Textile 30-11-2021 Hits: 3119

Textile & Leather exporters want restoration of 'Preferential Trade Terms (PTT)' with the US

Textile 30-11-2021 Hits: 3119

30th November 2021, Mumbai:

Indian exporters from labour-intensive sectors like textiles and leather industry are extremely keen on the restoration of trade benefits worth $6 billion under the US’ Generalized System of Preferences (GSP).

Their pitch comes after Commerce and Industry Minister Piyush Goyal made a renewed push for the restoration of these benefits, which were withdrawn in June 2019 by the Donald Trump administration, at the revived India-US Trade Policy Forum (TPF) with US Trade Representative Katherine Tai last week.

According to exporters from these sectors, the GSP scheme was withdrawn ‘prematurely’. The exporters said that while the withdrawal hadn’t been too debilitating and didn’t much affect the bilateral trade, a restoration would set some sectors on a better footing.

Goyal batted for the restoration of trade benefits under GSP in light of the fact that the Joe Biden administration has made it clear that it won’t go for a preferential trade arrangement under a limited deal with India at this point. The former Donald Trump administration had discussed a mini-trade deal and these issues were expected to be ironed out under that.

While in the past Goyal had said that lack of preferential trade with the US would not have a “significant impact” for a country of India’s size and strength, his push at the latest round of the TPF came as a surprise for those exporters who used to benefit vastly from these privileges.

Established under the US Trade Act of 1974, GSP currently benefits around 119 countries through preferential duty-free treatment. India used to receive benefits worth $6 billion on 2,167 products before it was removed from the preferential list.

MK Stalin, the Chief Minister of Tamil Nadu, has now pressed the Union Textiles Minister on the issue. In a letter to Piyush Goyal, he stated that the current crisis has resulted in a large number of export orders being canceled and difficulties in meeting long-term export obligations.

"If this scenario does not improve, a considerable number of garment and home textile units may become unprofitable in the near future, resulting in closure and widespread unemployment and industrial discontent."

According to my understanding, one of the main causes of cotton price volatility is the imposition of a 5% Basic Customs Duty (BCD), a 5% Agriculture Infrastructure Development Cess (AIDC), and a 10% Social Welfare Cess on these components in the Union Budget 2021-22, resulting in overall import duty of 11%.

Another factor driving up cotton prices is the Cotton Corporation of India's (CCI) bulk discount to traders who "purchased nearly 70% of MSP cotton auctioned by CCI at a lower rate during the cotton season due to the availability of a 90-day free period and thereafter speculated the market," according to the letter. He asked the Textiles Minister to instruct the relevant ministries to act and adopt policy measures to correct the situation, defend the textile sector, and avoid job losses.

To avoid more speculation in the future months, he advocated the abolition of the 11% import tariff on cotton, as well as a rethink of the CCI's commercial terms and conditions for e-auction of cotton by lowering the minimum lot size to 500 bales, which is sustainable for MSMEs.

Furthermore, yarn makers may be granted preference over dealers in the acquisition of cotton. The CM also advocated the extension of a 5% interest subsidy to spinning mills for cotton procurement during peak season (December to March).

THE NEWS MOTION (The news article has not been edited by DFU Publications staff)

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