cloth bag for ₹10-15, it is usually because the trader may be reselling export
surplus/reject stocks sourced from cities like Karur or Coimbatore. Otherwise an export-
quality bag will cost ₹150 or more,” he says.
The other way to reduce prices would be for manufacturers to use leftover fabric from
other orders to make bags, a method many apparel manufacturers in Karur are adopting,
he says. With direct and indirect home linen exports earning close to ₹6,000 crore in
foreign exchange, Karur’s manufacturers cater to big name clients like Walmart, Ikea,
Carrefour and JC Penney in the West. Automatic looms in neighbouring towns like Erode,
Namakkal, Tiruchengode and Rasipuram take care of the weaving for many Karur
companies.
“A minimum of 5 lakh cotton bags are being produced per month for domestic
consumption, but this doesn’t meet the current demand,” says Parthasarathy. “We are
expecting the plastic ban to create a fresh market for fabric bags within Tamil Nadu.”
The shift towards cloth bags is not limited to cotton; jute is another natural fibre with
potential. “As the cotton market gets saturated, more people are opting to use jute, not
just for bags, but also for decorative items and home furnishing,” says T Ayyappan, deputy
director, National Jute Board, Chennai.
A natural fibre produced from Corchorus grass, jute sourced from Andhra Pradesh and
West Bengal is being used by numerous small-medium business ventures in India. “Jute
can be used not only to make gunny sacks, but also to stitch bags. The thread can be used
to crochet handicraft items. Anyone with an industrial sewing machine (worth ₹15,000)
can start a unit to produce jute bags. The NJB also offers 50% subsidy for manufacturers
participating in foreign trade fairs,” says Ayyappan.
Not just a replacement
The market for cloth-based products has diversified into lifestyle sectors like wedding
favour bags, women’s sanitary pad packaging, and even stationery. But it would be
pointless if cheap cloth bags are simply used as a replacement for plastic, says Krishnan
Subramanian who runs the Madurai-based social enterprise The Yellow Bag specialising
in cotton carriers.
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“Banning plastics has not really changed the people’s mindset towards more eco-friendly
products,” he says. “Each cloth bag has consumed energy in terms of electricity, growing
the crop and so on, which shouldn’t be just thrown away. Bags should be made in a quality
that will last for a year or so. Resources — whether paper, cotton or plastic — are scarce.
How we use the products is critical,” he says.
Home
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GLOBAL:
EU to enact new controls to screen FDIs
(Source: Business Standard, March 05, 2019)
The European Union (EU) has decided to formulate and enact a new set of controls to
better scrutinise direct investments coming into the bloc from third countries on the
grounds of security or public order, the EU council said in a statement, here on Tuesday.
This was the first time the EU had decided to furnish itself with a comprehensive set of
rules, while its major trading partners had already similar controls in place, the council
added, reported Efe news.
"The new rules on screening of investments will ensure that openness goes hand in hand
with sensible protection of our strategic assets," said Stefan-Radu Oprea, Minister for
Business Environment, Trade and Entrepreneurship of Romania and President of the
council.
The council said regulations would establish a solid and stable framework for the
screening of foreign direct investments (FDIs) into the EU. Internal negotiations on the
subject were concluded on November 20, 2018.
The framework for rules should allow for coordinated methods of being able to scrutinise
inward investment at a community level.
The objective of all this was to be able to avoid investments from countries, such as China,
which could possibly pose a threat to security or public order within the community, one
of the most open in the world, the statement said.
Part of the new screening device would include a cooperation mechanism where member
states and the commission would be able to exchange information and raise specific
concerns over investments.
Member states will nevertheless retain the ability to review and potentially bar FDI on
security and public order grounds.
The decision to set up and maintain national screening mechanisms will also remain in
the hands of individual member states, the statement said.
The commission will be authorised to issue opinions in cases concerning several member
states, or when investments could affect a project or program of interest to the EU as a
whole, such as Horizon 2020 or Galileo.
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The new regulations are set to be published on March 21, the council said and added they
would come into force 20 days later. "The EU is and will remain one of the world's most
open places to invest in," Oprea said.
