Page 27 - February-March-2020

During the first phase of the FTA, local manufac-
The textile sector of Pakistan will get a boost in
tures complained about the unbalance in the
exports to China as the second phase of the Free
deal, especially the textile sector which raised
Trade Agreement (FTA) between China and
concerns about the favours it granted the
Pakistan will offer the same tariff concessions
enjoyed by the ASEAN countries.
Chinese textile industry. They believed that the
FTA was damaging the local industry and giving
undue advantage to the Chinese. The govern-
The agreement covers 313 tariff lines of US $8.7
billion Pakistan's overall exports and US $64
ment took note of the demands by the industry
billion of China’s global imports. Textile and
as they pointed out that during the first phase,
garments sector is at the forefront of this deal
tariffs were imposed on Pakistani textile exports.
At the same time, they complained that the
and will help enhance the sector’s exports to
country’s competitors from the ASEAN had duty
China as it offers the same duty free access to
ASEAN countries.
free access to the Chinese market.
The agreement is already bearing fruits as the
To fix this disparity, the Pakistani government held
Indian yarn exports dropped more than 38
several rounds of negotiations with their Chinese
counterparts and now hope that the second
percent for the first six months of the current
phase of the FTA would overcome the concerns
fiscal year. According to reports in the Indian
of the local manufacturers and increase exports.
press, the cotton yarn exports between April and
September of this year dropped from US $2.08
As a counter-measure, the sensitive list had been
billion to US $1.27 billion compared to the same
increased from 10% to 25%, totaling 1760 tariff
lines and covers 37% of Pakistan's imports from
period from last year.
China. This, the two sides hope, will give protec-
tion to Pakistani industry from Chinese import,
The Indian report cited the FTA’s second as a
and the textile and garments sector is a major
major reason for the decline as it said that the
India did not enjoy the same tariff free access to
beneficiary of this sensitive list. Whereas, the
the Chinese market, whereas India had to pay 3.5
tariffs from the industry had also been lifted to
to 5 percent tariffs.
increase the export of the sector. The Chinese
side also agreed to immediate market access on
its priority products, tariff reduction and measures
The full effects of the second phase of the FTA
for protection of the domestic industry on
could be gauged after the deal comes into effect
from December 1, which would boost the exports
Pakistan’s request.
of Pakistani products to the Chinese market.
The first phase of FTA between China and
Earlier in the month, Abdul Razak Dawood,
Pakistan was signed on November 24, 2006 and
Adviser to the Prime Minister for Commerce,
Textile, Industry & Production and Investment,
became operational in 2007. The negotiations for
the second phase began in 2011 and after eleven
announced that the second phase would come
into effect from December 1 and it was becoming
rounds, both sides signed the agreement in April
of 2019 in Beijing.
operational earlier than usual. He said that it
usually took a year to make such agreements
Now, the second phase is about to take effect
operational between countries but because of the
which is already showing some positive signs.
special relations enjoyed by both the countries.
26 18
Indian textile
industry in
Global cotton woven fabric
need of major
exports declining since 2013
reforms and
Woven fabric is highly important in textiles and collapsed to $26.60 billion in 2018 with 1.2% decline
subsidy
cotton woven fabric has been the largest exported and anticipated to reach $26.11 billion in 2021 with
group until 2015 because cotton is the largest a CAGR of 0.62 per cent from 2018, according to
sustainable and biodegradable fiber produced to the data provided by TexPro.
fulfil textiles product demands.
China, Pakistan, India and Italy were the key
Export of woven fabric in 2006 was 28.2% at $69 exporters of cotton woven fabric comprising 70.35%
billion in the total global textile export of $244 billion. of the total export until 2018 followed by Turkey,
Hong Kong and Germany.
In 2015, out of the total textile export ($315 billion),
According to Mr Munish Bagrodia, President Vietnam and Indonesia where it is approximately 5pc.

Northern India Textile Mills Association (NITMA), the However, in India, it is around 10-12pc, which
woven fabric was 25% (78 billion). Cotton woven
Mainly cotton woven fabric was imported by China,
Indian textile industry is passing through its worst increases the cost of operations and makes the AD
fabric was 37.1% at $29 billion of total woven fabric
Indonesia, Hong Kong, US, Italy and Germany at
phase since the past decade. industry non-competitive.
export. The trade of cotton fabric is decreasing
since 2013 universally with a considerable com- 34.68% of total import followed by Mexico, Sri
Lanka and Turkey. Highest import growth rate was
He said, “The country has a large and vibrant textile The state and central level taxes are also a major
pound annual growth rate (CAGR). The woven
achieved by Mexico(3.06%) and Sri Lanka(27.03%)
industry, employing millions of people in the value problem which have not been subsumed in GST.
fabric trade was $26.93 billion in 2016 that
in term of value from 2013-2018.
chain. But presently, the industry is passing through a These are mainly Mandi Tax and electricity duty at
bad phase.” state level and excise duty on petroleum products at
the central level.
Mr Munish Bagrodia and Mr Sanjay Garg, Senior Vice
President of NITMA, talking to the press said that The government should also look into making labor
India has a potential of grabbing a major portion of reforms immediately. There is a large potential of
MoU to be inked for Faisalabad Expo Centre
the global textile trade, which might eventually shift employing less educated and unskilled masses with
from China in the aftermath of US-China changing minimal training. The Prime Minister Skill
equation. Development Scheme is a step in the right direction.
A Memorandum of Understanding (MoU) for the construction of a state-of-the-art Faisalabad Expo Centre
The NITMA officials said, “But here, the challenges They said that it should be implemented directly by
is expected to be inked soon, said Zafar Iqbal Sarwar, Senior Vice President FCCI.
are completely home-grown and hampering the Central government in participation with industry. The
growth of Industry. The biggest problem is that basic Employees State Insurance (ESI) scheme is putting a
He had a detailed meeting with Provincial Secretary Industries, Muhammad Zafar Iqbal (PAS) to discuss
raw materials, such as cotton and polyester, are not huge burden on industry but not benefitting the labor
the related issues. The meeting was also attended by Bilal Waheed Sheikh Vice President FCCI, Rafia
available at global prices that are lower. The Indian force due to lack of adequate hospitals and
Syed, Additional Secretary (Commerce), Zia-ul-Mustafa CEO Pakistan Expo Pvt Ltd Company, Amir
dispensaries.
government should adopt market-driven Saleemi, CEO FIEDMC.
agri-commodity markets and stop the practice of
buying cotton by CCI and Nafed under the MSP Simultaneously, the neighboring countries like
The meeting discussed various modes for the construction of Faisalabad Expo Centre and it was decided
operations. The government should instead support Bangladesh and Sri Lanka should not be allowed to
in principle that it would be completed on the model of Lahore and KPK expo centres.
farmers by direct cash transfers in such scenarios. It misuse the bilateral FTAs by dumping goods made
will help the industry in sourcing the raw material at out of Chinese raw materials.
global prices.”
NITMA said that India at large is facing the problem
They further added that another one of the big issues of unemployment and if the government can resolve
are the high interest rates as compared to the these issues, the textile industry can largely help the
competing countries including China, Pakistan, nation on the job front.
October/November 2019
February/March 2020