In an attempt to improve the Indo-EU trade relationship in textiles and clothing with regard to market access, the Federation of Indian Industry (CII) and Euratex is to set up a joint working group (director-e News, Wednesday 20 November).
The joint working group will review all tariff and customs procedures and related issues, and suggest steps to increase trade and investment by removing existing trade barriers. It will then submit a report on mutually workable tariff reductions and other market access conditions at the fourth EU-India summit in 2003.
According to the India-EU joint study on textiles, prepared by the CII, a bilateral trade agreement for the removal of non-trade barriers and increased market access, besides outward processing trade arrangements, should be established between India and the EU.
The CII study further suggests that a customs co-operation agreement should be signed, covering imports and exports under the Trade and Development Programme budget to resolve issues related to customs valuation.
Both India and the EU should jointly work out the contents of marking and labelling provisions on industrial trade transactions, the CII study says, pointing out that the main objective of these provisions is consumer protection for retail purchases of fabrics for tailoring.
The study is also of the view that an agreement for bilateral protection against piracy, for all registered textile designs, would provide a mechanism for implementation under joint supervision of Euratex and the CII.
The study points out that although the new textile policy and de-reservation of the garment sector is conducive to invite foreign direct investment (FDI), the Indian garment and textile sector has not been able to attract substantial FDI over the years.
In order to promote FDI in outward processing trade models as well as to retain it in India, an industry level working group should be created to suggest steps to increase trade and investment, the removal of existing trade barriers and an increase the use of outward processing trade arrangements.
While India should simplify the operational procedures for warehousing schemes to attract FDI, the EU should encourage FDI in export-based trading activities by disseminating information about India's bonded warehouse schemes.
The CII study points out that the Indian textile industry must gear itself to meet the challenges and to compete in the emerging quota free trade scenario. For this, there is an urgent need to improve infrastructure facilities, such as availability of power to textile and apparel units of the country. The study suggests that textile and apparel cluster areas should be allowed to set up distributive generation models for power.
To achieve higher levels of garment exports, the CII study wants Apparel and Textile Export Parks, meeting world class standards, to be set up in select port cities, such as Mumbai and in Tamil Nadu, creating their own export clusters.
Special Economic Zone (SEZ) status should be granted to these parks, which should follow international practices, including customs bonded warehousing, zone-based clearances among others.
The CII points out that India has been losing huge market share in the EU for specific products due to anti-dumping initiations and preferential treatment given to competing countries like Pakistan under the Generalised System of Preferences (GSP) scheme.
To improve the cost structure of Indian companies to counter the GSP tariff disadvantage, the study suggests that steps should be taken to reduce import duties on all textile machinery for a period of five years. This would help in cost reduction in capital investments, the study claims.
Anomalous disparities in the tax structure distort the competitiveness of the textile industry, the CII argues. It wants disparities in taxation structures on the basis of fibre and enterprise size to be removed. The study further states that scale-based duties that create distortion should be removed and a uniform rate of excise duty should be imposed across all types of yarn, fabric and garments.
To enhance productivity of the textile sector, the study recommends that investment barriers should be removed and knitting, handloom items and processing should be de-reserved. Exemptions on grinned cotton, hank yarn, grey fabric, hand processors, knitwear and hosiery should be removed, the CII states.