Home
FOBAP urges Manila for tax incentives for garments sector
(Source: Fibre2Fashion, February 27, 2019)
The Philippine Government must guarantee much-needed tax incentives for investors
who are willing to risk capital in revival efforts if it wants to revive the domestic apparel
industry, it, according to the Foreign Buyers Association of the Philippines (FOBAP),
which said revival efforts will only succeed if existing tax perks are retained.
Such perks include the 5-per cent tax on gross income paid by economic zone firms in lieu
of all local and national taxes.
Incentives will be overhauled under the proposed Tax Reform for Attracting Better and
High-Quality Opportunities bill, also known as the Trabaho bill, FOBAP president Robert
M Young said.
The Trabaho bill will gradually reduce corporate income tax to 20 per cent in 2029 from
30 per cent now and rationalize incentives. The measure is awaiting the approval of
senators, who are currently on a break for the mid-term polls in May.
The country’s garments industry will benefit if the government grant subsidies for power
and labour, a report in a business daily in the country quoted FOBAP director Ding
Buendia as saying.
He said a couple of Chinese firms are now looking into setting up factories here, while
some are planning to partner with Philippine companies.
The government has to revitalize the garments industry if it wants to trim the
country’s trade gap and penetrate more markets, particularly in its Southeast Asian
neighbourhood, Young added.
Home
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UNECE stresses transparency for garment/footwear sector
(Source: Fibre2Fashion, March 05, 2019)
UNECE, along with the ITC, the European Commission, ILO and partners from the
private sector, civil society and academia, is charting out a Decent Work and
Transparency and Traceability Tool, to help the garment sector make risk-informed
decisions and operate along a set of internationally agreed practices, increasing
transparency vis a vis final consumers.
This will include a policy recommendation, to enable governments to advance the
necessary policy approaches, and a comprehensive Technical Global Standard for the
Traceability of Sustainable Value Chains in the sector, covering the entire life-cycle of
products. The move is in view of an analysis presented at the OECD Due Diligence Forum,
held during February 12 to 14 in Paris and attended by about 600 policy makers and
experts of the sector, by UNECE. The analysis was conducted through targeted interviews
and field visits, and a detailed survey, involving more than 100 companies from all over
the world, from raw material producers to large brands and retailers.
According to the analysis, for more than 65 per cent of companies, traceability helps build
trust with consumers; develop more solid networks with clients and suppliers; and
identify opportunities for efficient and sustainable management of resources. And while
key challenges lie in the fragmentation of the value chain and data security, technological
advances (eg blockchain, bar codes, chips) can play an important role.
However, only 34 per cent of the companies have reported to have traceability systems in
place, and most of them can identify and track their immediate suppliers only. But
information is often lost about the suppliers of their suppliers – not to mention the third
and fourth levels of suppliers. The analysis also shows that a positive correlation between
traceability and transparency and sustainability, meaning that tracking and tracing the
value chain makes sustainability claims more credible.
When it comes to the key ingredients of a robust traceability system, companies (more
than 55 per cent) have indicated that data/information to be exchanged along the value
chain should include information on the countryof origin; features and properties and
processing step of raw material, products, parts and components; and compliance with
sustainability requirements.
The study also highlights the relevance of policy and legislation to enhance the visibility
along the value chain. Compliance with national, regional or international regulatory
requirements or guidance directives and common criteria to measure and benchmark
sustainability performance, coupled with effective auditing systems are a priority for
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26 CITI-NEWS LETTER
companies (75 per cent of respondents), which have also stressed the need for fiscal
incentives (64 per cent), support to research and development (54 per cent) and training
for skills development (61 per cent).
“Scientific findings and policy principles for due diligence and sustainability in the
industry are now widely agreed. It is time to implement and accelerate action,” stressed
OECD secretary general Angel Gurria at the OECD Forum. This project is about action
and builds on the UNECE and ITC vast experience and expertise in supporting policies,
regulations, standards and tools, which guide value chains towards more responsible
production and consumption patterns. The project, funded by the European Union, is to
be implemented over the period 2018 to 2021.
In September, last year, on the day of the opening of the Milano Fashion Week, the New
York Times published an investigation shedding a disturbing light on the practices of
several renowned clothing brands in South Italy. Finishing a luxury coat, sold for € 800-
2000, requires some 4-5 hours of highly-skilled work. But all too often, female workers
working at home earn a maximum of € 4-5 per hour paid in cash, without any regular
contract, insurance or pension contribution. The brands concerned declared that they
were in line with ethical sourcing practices, and that they sent regular inspections to their
sub-contractors.
