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final products, with huge valueaddition at every stage of processing. Textile industry in India has vast potential for creation of employment opportunities in the agricultural, industrial, organized and decentralized sectors & rural and urban areas, particularly for women and the disadvantaged. Indian textile industry is constituted of the following segments: Readymade Garments, Cotton Textiles including Handlooms, Man-made Textiles, Silk Textiles, Woolen Textiles, Handicrafts, Coir, and Jute. Till the year 1985, development of textile sector in India took place in terms of general policies. In 1985, for the first time the importance of textile sector was recognized and a separate policy statement was announced with regard to development of textile sector. In the year 2000, National Textile Policy was announced. Its main objective was: to provide cloth of acceptable quality at reasonable prices for the vast majority of the population of the country, to increasingly contribute to the provision of sustainable employment and the economic growth of the nation; and to compete with confidence for an increasing share of the global market. The policy also aimed at achieving the target of textile
The Textile Industry occupies a vital place in the Indian economy and contributes substantially to its exports earnings. Textiles exports represent nearly 30 per cent of the country's total exports. It has a high weight age of over 20 per cent in the National production. It provides direct employment to over 15 million persons in the mill, powerloom and handloom sectors. India is the world’s second largest producer of textiles after China. It is the world’s third largest producer of cotton-after China and the USA-and the second largest cotton consumer after China. The textile industry in India is one of the oldest manufacturing sectors in the country and is currently it’s largest. The Textile industry occupies an important place in the Economy of the country because of its contribution to the industrial output, employment generation and foreign exchange earnings. Outlook for Indian Textile Industry The outlook for textile industry in India is very optimistic. It is expected that Indian textile industry would continue to grow at an impressive rate. Textile industry is being modernized by an exclusive scheme, which has set aside $5bn for investment in improvisation of machinery. India can also grab
Multi Fiber Agreement
The MFA was introduced in 1974 as a short-
term measure intended to allow developed countries to adjust to imports from the developing world.
The Agreement was not negative for all
developing countries. Ex – European Union (EU) and Bangladesh.
But however at the GATT 1994, it was decided
to bring the textile trade under the jurisdiction
Removal of MFA
Bangladesh was expected to suffer the most from
the ending of the MFA, as it was expected to face more competition, particularly from China.
The removal of quotas is likely to have political,
consumer and efficiency implications for the countries involved.
The main positive impact of removing the quotas
was the overall increase in efficiency as greater competition was introduced into the market.
Phase-out of MFA
16 % of the total volume of the imports of the listed textiles
and clothing products on the date of entry into force of the ATC (1st January, 1995) must be outside quotas. 17 % of the total volume of imports of the listed textiles and clothing products on the first day of the 37th month or the end of the third year (1st January, 1998) must in addition be integrated, adding up to a cumulative total of 33 % 18 % of the total volume of imports of the listed textiles and clothing products on the first day of the 85th month or the end of the seventh year (1st January, 2002) must in addition be integrated, adding up to a cumulative total of 51 % 49 % of the total volume of imports of the listed textiles and clothing products on the first day of the 121st month or the end of the tenth year (1st January, 2005) must be integrated. This adds up to a cumulative total of 100 % and quotas disappear thereafter.
INTRODUCTION TO ATC
•From 1974 until the end of the Uruguay Round, the trade was governed by the Multifibre Arrangement (MFA) .This was a framework for bilateral agreements or unilateral actions that established quotas limiting imports into countries whose domestic industries were facing serious damage from rapidly increasing imports •The quotas were the most visible feature. They conflicted with GATT’s general preference for customs tariffs instead of measures that restrict
•Since 1995, the WTO’s (World Trade Organization) Agreement on Textiles and Clothing (ATC) took over from the Mulltifibre Arrangement (MFA). •By 1 January 2005, the sector was fully integrated into normal GATT rules. •In particular, the quotas came to an end, and importing countries are no longer be able to discriminate between exporters. The Agreement on Textiles and Clothing no longer exists: it’s the only WTO agreement that had self-
KEY ELEMENTS FINALIZED REGARDING ATC ARE AS FOLLOWS:
(d)the product coverage, basically encompassing yarns, fabrics, made-up textile products and clothing (b) a programme for the progressive integration of these textile and clothing products into GATT 1994 rules.
integration by Members of products representing not less than 16 per cent of that Member's total 1990 imports
1 January 1998
Not less than a further 17 per cent was integrated. not less than a further 18 per cent will be integrated all remaining products (amounting up to 49 per cent of 1990 imports into a Member) will stand integrated
1 January 2002
1 January 200
Along with the integration process, there is a programme for liberalizing the existing restrictions, that is, for enlarging the bilateral quotas carried over from the former MFA on 1 January 1995 until such time as the products are integrated into GATT, at which time the quotas terminate. These former MFA quotas, when carried over into the ATC on 1 January 1995, represented the starting point for an automatic liberalization process. The former MFA growth rates applicable to each of these quotas were increased on for the first stage of the Agreement and the new growth rate was applied annually in the following YEAR CHANGES way: STAGES
Stage 1 1 January,1995 Growth rate increased by a factor of 16% annually Growth rate increased by a factor of 25% annually Growth rate increased by a factor of 27%
1 January 1998
1 January 2002
Provisions relating to the commitments
undertaken in all areas of the Uruguay Round as they relate to textiles and clothing require that all Members “shall take such actions as may be necessary” to abide by the rules and disciplines of WTO so as to achieve improved market access, to ensure the application of fair and equitable trading conditions and to avoid discrimination against textiles and clothing imports (Article 7).
