Pakistani textiles and MFN with India

These days there is considerable debate on the many pros and cons of granting MEN status to India. While politicking and difference in agenda's are common place in such debates, it is unfortunate that the facts behind the arguments get diluted as the debates continue. One such example is the debate currently involving the textile industry and the potential products to be included or excluded from the "negative list".
A "negative list" of products is made to safeguard those products/industries that either represent a strategic importance to the development of a country or can become potential targets of exploitation by the trade nation. Having a position of respect and strength in Pakistan's economy, the textile industry enjoys a fair amount of influence in trade and foreign policy. With such a position comes a responsibility - the responsibility to represent the long-term benefit of the country, not just the short-term goals of its individual members. One such example is the recent proposal by certain representatives of the textile industry to debar Polyester Staple Fibre (PSF) from the proposed negative list, through misrepresentation of facts, the impact of which could be far greater reaching than just short term goals envisaged.
Over the years, as demand from the downstream sectors started to improve the PSF industry invested over USD 500 million in expansions and de-bottlenecking projects. Presently another major expansion project with an investment of USD 250 million (IFL expansion) is planned for completion by close of 2012. This project is being set up in a record time of 18 months, including building of large-scale infrastructure and import/installation of customised machinery, and shall come on-line in 2012. This investment shall increase the capacity of the domestic industry by 60% and shall cater fully to the current requirements of the downstream industry as well be sufficient to meet the expected demand of the domestic industry for the next five years.
In terms of pricing, this industry has long been at the forefront of providing a level playing field to the textile industry, regularly benchmarking its prices to those of the international competitors and at times supplying product below their own costs in order to protect the local industry from any competitive disadvantage. Interestingly, according to the data available from various sources, it is evident that PSF prices in Pakistan are in line with India and at times even lower and, therefore, including PSF in the negative list does not impact the textile industry in any way.
The disadvantage of exposing this industry to the MEN status, however, has been ignored by the textile industry at large, and by APTMA in particular. Indian producers of PSF have long been at the forefront of anti-dumping investigations, a fact further established by the WTO report stating India to be the second most frequently investigated country (after China). As a matter of fact, the EU enforced stringent antidumping measures against Indian producers between 15% and 27% for a 10 year period from 2000 to 2010. Today, like Pakistan, India also has a surplus supply of PSF, and there would be no protection for Pakistan's industry from producers that have a history of unfair trading practices. While, in the short term these unfair trading practices would result in uneconomically low prices of raw materials for the spinning industry, in the longer term, for Pakistan it would result in the closure of a major growth industry (as was the example in 2009 with the shutdown of one major producer). Apart from the loss of thousands of direct jobs and the impact of numerous other support industries in the longer term, Pakistan's textile industry would also be hostage to predatory pricing by producers of PSE in exporting country.
Additionally, while the local producers of PSF are proud of their competitiveness and confident that given a level playing field they would be able to compete with Indian manufacturers, India itself has adopted a highly protectionist structure for its PSE industry. While import duty is only at 5%, there are hidden barriers in the form of 10% CVD additional duty, 3% central excise cess, 3% customs cess, and 4% special CVD duty. One can't help but notice that these duties show a definite intention to protect the industry and can only suggest the strategic status granted to this industry by India.
In conclusion, one would hope that logic would prevail and an ideal debate regarding the exclusion of products from the negative list would be based on concrete facts, with all misinformation being verified and filtered by relevant government departments. Independent bodies are expected to act responsibly and provide the government with logical arguments and factual data so that policy decisions are taken in the interest of not one or the other group but in the larger interests of Pakistan.