Textile, clothing exports face competitive threat

Pakistan''s one-third of textile and clothing exports are facing a competitive threat in the post-quota era. According to a study conducted by Pakistan Institute of PITAD, an attached department of Commerce Ministry, Pakistan has lost its market share to China in those core threatened lines in which world exports growth rate was fast while market share to India was lost in the slow growing categories.
Further intense competition is expected in major importing markets of Pakistan, ie EU-27 and USA, since safeguard measures on specific Chinese textiles and clothing has expired. "As five years have elapsed since the expiry of agreement on textiles and clothing (ATC), it is time to confront and resolve the ambiguity of ex-ante studies with actual performance of Pakistan''s textiles and clothing exports in post-quota era," the study said.
The study titled ''post-ATC threats to Pakistan''s textiles and clothing Export: identification of product lines at a disaggregated level'' was conducted by Dr Sajjad Akhtar and Yasmin Abdul Wahab. The scope of the report was as follows: (i) to assess and compare the performance and global competitiveness of Pakistan''s textiles and clothing exports between ATC and post-ATC periods;
(ii) to assess and compare the performance of Pakistan''s textiles and clothing exports between the two periods vis-à-vis its three regional competitors, ie India, Bangladesh and China;(iii) to identify those sub-sectors and product lines which are threatened globally in the post-ATC period; and (iv) to assess competitive pressures from regional competitors in Pakistan''s major importing markets (USA and EU-27) between the two periods.
The analysis reveals that out of 551 textiles and clothing product lines (HS-6 digit), 120 lines face threat in the post-quota era. These constitute 21.5 percent of selected lines and 33.7 percent of total textiles and clothing exports. Additionally, 106 product lines or 19 percent of the lines have weakened further (in terms of competitiveness) in the post-ATC era. Among the 120 threatened lines, 29 lines (designated as core threatened lines) constitute more than 90 percent of total threatened lines. However, among these threatened tariff lines, some products may be low value-added and low export earners, yet it gives the guideline to policy-makers to make their negotiating positions in any future trade promotion strategies.
The study further says that empirical evidence indicates that within 120 threatened lines, Pakistan''s loss of market share to China and India was the highest in those product lines in which world exports experienced a slow growth rate. Moreover, Pakistan has not been able to hold its position in specialised products, neither in ATC nor in Post-ATC periods, with respect to all three (including Bangladesh) regional competitors. Results also suggest that Pakistan''s 120 threatened lines have a more common post-ATC export profile with India rather than China and Bangladesh.
In terms of competitors'' positioning, out of Pakistan''s 29 core threatened lines, India is competitive in 13, China in 14, and Bangladesh in 7. Interestingly, only two of the lines among China and India are common. Thus, the threats to our exports in the Post-ATC were mutually exclusive or divided between China and India in both the major importing markets.
The report has also contributed in the policy-making framework by examining recently offered EU emergency package and compared those tariff lines'' positions vis-à-vis Pakistan''s competitors. The report explains the reason for the opposition of India and Bangladesh to the grant of concessions under EU emergency package. The study finds that if Pakistan is granted flood relief duty waiver by EU-27, estimates from the various methodologies and under varying assumptions indicate that benefits from emergency trade concessions only to Pakistan can range from US $92 million to $255 million. Moreover, a one percent capture of respective shares of competitive exports of competitors to EU by Pakistan due to tariff reduction adds $115 million to our exports.
The identification and positioning of product lines at the 6 digit HS-level into competitive, threatened, weakened and emerging lines in the Post-ATC period has direct policy relevance in terms of mapping them onto firms and devising various mesa-level and micro-level interventions including trade diplomacy, at the product/firm level to mitigate the approaching threats to textiles and clothing exports.