'Ink FTA with EU to offset adverse impact of TPP on textiles'

India should sign a free trade agreement with the European Union to offset the negative impact anticipated from the Trans-Pacific Partnership (TPP) accord on the country's textiles exports, Assocham said today.
In August, expressing disappointment and concern over the EU banning sale of around 700 pharma products clinically tested by GVK Biosciences, India has deferred the talks with the European Union on the proposed free trade agreement (FTA).
Pointing out that the textiles industry has the potential to touch USD 500 billion by 2025 from the current level of USD 100 billion, the industry body advocated signing of a free trade pact with European Union (EU) "before our industry becomes uncompetitive due to Trans-Pacific Partnership (TPP)".

The US, Japan and 10 other Pacific-Rim nations recently reached a final agreement on the largest regional trade accord in history dubbed as the Trans-Pacific Partnership (TPP) deal.
"The Trans-Pacific Partnership (TPP) between US, Japan, Canada, Chile, Vietnam, Malaysia, Singapore, Australia, Brunei, Mexico, New Zealand and Peru, which has been signed last week will cause trade diversions effects in some of the key sectors such as textiles and clothing industries for India," Assocham said.
In a note submitted to the government, the chamber has stated that the estimated USD 500 billion potential consists of domestic sales of USD 315 billion and exports of USD 185 billion.

"The domestic market has to grow at 16-17 per cent from the present USD 68 billion to around USD 315 billion. Currently, the total textile exports from India are around USD 40 billion," Assocham Secretary General D S Rawat said.

"Since we have not been able to complete the Doha Round of trade talks, our textiles industry is to face duty of 15-30 per cent in the developed markets of US and EU against the Least Developed (LD) countries like Bangladesh, Vietnam, Cambodia, Myanmar who are at zero duty," he added.
The US accounts for 20-35 per cent of India's ready-made garment exports and the TPP is going to affect India's textile sector in two ways: First, TPP member countries will get preferential access in the US markets as against Indian exporters. This would disadvantage India as US import duties on ready-made garments are high, the industry body noted.

Secondly, the Yarn Forward Rule -- a key feature of TPP -- makes it mandatory to source yarn, fabric and other inputs from any or a combination of TPP partner countries to avail duty preference. This would change the dynamics of the existing global supply chain in textile and clothing sector.
At present, India exports yarn and fabric to Vietnam, which then makes the textiles and exports to countries like the US. Now, because of yarn forward rule, they will be under pressure to develop local production.
While Vietnam will have zero-duty access to the US market for textiles, Indian players will have to pay higher duties, which will make India's textiles exports uncompetitive.

The India-EU trade talks, formally known as Broad-based Trade and Investment Agreement (BTIA), remain stuck as both sides are not satisfied with each other's offers.
The talks were launched in June, 2007 and have missed several deadlines.