It is business as usual as far as India’s exports of textiles and apparel to the US are concerned. There was a sharp 8.33 percent increase in the first six months of 2019 (January-June) over the same period last year. Apparel, the most important item in the country’s textiles export basket, posted a 10.43 percent growth during the same period, as per the latest US data. What is more, India has overtaken China in respect of exports of apparel as well as total exports of textiles and garments. A further encouraging development is that India’s exports had been higher than the total exports of this product to the US. This shows that these exports have remained unaffected despite withdrawal by Washington of the benefits of its Generalized System of Preferences (GSP) scheme to India’s exports, including textiles and garments, on June 5 this year.
While data after June is awaited, the position is unlikely to be very much different as the GSP phaseout impact will only be very marginal. So, one could expect the uptrend in exports to continue in the remaining period of 2019.
Currently, India’s share of textiles and apparel exports in the US is around 18 percent. The data shows that India’s apparel exports were much higher than those of China’s just 0.68 percent. The same was the case in respect of China’s exports of textiles and apparel at only minus 1.95 percent. Vietnam, now India’s major competitor, recorded a 12.28 percent increase in its total textiles and apparel exports and 11.74 percent rise in its apparel exports.
India’s apparel exports were more than those of Mexico and Honduras, both of which are governed by the North American Free Trade Agreement (NAFTA) and the Caribbean Basin Initiative (CBI) where their apparel exports had qualified for duty-free entry in the US. Earlier, they had been enjoying quota-free status which was terminated in 2005 after the expiry of the WTO Agreement on Textiles and Clothing (ATC). Other Latin American countries like El Salvador, Costa Rica and Dominican Republic are also covered by these agreements and also enjoy duty-free entry of apparel in the US. All these agreements are not without a rider. The countries in question have necessarily to use US fabrics, convert them into garments and export to the US. In effect, there is no manufacturing activity in the US. As regards non-apparel, which consists of yarn, fabrics and made-ups, India notched up a 5.99 percent growth. On the other hand, China’s exports showed a negative growth of 6.88 percent. Vietnam posted a higher growth of 20.6 percent. Mexico recorded a growth of 4.84 percent in its exports. Total exports of non-apparel from all countries including India to the US grew by just 0.95 percent during the period under review. In value terms, the data show that India’s apparel exports rose from $2,052.93 mn to $2,267.02 mn, while China’s exports marginally increased from $11,229.35 mn to $11,306.26mn during the period in question.
Total exports of textiles and apparel were valued at $3,898.7mn against $4,223.3mn in January-June 2018. China’s exports dropped from $17,216.8 mn to $16,881.9mn.The data shows that India’s total textiles and garments rose from $7,397.98 mn in 2017 to$7,671.66 mn in 2018. During the same period, China’s exports increased from $3,870.5 mn to $40,576.7 mn. Total exports to the US by all countries including India were up from $10,5822.4 mn to $1,11,006.6mn.
On America’s concern that India’s trade tariffs are quite high, officials explain that the bound rate of duty agreed to at WTO is 40 per cent. The average import duty on industrial goods is 10.42 percent and trade weighted average import duty on industrial goods is 5.6 percent. Officials also point out that New Delhi’s decision to raise tariffs on 28 American products is worth $1.1 bn and was in retaliation to Washington’s move to slap tariffs on aluminum and steel, besides withdrawing the GSP benefits to India’s exports, including textiles and apparel.
India was the single largest beneficiary of the US GSP scheme allowing it to export $5.7 bn worth of dutyfree goods in 2017, according to the data available from the US Congress. US Congress. New Commerce and Industry Minister Piyush Goyal told the Lok Sabha during question-hour recently that the US decision of withdrawing the GSP benefits “is not exactly as per the norms of WTO and GATT which have been mutually agreed to and which are multilateral agreements.”Goyal further said, “One thing is very clear. The government will never ever compromise on national security and at no point of time will trade negotiations be allowed to overtake what is in the national interests of the people of India.”
As per official data, India’s total exports to the US rose from $47.9 bn in 2017-18 to $52.4 bn in 2018-19. On the other hand, India’s imports from the US in textiles and clothing had been $26.6 bn to 35.5 bn in this period. This shows that US exports to India have risen much faster than India’s exports to the US. Before the quotas were abolished through the Agreement on textiles and clothing, global trade in textiles and clothing had been governed by Multi-Fibre Agreement (MFA) from 1774-1994. WTO came into being on January 1, 1995.
It needs no mention that the US again is an important destination for our textiles and clothing exports. India is the largest supplier of apparel and textiles products to the US after China and Vietnam.
A study by FICCI and Wazir Advisers says that the textiles industry has witnessed a major shift in the last three decades in terms of its production base. Till 1980s, production of textiles and apparel was centered in the US and the EU. Over a period of time, production of these items shifted majorly to Asian countries. This was because of due to an attractive low cost manufacturing advantages in these developing countries.
Finding production of textile items becoming unprofitable for manufacturers due to rising costs, the US and the EU sought alternative destinations. Asian countries with availability of abundant and cheap manpower, vast natural resources and favourable economic policies were the most attractive destination for manufacturing textiles products.
The shift has meant maximum gains for China. Following the liberalisation of China’s industrial policy in the 1999s, the country experienced a massive boost to industrialization. As a result, China emerged as the biggest manufacturing base for textiles, worldwide. It has remained the largest exporter of textiles and apparel maintain a dominant share of 40 percent since 2000.
Currently, the US and the EU have become the largest consumption bases in the world, while manufacturing is concentrated in Asian countries such as China and India (Large consumption bases as well) Bangladesh, Vietnam, Sri Lanka, Pakistan etc.