FTA with EU and US to offset adverse effects of TPP on India textiles

Indian textile industry to touch its potential of $500 billion by 2025 from the current level of $110 billion, Assocham, industry body advocated signing of FTAs with European Union countries (EU) and entering agreement with the US to offset the negative impact from theTrans-Pacific Partnership (TPP) accord on textile exports.

The chamber has stated that the estimated $500 billion potential consists of domestic sales of $315 billion and exports of $185 billion.
India’s garment exports to the US accounts for 20-35 percent.

The chamber said that since India have not been able to complete the Doha Round of trade talks, textile industry is to face a duty of 15 to 30 percent in the developed markets of US and EU against the Least Developed (LD) countries like Bangladesh, Vietnam, Cambodia, Myanmar who are at zero duty. If Doha round would have been completed the duty would have been come down to single digit.

With the Trans-Pacific Partnership (TPP) between US, Japan, Canada, Chile, Vietnam, Malaysia, Singapore, Australia, Brunei, Mexico, New Zealand and Peru, concluded last week will cause trade diversions effects in some of the key sectors such as textiles and clothing industries for India.

First, TPP member countries will get preferential access in the US markets. Secondly, the ‘Yarn Forward Rule’ makes it mandatory to source inputs from any or a combination of TPP partner countries to avail duty preference. This would change the dynamics of the supply chain.