ISLAMABAD: After Pakistani farmers’ recent lobbying to prevent imports of agricultural produce from India, the Ministry of Textile Industry, too, seems to be getting cold feet ahead of the liberalisation of trade between the two estranged neighbours. Its apprehensions over the import of Indian textiles have surfaced hardly a month before the government is expected to phase out its negative list for goods tradable with India.
The Ministry of Textile Industry now says that the future of local industry seems bleak because of the “hasty” decision to open Pakistani markets for Indian textiles. It claims that allowing imports at reduced rates under the Most Favoured Nation (MFN) regime will swallow up the domestic textile sector.
Echoing similar concerns first raised by farmers on imports of India’s agricultural produce, the ministry says that the Indian textile industry enjoys “huge” subsidies and tariff protection, which will lead to imbalances in the market and affect Pakistani farmers. It has argued that India and Bangladesh have realised the importance of the textile sector in their economic development, growth of exports and generation of employment and therefore protect their industry. The ministry says that Pakistan should also protect its textile sector, which it fears will be “destroyed” after the entrance of Indian goods into domestic markets.
“We have still not been able to export more than $272 million worth of goods to India, whereas India has exported around $1.5 billion worth of commodities to Pakistan, being allowed 1,900 tariff lines,” the textile ministry said in its comments on trade with India after the grant of the MFN status. It added that Pakistan exported only $45 million worth of textile products to India in 2010, whereas India exported $566 million worth of textile products to Pakistan while the negative list was still in force.
Under the South Asian Free Trade Area (Safta) agreement, tariff rates are to be held between 0%-5% on all products not on a country’s sensitive list. Initially, Pakistan had 1,183 tariff lines on the sensitive list, out of which 293 pertained to textile products. Recently, the Ministry of Commerce whittled the sensitive list by 20% and the sensitive list now contains only 242 textile tariff lines. The Ministry of Textile Industry is worried that there is no indication that India or Bangladesh have done the same, or intend to do so.
“Almost all textile lines in which Pakistan has export potential are itemised in India’s sensitive list. Other than this, India has kept high non-ad valorem duties on most textile products (around 700 tariff lines) which form barriers to Pakistan’s exports,” the textile ministry cautioned. The textile ministry also alleged that India’s multilayered tariff system damages Pakistan’s export prospects to the country.
“India has huge state-owned textile mills and cotton trade. India has also banned the export of cotton, which results in lowering the cost of cotton for Indian textile industries and losses for Pakistani importers of cotton,” the textile ministry additionally noted.
The textile ministry has said that a tariff level for trade with India should be computed scientifically to ensure optimal rates. The ministry also warned that as far as trade defence mechanisms are concerned, Pakistan may have laws in place, but the country has limited experience in handling anti-dumping measures and limited resources to implement protective policies.
“A highly-skilled, well-budgeted and resourceful organisation, along with an organised domestic sector, may take years to develop. Till such time, there will be no mechanism available for the defence of the domestic sector,” the textile ministry says.
It also claimed that the private sector lacks the capacity to initiate or develop a strong case to invoke trade defence laws on the basis of a decrease in capacity utilisation and or loss in domestic market share, as no reliable data has been maintained as far as local production and sales is concerned. Recourse to such data is an important requisite for any kind of defensive action under the World Trade Organization’s laws.
On the other hand, the Indian textile industry – which is the second largest in the world – is enjoying a large protected domestic market, which ensures economies of scale, said the ministry. It said it fears the opening of borders will just increase the outreach of Indian textiles under the umbrella of SAFTA tax regimes.
Published in The Express Tribune, November 22nd, 2012.