Annexure India s FTA/PTA and RMG Trade with FTA/PTA Partners
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1 Annexure 1 1. India s FTA/PTA and RMG Trade with FTA/PTA Partners The size of India s clothing industry is estimated to be US$ 62 bn. in 2012 as per FICCI and Textile committee estimates including exports and domestic consumption. India has an overwhelming presence in textile and clothing industry starting from fibre to garments stage and the sector s importance in the economy can be seen from its contribution in GDP, Industrial Production, export earnings and employment generation. The sector contributes about 14% in industrial production of country, 5% share in GDP, 11% to the country s exports earnings and employs more than 6 million people directly in industrial jobs. In the last eight years, the sector has shown growth of almost 5%. In , after the end of quota regime the textile sector in India grew by 10%. In , the sector registered a growth of 5.7% owing to weak global demand. Thereafter the sector started recovering and registered positive growth in next two years due to stimulus provided to government of India. Through the growth of 7% in in highest in the last five years, however growth and share of cotton base apparels are coming down because of the slowing demand in global market of cotton base apparel products. Current FTA engagement gives only 7% value of India s total apparel export duty free access in global market while rest of the value remains dutiable which makes Indian products costlier when compared to China, Bangladesh and Vietnam which have more than 30% value duty free in the world market due to their LDC status and FTA engagement. Details of India s FTAs and PTAs already signed are given below A. FTAs already signed : Name of the Date of Signing of the 1 India - Sri Lanka FTA 28th December on SAFTA (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) 3 Revised of Cooperation between Government of India and Nepal to control unauthorized Date of Implementation of the March, th January, st January, 2006 (Tariff concessions implemented from 1 st July, 2006)
2 trade 4 India - Bhutan on Trade Commerce and Transit Renewed periodically, with mutually agreed modifications India - Thailand FTA - Early Harvest Scheme (EHS) 6 India - Singapore CECA 29th June, st August, India - ASEAN- CECA - Trade in Goods (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) 8 India - South Korea CEPA India - Japan CEPA India - Malaysia CECA Product coverage in terms of HS codes in the sector Under the clothing sectors HS 61&62 are covered which have around 34 categories at HS 4 digit, 249 product category at HS 6 digit and around 398 products categories at HS 8 digit followed in India. However, in case of India more than 90% exports are confined to 100 products at HS 6 digit. (List of the product category at HS 4, 6 and 8 digit are given in annexure 1). 1. India has proactively followed diversification policy by way of incentivizing the export to non-traditional market as well as actively engaging itself in the bilateral trade agreements. India so far has signed almost 15 pacts falling in the various categories of bilateral trade treaties like Free Trade s (FTA)/Preferential Trade s (PTA)/ Comprehensive Economic cooperation (CECA)/ Comprehensive Economic partnership CEPA. 2. Trade s Signed (FTA/CEPA/CECA) (10) Name of the Date of Signing of the 1 India - Sri Lanka FTA 28th December on SAFTA (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) Date of Implementation of the March, th January, st January, 2006 (Tariff concessions implemented from 1 st July, 2006)
3 3 Revised of Cooperation between Government of India and Nepal to control unauthorized trade 4 India - Bhutan on Trade Commerce and Transit Renewed periodically, with mutually agreed modifications India - Thailand FTA - Early Harvest Scheme (EHS) 6 India - Singapore CECA 29th June, st August, India - ASEAN- CECA - Trade in Goods (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) 8 India - South Korea CEPA India - Japan CEPA India - Malaysia CECA Source: MOC, PTAs already signed (5) Name of the 1 Asia Pacific Trade (APTA) (Bangladesh, China, India, Republic of Korea, Sri Lanka) 2 Global System of Trade Preferences (G S T P) (Algeria, Argentina, Bangladesh, Benin, Bolivia, Brazil, Cameroon, Chile, Colombia, Cuba, Democratic People's Republic of Korea, Ecuador, Egypt, Ghana, Guinea, Guyana, India, Indonesia, Iran, Iraq, Libya, Malaysia, Mexico, Morocco, Mozambique, Myanmar, Nicaragua, Nigeria, Pakistan, Peru, Philippines, Republic of Korea, Romania, Singapore, Sri Lanka, Sudan, Thailand, Trinidad and Tobago, Tunisia, Tanzania, Venezuela, Viet Nam, Yugoslavia, Zimbabwe) Date of Signing of the July, 1975 (revised signed on 2 nd November, 2005 April, 1988 Date of Implementation of the 1st November,1976 April, India - Afghanistan 6th March, 2003 May, 2003