This highlights a critical issue: complex and fragmented value chains make it extremely
difficult for brands and manufacturers to get the full story behind their goods, to identify
where exactly risks lie, and to respond to growing consumers’ and civil society’s demand
for attaining sustainability in the sector. Enhancing the traceability and transparency of
the value chain, has become a key priority for advancing sustainable production patterns,
advance a circular economy approach, and inform responsible consumption choices, in
line with the Sustainable Development Goal 12 of the UN 2030 Agenda. And in line with
the agenda for sustainable fashion, subscribed by the 100 major fashion brands at the
Copenhagen Fashion Summit, last year.
Home
US decision to remove Turkey from GSP contradicts $75B trade target
(Source: Daily Sabah, March 05, 2019)
In response to Washington's move to ‘graduate' Turkey from the generalized
preferential system program for trade, Ankara drew attention to the contradictory
nature of the decision, pointing to the recent mutual resolution to raise bilateral trade
to $75 billion
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27 CITI-NEWS LETTER
An increase of Turkey-U.S. trade volume, currently standing close to $21 billion, to $75
billion has been one of the most discussed topics in the recent phone calls between
President Recep Tayyip Erdoğan and U.S. President Donald Trump. In line with that
target, Turkish and American businesspeople have already begun working on plans for a
free trade agreement. While efforts continue in trying to accomplish this trade goal, U.S.
Trade Representative Robert Lighthizer announced on Monday that President Trump
intends to terminate Turkey's designation as a beneficiary developing country under the
Generalized System of Preferences (GSP) along with India, citing the countries'
economically developed status.
"An increase in Gross National Income (GNI) per capita, declining poverty rates and
export diversification, by trading partner and by sector, are evidence of Turkey's higher
level of economic development," the statement said. Trade Minister Ruhsar Pekcan
criticized the move on her official Twitter account and highlighted that removal of Turkey
from the GSP program is contradictory to the target of $75 billion in bilateral trade, a
mutually agreed goal. "We still would like to pursue our target of increasing our bilateral
trade with the U.S. who we see as our strategic partner, without losing any momentum,"
she said and added, "This decision will also create repercussions for small and medium-
sized enterprises [SMEs] in the U.S."
In August 2018 the U.S. started the process of reviewing Turkey's beneficiary status in the
GSP program, following Turkey's decision to increase tariffs on some U.S.-made products.
In August 2018 the U.S. Trade Representative's (USTR) office said the review could affect
$1.66 billion worth of Turkish imports into the U.S. that benefited from the GSP program
last year.
Removing Turkey from the program would not take effect for at least 60 days after
notifications to Congress and the Turkish government, and it will be enacted by a
presidential proclamation, the USTR said. Trump notified Congress in a letter on
Monday.
Trade Minister Pekcan explained that U.S. imports from Turkey within the framework of
the GSP program in the period of January-November 2018 totaled $1.74 billion,
accounting for 8.2 percent of the U.S.' total GSP imports recorded at $20.9 billion. The
leading GSP import categories were vehicles and vehicle parts, jewelry and precious
metals, and stone articles, the website said.
Minister Pekcan also stressed that the $1.74 billion GSP exports constitute only 19 percent
of Turkey's total exports to the U.S., recorded nearly at $9 billion last year. The
"graduation" of Turkey from the program – as the office of the U.S. Trade Representative
put it – means that Turkish exporters will have to pay an extra $63 million in import
tariffs. "These extra tariffs will also negatively impact American SMEs, as much as they
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28 CITI-NEWS LETTER
will affect Turkish exporters, because the quality of the Turkish products and their
competitive prices are globally recognized. We will continue to work raising exports to the
U.S." Pekcan said.
Home
Trade war a boon for Bangladesh: ADB
(Source: The Daily Sabah, March 05, 2019)
GDP will grow 0.19pc more and exports will rise by an additional $400m if trade war
escalates
Bangladesh's gross domestic product (GDP) will grow 0.19 percent more within the next
one or two years if the US-China trade war escalates further, the Asian Development
Bank's (ADB) chief economist said on Monday.
Moreover, the country will be able to make exports of an additional $400 million, said
Yasuyuki Sawada.
