In a meeting with the Commerce and Industry Ministry, textile manufacturers and exporters recently reiterated caution against opening up the domestic market for China under the proposed Regional Comprehensive Economic Partnership (RCEP) agreement. Sources present at the meeting said they pointed out added competition from Chinese cheaper goods may put pressure on domestic sales at a time international business has been under threat from Bangladesh and Vietnam. However, the government has assured them their interests will be protected.
RCEP is India’s most ambitious trade pact, currently under negotiation. Based on India’s existing free trade agreement (FTA) with the 10-nation Asean bloc, the RCEP will include all the nations with which the Asean has trade deals — New Zealand, Australia, China, India, Japan and South Korea. At the last such meeting on RCEP, the Confederation of Indian Textile Industry (CITI) had cautioned the government to tread carefully while ceding space to China in the global textiles and clothing (T&C) sector. Half of India’s T&C trade in RCEP is with China, with which it had a big trade deficit of almost $1 bn in 2018, it had said.
Export of readymade garments, in which India’s export competitiveness has fallen over the past fiscal year, contracted by 2.44 per cent in August. The sector had shown signs of steady recovery in July with 7.66 per cent growth, after months of continuous contraction. However, CITI said that while the ongoing US-China trade war presents an opportunity to Indian textile manufacturers to enhance their exports to the US, China too would be looking for new markets for its products.
This is true for the fabrics sector, which has seen a division in opinion on RCEP. China, South Korea and major Asean markets may become large destinations for fabric industry. “The RCEP accounts for nearly 30 percent ($50 bn.) of global trade in Man-made fibre textiles and this share is growing rapidly. The shifting of production of textile products from the west to the east is increasing both intra and inter-national textiles trade in this region,” the Synthetics and Rayon Textiles Export Promotion Council said.
“We have suggested some caution be exercised during the talks on reducing tariffs for textile products. Accordingly, we have asked that some items be kept in the negative list when it comes to China,” a senior functionary of Apparel Exports Promotion Council, said.
So far, RCEP talks have seen 28 rounds of negotiations, apart from seven minister-level meets. New Delhi has apparently made it clear that significant tariff concessions have already been made and further talks would be based only after an equal push by China. However, significant changes are expected before November 4, the deadline decided on by all negotiating countries, including India.
“As long as India’s domestic industry and our national interests is protected, the faster it (the RCEP) is done, the better it is for India,” Commerce and Industry Minister Piyush Goyal, had said last week. He had added that cotton textile exporters have also requested a speedy conclusion to the negotiations, citing an 8 per cent duty that hinders their chances of exporting to China.
In the meantime, India is preparing a final list of products on which it may retain import tariffs for China, painfully aware of a huge trade deficit. Such a list is based on its plan of a “differential tariff reduction” for various nations. Also under consideration is a mechanism to fix an import ceiling, again particularly for China. This is the first time New Delhi will fix such a ceiling in any trade deal.
Goyal also met representatives of the pharmaceutical and chemical industries recently. Pharma players have been relatively favorable to the deal. A senior official said they have argued for greater access to Chinese markets. China imports about $25 bn worth of medicines, of which India’s share is currently only $200 mn.