If an exporting Member is found not to be
complying with its obligations, the Dispute Settlement Body or the Council for Trade in Goods may authorize an adjustment to the quota growth
Textiles Monitoring Body (TMB)
The Textiles Monitoring Body has been established to supervise the implementation of the ATC and to examine all measures taken under it, to ensure that they are in conformity with the rules. It is a quasi-judicial, standing body which consists of a Chairman and ten TMB members, discharging their function on an ad personam basis and taking all decisions by consensus. The ten members are appointed by WTO Member governments according to an agreed grouping of WTO Members into constituencies. There can be rotation within the constituencies. These characteristics make the TMB a unique institution within the WTO framework. It monitored actions taken under the agreement to ensure that they were consistent, and it reported to the
The Textiles Monitoring Body also dealt with disputes
under the Agreement on Textiles and Clothing. If they remained unresolved, the disputes could be brought to the WTO’s regular Dispute Settlement Body.
In January 1995, the General Council decided upon the
composition for the TMB for the first stage. In December 1997, the General Council decided upon the composition for the second stage (1998-2001).
When the Textiles and Clothing Agreement expired on
1 January 2005, the Textiles Monitoring Body also ceased to exist.
IMPACT OF IMPLEMENTING QUOTAS & ATC
The impact of implementing the ATC has several dimensions – there is the political gain related to the credibility of the multilateral trading system at a time when the system is experiencing considerable strains.
there are the efficiency gains from eliminating highly
distorting quotas that have lead to an inefficient global allocation of textile and clothing production.
There is the loss of quota rents on the part of ATC
IMPACT OF QUOTAS
a quota is equivalent to a tariff and as such it increases
the local price of the product in question in the importing country, and reduces local demand for the product. However, while the increased price in the case of tariffs partly benefits local producers and partly the government through tariff revenue, the increased price due to the MFA/ATC partly benefits local producers and partly accrues to the exporters as quota rents.
Another impact of the quotas (and tariffs) is that when
the importing country is large, quotas lower the price of the product in question in unrestricted markets because the large country's reduced demand is sufficient to
If the quotas are set at a level higher than local demand
at world market prices, then the quota will not be binding, and will have no effect besides the administrative costs of managing the quota system, which may still be significant both on the exporting and importing side.
India also has a number of domestic distortions that if
eliminated would improve the performance of the clothing and textiles sector substantially. Thus, according to a study by the World Bank, the welfare gains to India from the elimination of the ATC quotas would be three times as high if combined with domestic reforms.
At the end of December 2004, the Agreement on
IMPACT OF TERMINATION OF ATC
Textiles and clothing was terminated.
All textiles and clothing products were fully
integrated into WTO rules, and bilateral quotas removed. in textiles and clothing was a very positive and long-awaited development for the industries and millions of consumers who will benefit from a more open, non-discriminatory and transparent trading environment in this sector. reductions in the area of textiles and clothing.
Full application of WTO rules to international trade
As part of these negotiations, we hope to see tariff Changes to existing WTO rules or new WTO
disciplines which might be agreed may also have an impact on international trade in this sector i.e.
IMPACT OF APPLICATION OF WTO RULES
As of 1 January 2005, WTO rules have been applied to trade in
textiles and clothing as in all other areas of trade. These include the core WTO principles of transparency and nondiscrimination.
Tariff preferences for developing countries under the
Generalised System of Preferences and initiatives for leastdeveloped countries, such as the European Union’s “Everything but Arms” initiative and the United States’ “Africa Growth and Opportunity Act” will remain. feature of the trading system with their preferential market access features.
Regional trade agreements will continue to be an important
WTO rules on anti-dumping and security have the following
impact: - prevent unfair trading practices - prevent injurious trade flows
Known as world’s textile hub from the
pre-maurya civilisation. Transit for the golden silk route. British colonial rule help to establish eastern Manchester in Ahmedabad and part of Bombay presidency. Post independence boom- due to favoured quota import policy by developed nation.
Global manufacturing backyard Supply to all textile and retail majors like
Dolce and Gabbana, Gap, Mark & Spencer, Zara and Harrod’s. Global VC major like Blackstone picking up shares in Gokaldas exports and Himatsingasiede. Knit ware hub at Ludhiana and Tirupur and dedicated textile SEZ by Adidas in Nellore, AP. Indian majors Spentex, GHCL and Welspun
SLOWDOWN IN GROWTH
The growth rate in the textile industry became
0.8 % in 2008-09 (April-August). The growth rate of Wool, Silk & Man-Made Textiles sector became negative (-1.2%) in the first five month in the year (April-Aug). The jute textile segment also declined in 200809 by 7.4% as compared to the 33% growth in 2007-08. Textile products picked up slightly (5.8%) in 2008-09 as compared to 3% in 2007-08.
Excise Duty on Textile Machinery &
Spares to be reduced
Reduction of Custom Duty on Textile
Exemption route to be extended to
Export Oriented Units (EOUs)
Fringe Benefit Tax under Sec 115 of the
Income Tax Act
Refund of State Taxes & Duties to Exporters Uniform rate of VAT on Industrial Inputs Reduction of Excise Duty on Man–Made fibre
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