Bangladesh will receive a lot of work orders, mainly shifted from China—the largest
apparel supplier worldwide—because of the tariff war, he said.
Four countries will mainly benefit from the shifting of work orders and foreign direct
investment due to the trade war -- Vietnam, Cambodia, Thailand and Bangladesh, said
Sawada.
He was presenting a keynote at a seminar on “Impact of emerging international trade
relations on Bangladesh” at the Radisson hotel in Dhaka.
Economists from home and abroad, ADB high-ups and researchers attended the seminar
which had Commerce Minister Tipu Munshi as the chief guest.
“Garment, textile, IT and agricultural products seem to be exported more due to the trade
war...Gains from trade redirection are not automatic or assured. There is a need to
compete with others,” he said.
Also a higher domestic demand propelled Bangladesh's miraculous and extremely robust
economic growth, he said. At the end of the year, the GDP growth would hit 7.5 percent,
as was predicted in the first six months of this year, the economist said. However, the
prediction is a little bit lower than the 7.9 percent that the country experienced last year.
The US was supposed to implement its decision of imposing tariff rates ranging from 10
to 25 percent on $200 billion-worth Chinese goods from March 1.
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29 CITI-NEWS LETTER
“We do not know whether the US is going to impose 10 to 25 percent tariff rates on
another $200 billion or whether is it going for a withdrawal,” said Mustafizur Rahman,
distinguished fellow at the Centre for Policy Dialogue (CPD). “It depends on various
scenarios,” he said while discussing on Sawada's presentation.
The implications might worsen if the trade war escalates, Rahman said. The US has been
making the multilateral trading system of World Trade Organisation almost
dysfunctional, the CPD economist said.
The WTO would have been the best trade guard for Bangladesh as this organisation
practises the rule-based trading system, he said.
Rahman warned to be vigilant of the continuation of trade privileges when the United
Kingdom comes out of the European bloc as England is not only Bangladesh's third largest
export destination but also the hub for Bangladesh to reach other European countries.
Both the European Union and the United Kingdom promised to continue providing the
generalised system of preferences facility after Bangladesh graduated in status from least
developed to developing country, he said.
However, it is still a matter of concern how the “Rules of Origin” will be determined,
Rahman said.
Bangladesh needs more entrepreneurs for new job creation and to reduce income
inequality as the country is now on a development trajectory, he added.
“Investing in good infrastructure, providing good logistics and easy facilitation can help
develop an efficient global value chain, and thereby attract global companies to move their
production centres to Bangladesh,” said Manmohan Parkash, country director of ADB's
Bangladesh office.
“Bangladesh is benefitting from the trade war as we are receiving more work orders over
the last few months,” said Commerce Minister Tipu Munshi.
Mashiur Rahman, economic affairs adviser to the prime minister, said 35 percent of
Vietnam's exports were machinery while garments attributed to only about 6 to 7 percent.
The drivers were foreign direct investment with foreign management and foreign
expertise, the adviser said.
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30 CITI-NEWS LETTER
Pak-India trade is only $2 bn against $37 bn potential
(Source: Khalid Mustafa, The International News, March 06, 2019)
Trade between Pakistan and India has experienced many upheavals since partition of
Sub-Continent, and after lapse of almost 72 years; the trade between the two countries
hardly surpassed the figure of just over $2 billion knowing the fact that both the nuclear
states have the potential of annual trade of $37 billion between them, a top official at
commerce ministry told ‘The News’.
“Soon after the partition, in 1948-49, 23.6 percent of Pakistan’s global exports went to
India and 50.6 percent imports of Pakistan’s global imports came from India, but over
the years and decades on account of wars the trade between the states went down and
currently stands at just over $2 billion,” he said.
History shows, the official said, that first trade bickering between the two countries
started when Pakistan Finance Minister Ghulam Muhammad in October 1949 announced
to remove some articles imported from India from the exemption list for import duty and
in return Indian Commerce Minister KC Neogy told the Lok Sabha that India suspended
export of coal to Pakistan because Pakistan had deliberately detained enormous
quantities of jute purchases paid by Indian nationals. After 1965 war and then 1971 war,
bilateral trade tumbled to zero.