4 4 India - MERCOSUR 25th January, June 1, India - Chile 8 th March, 2006 September, 2007 Source: MOC, Growth and Share of Garment Exports in India s FTA Partners Name of the Share in India s Garment Export to World in % 2013 CAGR in % before FTA Implementation CAGR in % After FTA Implementation 1 India - Sri Lanka FTA.4% 0% 1.2% 2 on SAFTA.7% 21.4% 24% (India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives) 3 Revised of.1% 14.6% 28.7% Cooperation between Government of India and Nepal to control unauthorized trade 4 India - Thailand FTA -.1% -10.5% 32.7% Early Harvest Scheme (EHS) 5 India - Singapore CECA.4% 6.6% 4% 6 India - ASEAN- CECA - 1.3% 7.3% 11.8% Trade in Goods (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) 7 India - South Korea.2% 19.1% 42.1% CEPA 8 India - Japan CEPA 1.4% 7.3% 7.9% 9 India - Malaysia CECA.7% 9.7% 36.3% Source: UN Comtrade, 2014 PTA Already Signed Growth and Share of Garment Exports in India s FTA Partners Name of the 1 Asia Pacific Trade (APTA) (Bangladesh, China, India, Share in India s Garment Export to World in % 2013 CAGR in % before FTA Implementation CAGR in % After FTA Implementation 1.2% 22.2% 15.5%
5 Republic of Korea, Sri Lanka) 2 Global System of Trade 7% 0% 14.4% Preferences (G S T P) (Algeria, Argentina, Bangladesh, Benin, Bolivia, Brazil, Cameroon, Chile, Colombia, Cuba, Democratic People's Republic of Korea, Ecuador, Egypt, Ghana, Guinea, Guyana, India, Indonesia, Iran, Iraq, Libya, Malaysia, Mexico, Morocco, Mozambique, Myanmar, Nicaragua, Nigeria, Pakistan, Peru, Philippines, Republic of Korea, Romania, Singapore, Sri Lanka, Sudan, Thailand, Trinidad and Tobago, Tunisia, Tanzania, Venezuela, Viet Nam, Yugoslavia, Zimbabwe) 3 India - Afghanistan.5% -66% 12.1% 4 India MERCOSUR (Brazil, 1.5% 12.4% 35.5% Argentina, Venezuela, Uruguay, Paraguay) 5 India - Chile.3% -9.2% 33.7% Source: UN Comtrade, It may be seen from above data analysis that India s clothing exports to the FTA countries/blocks have increased significantly after signing of the FTA/PTA agreements. These markets accounted for 12% share in India s clothing export to world and around 58% (of US$ 475 mn. in 2013) share in India s global clothing import. Except Singapore market all other markets have registered positive growth in trade of clothing. 5. All FTA partners, on the basis of all products account almost 30% share in global GDP, 47% of the global export and 41% of the global import, making them natural choice for economic tie up. Currently (2013) these countries/regions accounted for almost (US$ 182 bn. in 2013) 54% share in all commodity export of India to world and again 54% (US$ 252 bn. in 2013) share in all commodity import of India from world. 6. Indian textile and clothing sector has done spectacular performance not only by capturing the new markets but also by way of forex earning and have also helped in reducing global trade deficit of India in the last 3 to 5 years. India exported worth US$ 2 bn. clothing commodities to these markets out of total export of US$ 15.7 bn. (2013) and imported around US$ 275 mn. out of total US$ 475 mn. (2013) making them big and growing trade partner of India.
6 7. However, India s main export markets are EU and USA which accounts 64% share in India s total export to world which was around 90% during Indian exporters are unable to penetrate in to the US and EU markets which remained protective and are not willing to reduce the import tariff for Indian garment exporters. Moreover, global competitors like Bangladesh, Cambodia, Vietnam, Myanmar and Laos enjoy preferential market access in EU markets. On an average India faces 17% import duties on cotton garments and 29% on MMF garments in USA and 12% duties in EU market, making almost 64% India s RMG export by value in-competitive in these markets. There is tariff escalation in these markets as we move on the higher ladder of textile and clothing value chain e.g. EU imposes 4% import duties on yarn, 8% on fabric and 12% on clothing items making the RMG export from India more expensive than the other commodities of textiles. 3. Major Value Chains in the sector a. Customs duty structure of raw materials, intermediates and finished goods for the particular value chain Product Code Customs duty structure of raw materials, intermediates and finished goods for the particular value chain Product Label Equivalent ad valorem tariff applied by India for import from overseas markets '50 Silk Fibre, Yarn and fabric 13.1 '51 Wool, animal hair, horsehair yarn and fabric thereof 15.4 '52 Cotton Fibre, Yarn and fabric 19.5 '53 Vegetable textile fibres nes, paper yarn, woven fabric 9.1 '54 Manmade filaments Yarns 25.9 '55 Manmade staple fibres 19.6 '56 '58 '59 Wadding, felt, nonwovens, yarns, twine, cordage, etc Special woven or tufted fabric, lace, tapestry etc Impregnated, coated or laminated textile fabric '60 Knitted or crocheted fabric 10.8 Source: Trade Map, ITC,
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