Page 25 - July-August-2020

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US-China agree to a trade deal

Indian textile

The US-China trade war has de-escalated with an world markets, while some US-based businesses
agreement between the two countries and the first are not happy with the deal. In a statement the
industry in
phase of a new trade deal has been reached National Council of Textile Organizations (NCTO)
between the two giants. According to the new said, “The announcement reduces tariffs on finished
agreement, the scheduled tariffs by both sides to products at the same time it keeps tariffs in place
need of major
be enforced in December has been called-off. on key inputs that aren’t made in the U.S. such as
certain dyes, chemicals, and textile machinery. We
The phase one of the deal includes phasing out of believe a wiser approach would be to maintain
reforms and
tariffs on Chinese goods. While the first phase will penalty duties on finished Chinese products while
leave 25% tariffs on $250 billion in imports from reducing 301 duties on key inputs that are used by
China in place and cut the existing duties on $120 US manufacturers”.
subsidy
billion in products to 7.5%. China will also debate to
not impose tariffs on American goods and accord- “As domestic textile companies fight to compete
ing to the deal, China will increase purchase of with China and their illegal trade practices, it is
agriculture products from the US. important that US manufacturers should be the first
to see penalty duties removed on inputs not made
The move has eased the growing tensions in the in the United States,” the NCTO added.
Govt assures APTMA of quick resolution
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
Indian textile industry is passing through its worst increases the cost of operations and makes the AD
industry non-competitive.
phase since the past decade. to power tariff issue
He said, “The country has a large and vibrant textile he argues will raise costs and the industry will lose
The state and central level taxes are also a major
A priority meeting will be held with the prime
problem which have not been subsumed in GST.
industry, employing millions of people in the value any competitive advantage it could garner despite
minister on the issue of the power tariff adjustments
These are mainly Mandi Tax and electricity duty at
chain. But presently, the industry is passing through a the set tariff of 7.5 cents/kWh already being higher
to the export sector, assured Abdul Razak Dawood,
bad phase.” than the regionally prevailing competitive tariffs.
state level and excise duty on petroleum products at
the prime minister’s advisor on commerce,
the central level.
industries, production, and investment while talking With the adjustments done by the DISCOs, the
Mr Munish Bagrodia and Mr Sanjay Garg, Senior Vice zero-rated industry’s tariff has risen by Rs 1.2 from
to a delegation of the All Pakistan Textile Mills
President of NITMA, talking to the press said that Rs 11.38 per unit. Sattar added that charging
The government should also look into making labor
Association (APTMA).
reforms immediately. There is a large potential of
India has a potential of grabbing a major portion of another Rs 4-5 per unit in addition to the
employing less educated and unskilled masses with
the global textile trade, which might eventually shift cent-based tariff would defeat its purpose
The APTMA had complained to Abdul Razak
minimal training. The Prime Minister Skill
from China in the aftermath of US-China changing altogether. The APTMA claims the exporting sector
Dawood in a letter that the quarterly adjustments of
Development Scheme is a step in the right direction.
equation. pays Rs 15-16/kWh while additional power is
power tariff negates the initiatives the government
had given to the export sector in this regard. marketed to the general public at Rs 11.7/kWh.
The NITMA officials said, “But here, the challenges They said that it should be implemented directly by
The ECC and the federal cabinet had set the power
Central government in participation with industry. The
are completely home-grown and hampering the The APTMA argues how the ECC and the cabinet’s
tariff for the export sector so that the increase in
Employees State Insurance (ESI) scheme is putting a
growth of Industry. The biggest problem is that basic decision on a fixed dollar-based tariff can be altered
tariff would be automatic whenever there was
raw materials, such as cotton and polyester, are not without prior approval, as the raised tariff is now
huge burden on industry but not benefitting the labor
devaluation in the rupee and the industry would get
available at global prices that are lower. The Indian being regularised retrospectively, paving the way for
force due to lack of adequate hospitals and
competitive tariff, which would help them fix their
government should adopt market-driven unnecessary litigation.
dispensaries.
product prices accordingly. However, the DISCOs
agri-commodity markets and stop the practice of
are charging a quarterly adjustment in addition to
buying cotton by CCI and Nafed under the MSP The textile industry is also looking forward to
Simultaneously, the neighboring countries like
the 7.5 cents/kWh set tariff.
operations. The government should instead support another reprieve in 2021 as Energas, a consortium
Bangladesh and Sri Lanka should not be allowed to
misuse the bilateral FTAs by dumping goods made
farmers by direct cash transfers in such scenarios. It of large domestic LNG users supported by Exxon
APTMA Executive Director Shahid Sattar said in his
out of Chinese raw materials.
will help the industry in sourcing the raw material at Mobil Corp, sets its eyes on starting Pakistan’s
letter, “We now understand that it is proposed to
global prices.” largest LNG import terminal by 2021. The project
charge FPA in addition to these as well which
NITMA said that India at large is facing the problem
essentially means that the exporter will not be aims to provide power at 25% less than existing
They further added that another one of the big issues terminals to customers including textile mills, power
of unemployment and if the government can resolve
aware of his energy cost and will therefore have to
are the high interest rates as compared to the plants and fuel stations, once its terminal gets the
these issues, the textile industry can largely help the
export on a presumptive cost basis which naturally
nation on the job front.
competing countries including China, Pakistan, green light.
will be higher to cater for unforeseen costs." This,
July/August 2020
November/December 2019