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EC snubs textile exports

Sep 29, 1999

India's exports to the European Union (EU) are likely to come to a halt due to a dispute between the European Commission (EC) and India over the latter's failure to bind its tariffs. This was reported by a leading financial daily.


Source: HSBC

Textile exports account for a third of total exports to the EU. In September itself, utilisation of the EC quota by Indian textile had reached 95% in some lines, while in others, the level was a more comfortable 80%. Additional exports are bound to be held-up as the EU refuses to extend additional flexibility to Indian exporters.

EU's rigid stand on this issue relates to the memorandum of understanding (MoU) reached between India and the EC in 1994. India had agreed to bind its tariffs to World Trade Organisation (WTO) levels. India had resolved to open its internal markets by abolishing all quantitative restrictions. While India has reduced the import tariffs over the years, it has not done so rapidly enough. At current levels, the tariffs are not in line with the WTO-committed levels. The EC insists that India comply with the WTO tariff levels if it wants to continue importing into the EU.

While the country goes to the polls, this issue is expected to remain in limbo as no firm decision can be taken in this regard until the new government is sworn in, which could be by the end of October. India's textile exports in 2HFY2000 are likely to be hit by EU's rigid stand. With the domestic market already facing excess supply, and the EU shutting its markets, Indian exporters will have no other option but to cut down production. Else they will be saddled with excess stocks which they will be forced to offload in the local market at rock-bottom prices.

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