For a package that is being touted with so much official fanfare, the EU trade concessions have earned a lot of flack from the domestic textile industry, as it is not satisfied with the items included in the duty wavier list.
The value-added sector has opposed the EUs decision to grant duty-free access to exporters of yarn, plain fabric and semi-finished goods. They fear that it will reduce raw material supplies in the local market, as prices offered by the international market are more lucrative than what is being offered at home.
The issue of raw material exports has aggravated in the past few months on the heels of soaring cotton prices - currently changing hands at a towering rate around Rs7,450 per maund - which has already taken a toll on the local industry.
Even more astounding is the fact that the textile industry in general believes that the package will do too little to lift exports. Though, the list also includes value-added items, the market believes that positive benefit arising from growth in value-added exports would be offset by the negative impact stemming from the shortage of raw material.
Moreover, given the size of countrys total textile exports, which stands at $10 billion, the reported benefit of around $140 million per year through this deal is peanut.
In this regard, the Ministry of Textile Industry (MoTI) has finalised a list of 15 high value-added items in addition to the existing list of 64 textile items currently accepted by the EU. Aiming to create real value for textile industry, the MoTIs list includes items like bed linen, carpets and knitted garments.
However, the chances that this additional list of 15 items will be accepted by the EU appear slim at the moment, because this proposal has to pass through not only EU member states but it also has to get through the WTO.
Resistance on the part of local European industry can be gauged from the fact that Euratex - the association that represents the continents textile industry has raised voices by saying that concessions will affect the entire supply chain and will put up to 120,000 jobs at risk in the coming three years.
Understanding these potential hiccups, officials at the commerce ministry argue that the EU package is unilateral; it is neither forced upon nor it has been passed through negotiations; and so it should be accepted since it will provide additional market opportunity.
Trade deals can never be ideal, as there is always a win-lose situation. However, at this stage, it is difficult to estimate the true impact as there is ambiguity. Moreover, much depends on how the local industry responds to such incentives. Whatever the case be, this trade for aid package can be used as a case to fetch similar deals from other trading partners such as USA, China, Canada and Japan.