Look at a few recent developments regarding trade discussions among major countries. India has revived the initiative for Preferential Trade Agreement (PTA) with South African Customs Union (SACU). Indian Commerce Minister Piyush Goyal said that after 2 years of negotiations, India and the United States are closing in on a trade deal. Both countries have planned to start negotiations on a broader Free Trade Agreement (FTA) later in the year, either before or after the US elections in November. A high-level trade and investment dialogue between India and the EU, set up after the first virtual India-EU summit, is expected to move to a broad-based FTA that has held out promise, but has been stalled for the past 7 years.
In the current situation, however, due to the COVID-19 pandemic and changing international relations between various countries, economies are under pressure. So, bilateral trade relations are something that can support or even work as a lifesaver for particular industries like apparel export from India, which has remained stagnant for the past few years but can be doubled in 3 years if trade agreements are revised. Just a few days back, the issue was brought to the Prime Minister Office (PMO) and a request was made for a comprehensive review of trade agreements through a fast-tracked mechanism with leading markets – EU, UK, US, Australia and Canada.
One may say such discussions on bilateral trade are the routine process, as India has not seen any major breakthrough in this regard at least in the last 7-8 years, but in an unprecedented situation, such developments bring a hope that trade will get a boost in future. Any kind of bilateral trade agreement – be it PTA, Comprehensive Economic Partnership Agreement (CEPA) or FTA – is highly important for apparel export trade.
The issue is not only about the top or traditional markets of India like US, EU and UK; any such trade agreement even with comparatively smaller markets can also help Indian garment factories as also the textile companies. To increase India’s apparel export, it is essential to explore new markets or focus more on the emerging markets. As COVID-19 has adversely impacted the core markets of India, focusing more on emerging and non-traditional markets has become unavoidable now.
For example, the discussion with the SACU including five countries – South Africa, Namibia, Botswana, Lesotho and Eswatini – is also under process. Overall, trade between India and Africa stood at US $ 66.7 billion in 2019-20, and out of that, India-SACU trade was US $ 10.9 billion. As far as textile and apparel products are concerned, India reported the exports of around US $ 300 to SACU region in 2019-20. The main exports included knitted and woven apparel worth US $ 92.92 million and US $ 67.14 million, respectively. Similarly, man-made staple fibres were also exported to the tune of US $ 25.58 million in the same period. Though the overall economy of this region is not much enthusiastic, there is enough potential to increase it further as this region has a population of around 70 million (South Africa has a population of 60 million).
Currently, India stands at the fifth position when it comes to exporting textile and clothing to South Africa. China, Vietnam, Lesotho and Eswatini have more shares in the exports to South Africa. Overall, this region (SACU) can be a good opportunity for Indian SMEs and small buying agents if PTA succeeds. Truworths, Ackermans, Foschini and Woolworths are some of the leading retail chains of South Africa, and few Indian apparel exporters are already working with them.
As for countries or regions with small population, Canada (37 million) and Australia (25 million) are also among major markets for India. Yes, economies as well as demands in these countries are much better than any other country (apart from the EU and the US) with small population. So, it is essential for India to increase its thrust on small but emerging markets where it hasn’t focused as much so far. And bilateral trade must be a game changer in this regard.
If implemented, India-Australia CEPA can triple India’s apparel exports to Australia in 3 years. India can increase additional exports of US $ 500 million in the next 3 years, if the CEPA with Australia is concluded. It is pertinent to mention here that Canada was earlier a very large market for India, but the latter lost a substantial share of apparel exports as its competitor countries entered trade agreements with Canada. With a CEPA in place, India will be able to easily recapture the lost ground.
From decades, time and again, Indian apparel exporters have raised the issue of FTAs and now as things are passing through major disruptions – be it the pandemic or the leading countries’ growing tussle with China – it is the high time to finally do something concrete in this direction.
It is being said that the discussions or negotiations at top levels are at a limited trade pact aimed at restoring zero tariffs on a range of Indian exports to the US under its Generalised System of Preferences (GSP), which was withdrawn by the US last year. Whatever the case may be, the highest employment sector (textile and apparel) shouldn’t be ignored anymore.