The official while quoting the World Bank report titled A Glass Half Full: The promise of
Regional Trade in South Asia, said that the current trade between the two nuclear states
is just $2 billion and it could touch the staggering figure of $37 billion if the trade barriers
are removed.
Prior to Pulwama incident the trade between the two neighbouring countries stood at $2.5
billion out of which imports from India were at $1.7 billion and exports from Pakistan
were at $350 million. Following war like situation, India imposed 200 percent customs
duty on Pakistani products virtually ending to tariff concessions under MFN status earlier
extended to Pakistan. The one sided imposition of 200 percent duty on Pakistani products
also ate up the tariff concessions earlier available under SAFTA (South Asia Free Trade
Agreement). Now Pakistan’s export to India is subject to lifting of 200 percent duty.
Soon after India imposed 200 percent duty on Pakistani products, the top authorities in
the Commerce Ministry had worked out tit-for-tat strategy. Under the strategy it was
proposed to place Indian 90 items in the negative list under which import from India will
immediately be curtailed by $500-600 million. Ministry also proposed to ban Indian
items worth $600 million being exported to Afghanistan under transit trade agreement.
But the top leadership did not accord approval to it.
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31 CITI-NEWS LETTER
However, both countries currently have no bilateral trade agreement, rather it was SAFTA
accord signed between SAARC countries and being WTO member, under which all
countries give MFN status to each other and under that status, India was giving to
Pakistan the tariff concession which it is giving to all trading countries. However, under
WTO regime, member countries can have bilateral agreement such as Preferential Trade
Agreement and Free Trade Agreement. The South Asian Free Trade Area (SAFTA) is an
agreement reached on January 6, 2004, at the in Islamabad and the said agreement came
into force on January 1, 2006 creating a free trade agreement of 1.6 billion people in
Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka (as of
2018, the combined population is 2.08 billion people, about 27% of the world's
population). India and Pakistan ratified the treaty in 2009, whereas Afghanistan as the
8th member state of the SAARC ratified the SAFTA protocol on 4 May 2011.
In case of Pakistan, India has withdrawn MFN status and tariff concessions under SAFTA
regime which is why export to India at the moment came to halt. Pakistan established the
negative list under which India cannot export 1209 items to Pakistan.
India granted MFN status to Pakistan in 1996, a year after the formation of WTO. But
India under Prime Minister Narendra Modi has withdrawn the MFN treatment to
Pakistan. Pakistan still hasn’t granted MFN status to India. Pakistan argues it has no
benefit of MFN status as NTBs are creating hurdles for smooth exports of Pakistani
products to Indian market.
The official said Pakistan switched over to Negative List regime for trade with Pakistan in
March 20, 2012 and to this effect an SRO (Statutory Regulatory Order) was issued under
which 1209 items were included in the Negative List (Over 500 of which were auto, iron
and steel products). Only 137 item were importable from India. Major items included in
the list of importable items are livestock, vegetables and newsprint in rolls or sheets.
For the manufacture of pharmaceutical products, the manufacturer also import raw
material (except basic manufactured locally) and packing material approved by the
Director General Health Government of Pakistan.
Pakistan, currently, trades with India under positive list regime and imports items
through other countries which increases the cost of the items in the local market. To a
question, official said that trade with India in negative list regime was allowed only to
protect our local industry and the phasing out of negative list had been linked with
removal of Non-Tariff Barriers (NTBs) by India ensuring the access of Pakistani products
in the Indian markets. The official said that neither India removed NTBs nor Pakistan
phased out Negative List. Pakistan is currently exporting 74 products to India. Pakistan
export in 2015-16 stood at $312.2 million, in 2016-17, exports were at $348 million and
in 2017-18 export were at $ 350 million. However, Pakistan imports 137 products through
wagha. The import from India remained in 2015-16 at $1.66 billion which slightly came
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32 CITI-NEWS LETTER
down to $1.64 in 2016-17 and slightly went up to $1.79 billion in 2017-18. Pakistan has a
list of 936 items and almost 17.9pc of tariff lines that apply to imports from all Safta
countries. India maintains a list of 25 items (0.5pc of tariff lines), which includes goods
such as alcohol, firearms, etc. However, it has a much longer, 64-item list, (almost 11.7pc
of tariff lines) for Pakistan and Sri Lanka, but which effectively applies only to Pakistan,
because India applies a smaller sensitive list to Sri Lanka as part of a separate India-Sri
Lanka Free Trade Agreement.
Items on the Indian sensitive list can be imported at the most-favoured-nation tariffs
from any Safta country, including Pakistan, because India accorded Pakistan the status in
1996, soon after the accession of the two countries to the World Trade Organisation.
However, Pakistan has not granted India the most-favoured-nation’s status or non-
discriminatory market access.
In addition, the preferential access granted by Pakistan on 82.1pc of tariff lines under
Safta is partially blocked in the case of India because Pakistan maintains a negative list
comprising 1,209 items that cannot be imported from India. In practice, many of these
items are exported from India to Pakistan through a third country, usually the United
Arab Emirates. Pakistan import from India cotton, organic chemicals, Plastics and
articles thereof, Machinery, mechanical appliances, nuclear reactors, boilers; parts
thereof, tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and
other colouring, Rubber and articles thereof, Oil seeds and oleaginous fruits;
miscellaneous grains, seeds and fruit; industrial or medicinal, Iron and steel, Ships, boats
and floating structures Miscellaneous chemical products, Man-made staple fibers.
Pharmaceutical products, Essential oils and resinoids; perfumery, cosmetic or toilet
preparations, Coffee, tea, maté and spices, Soap, organic surface-active agents, washing
preparations, lubricating preparations, artificial, Inorganic chemicals; organic or
inorganic compounds of precious metals, of rare-earth metals, Mineral fuels, mineral oils
and products of their distillation; bituminous substances; mineral, Animal or vegetable
fats and oils and their cleavage products; prepared edible fats; animal, Man-made
filaments; strip and the like of man-made textile materials, Edible vegetables and certain
roots and tubers, Electrical machinery and equipment and parts thereof; sound recorders
and reproducers, television, Aluminum and articles thereof, Wadding, felt and
nonwovens; special yarns; twine, cordage, ropes and cables and articles thereof, Edible
fruit and nuts; peel of citrus fruit or melons, Cereals, Special woven fabrics; tufted textile
fabrics; lace; tapestries; trimmings; embroidery, Miscellaneous manufactured articles,
Meat and edible meat offal, articles of stone, plaster, cement, asbestos, mica or similar
materials, Preparations of cereals, flour, starch or milk; pastry cooks products, Optical,
photographic, cinematographic, measuring, checking, precision, medical or surgical, Lac;
gums, resins and other vegetable saps and extracts, Natural or cultured pearls, precious
or semi-precious stones, precious metals, metals clad , Printed books, newspapers,
pictures and other products of the printing industry; manuscripts, Sugars and sugar
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33 CITI-NEWS LETTER
confectionery, Albuminoidal substances; modified starches; glues; enzymes, Fertilisers,
Preparations of vegetables, fruit, nuts or other parts of plants, Copper and articles thereof,
Knitted or crocheted fabrics, Miscellaneous edible preparations, Products of the milling
industry; malt; starches; inulin; wheat gluten, Other base metals; cermets; articles
thereof, Zinc and articles thereof, Salt; sulphur; earths and stone; plastering materials,
lime and cement, Raw hides and skins (other than furskins) and leather, Glass and
glassware, Ores, slag and ash, Articles of apparel and clothing accessories, not knitted or
crocheted, Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of
base metal, Dairy produce; birds' eggs; natural honey; edible products of animal origin,
not elsewhere , Impregnated, coated, covered or laminated textile fabrics; textile articles
of a kind suitable , Articles of iron or steel, Vegetable plaiting materials; vegetable
products not elsewhere specified or included, Articles of apparel and clothing accessories,
knitted or crocheted, Lead and articles thereof, Cocoa and cocoa preparations, Paper and
paperboard; articles of paper pulp, of paper or of paperboard, Miscellaneous articles of
base metal, Nickel and articles thereof, Vehicles other than railway or tramway rolling
stock, and parts and accessories thereof, Other made-up textile articles; sets; worn
clothing and worn textile articles; rags, Railway or tramway locomotives, rolling stock and
parts thereof; railway or tramway track fixtures , Residues and waste from the food
industries; prepared animal fodder, Wood and articles of wood; wood charcoal, Toys,
games and sports requisites; parts and accessories thereof, Ceramic products,
Commodities not elsewhere specified, Footwear, gaiters and the like; parts of such
articles, Preparations of meat, of fish or of crustaceans, molluscs or other aquatic
invertebrates, Wool, fine or coarse animal hair; horsehair yarn and woven fabric, Works
of art, collectors' pieces and antiques, Photographic or cinematographic goods, Headgear
and parts thereof, Cork and articles of cork, Clocks and watches and parts thereof, Other
vegetable textile fibers; paper yarn and woven fabrics of paper yarn, Products of animal
origin, not elsewhere specified or included, Aircraft, spacecraft, and parts thereof, Articles
of leather; saddlery and harness; travel goods, handbags and similar containers; articles,
Carpets and other textile floor coverings, Furniture; bedding, mattresses, mattress
supports, cushions and similar stuffed furnishings, Musical instruments; parts and
accessories of such articles, Beverages, spirits and vinegar, Silk, Tobacco and
manufactured tobacco substitutes.
However, Pakistan exports to India edible fruit and nuts; peel of citrus fruit or melons,
Salt; sulphur; earths and stone; plastering materials, lime and cement, Raw hides and
skins (other than furskins) and leather, Mineral fuels, mineral oils and products of their
distillation; bituminous substances; mineral, Optical, photographic, cinematographic,
measuring, checking, precision, medical or surgical, cotton, Iron and steel, copper and
articles thereof, Inorganic chemicals; organic or inorganic compounds of precious metals,
of rare-earth metals, sugars and sugar confectionery, fertilisers, ores, slag and ash, Oil
seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal,
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34 CITI-NEWS LETTER
glass and glassware, Rubber and articles thereof, wool, fine or coarse animal hair;
horsehair yarn and woven fabric, Tanning or dyeing extracts; tannins and their
derivatives; dyes, pigments and other colouring , Plastics and articles thereof, Articles of
apparel and clothing accessories, not knitted or crocheted, beverages, spirits and vinegar,
preparations of vegetables, fruit, nuts or other parts of plants, Lac; gums, resins and other
vegetable saps and extracts, Machinery, mechanical appliances, nuclear reactors, boilers;
parts thereof, coffee, tea, maté and spices, articles of apparel and clothing accessories,
knitted or crocheted, toys, games and sports requisites; parts and accessories thereof,
other made-up textile articles; sets; worn clothing and worn textile articles; rags, articles
of leather; saddlery and harness; travel goods, handbags and similar containers; articles,
Essential oils and resinoids; perfumery, cosmetic or toilet preparations, Knitted or
crocheted fabrics, Paper and paperboard; articles of paper pulp, of paper or of
paperboard, Wadding, felt and nonwovens; special yarns; twine, cordage, ropes and
cables and articles thereof, Tools, implements, cutlery, spoons and forks, of base metal;
parts thereof of base metal, Articles of stone, plaster, cement, asbestos, mica or similar
materials, Silk, Impregnated, coated, covered or laminated textile fabrics; textile articles
of a kind suitable, Articles of iron or steel, Man-made staple fibers, Natural or cultured
pearls, precious or semi-precious stones, precious metals, metals clad, Electrical
machinery and equipment and parts thereof; sound recorders and reproducers,
television, Fish and crustaceans, molluscs and other aquatic invertebrates, Residues and
waste from the food industries; prepared animal fodder, Printed books, newspapers,
pictures and other products of the printing industry; manuscripts, Lead and articles
thereof, Footwear, gaiters and the like; parts of such articles, Miscellaneous manufactured
articles, Edible vegetables and certain roots and tubers, Man-made filaments; strip and
the like of man-made textile materials, Organic chemicals, Preparations of cereals, flour,
starch or milk; pastry cooks' products, Carpets and other textile floor coverings. The past
trade history also unfolds that the economic managers of the both the states realized the
importance of the bilateral trade agreement and to this effect both the states inked an 11
months first ever bilateral trade agreement on August 5, 1952 which came into effect from
August 8, 1952 till June 30, 1953. Under which Pakistan was to import 26 commodities
from India, And India was to import 14 commodities from Pakistan. Mr M Karamatullah
signed the trade agreement on behalf of Pakistan whereas Mr Bhoothalingam on behalf
of India. Mr M Karamatullah was leader of Pakistan trade delegation who remained in
talks with India trade team headed by Mr Bhoothalingam.
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