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71 disputed textile items -- India, EU resolve tariff bindings

G. Srinivasan

NEW DELHI, Aug. 13

INDIA and the European Union (EU) have successfully negotiated tariff bindings on some 71 disputed textile items, paving the way for easier market access to EU textile products to India and consequent grant of more quota of Indian export products to the EU markets.

Sources in the Textiles Ministry told Business Line here that as per the bilateral agreement India entered into with the 15-member EU in 1994, New Delhi is obliged to grant phased access for the 220 textile products of the EU through tariff bindings and phased removal of quantitative restrictions (QR). These tariff bindings could be either ad valorem or on specific rate on a whichever-is-higher basis for the transition period from 1995 to 2005 when there would be phased dismantling of the multi-fibre ar rangement (MFA).

Alongside the tariff bindings schedule by New Delhi, under the MFA, which provided quotas for specified categories of restrained textile products from India for exports to the EU, there were also provisions by which unutilised portions of quotas in one c ategory could be transferred and utilised to export in fast-moving categories. Besides, provisions also exist for transferring quotas from one time period to another both in terms of carry-over and carry-forward. These two sets of provisions are called f lexibilities.

Thus, in return for market access India provides to the EU textile and clothing products, India was offered progressive scale of exceptional flexibilities from 1995 to 2004 in respect of Indian products under restraint to the EU market. Though these are not additional quotas, these facilitate increased utilisation of existing quotas which amount to 8,000 tonnes. The EU gave such flexibilities during 1995 and 1996. For 1996-97, there was a partial release which was totally denied in 1998 and 1999 under t he plea that India did not bind its tariffs as per the MoU.

New Delhi said that the tariff bindings could not be effected as the EU did not supply confirmed export price data pertaining to the 220 Harmonised System (HS) lines till April 1998. However, India notified the bindings to the WTO on December 1, 1999 aft er receiving confirmation about the price data from the EU.

Even as the EU was informed of such bindings, there were still delays in the release of the exceptional flexibilities immediately. The matter figured during the visit of the European Commissioner (Trade), Mr. Pascal Lamy, to India in March and again duri ng the Prime Minister, Mr. Atal Bihari Vajpayee's visit to Lisbon (Portugal) in June. The matter was hanging fire in the meanwhile as the EU has harboured reservation on New Delhi tariff notification mentioning dissent on 71 tariff lines (citing the hig h levels of specific duties as the reason). Incidentally, as textile trade is governed by bilateral agreement, specific duty still remains, though under WTO specific duty rates are being progressively shifted to ad valorem rate.

In the aftermath of the Indo-EU first-ever summit in June, trade envoys of both India and EU met in Brussels and discussed to hammer out an agreement on the 71 disputed items covering man-made filaments, synthetic staple fibres, other woven fabrics of po lyester staple fibre, special woven fabrics, tufted textile fabrics,lace and tapestries, articles of apparel and clothing access not knitted or crocheted, other made-up textile articles, sets, worn clothing, carpets and other textile floorings.

The sources said that New Delhi was able to prevail upon the EU envoys about the tariff schedule on 71 items that except in 10 tariff lines of woven fabrics of wool or carded fine animal hair, combed wool where the maximum specific duty has been slashed by 10 to 25 per cent, in all other 61 items, there is not much of difference between the maximum specific duty till March 1, 2005 and from March 1, 2005 when the MFA would be dismantled and the interim agreement on textiles and clothing would no longer b e valid. This was possible, the sources said, because in as many as 51 tariff lines, there was a shift from per kilogram to per square metre which enabled India to retain its maximum specific duty to ward off import surge. However, the reduction in maxim um specific duty in wool sector might upset the domestic wool industry as it is importing raw wool to add value for re-exports when imported woolen fabrics would be flooding the market at a reduced duty rate, wool industry sources said.

Official sources are, however, relieved that a satisfactory settlement on tariff bindings has been achieved on the disputed 71 items which would instantly result in release of 3,500 tonnes of textile export products to India under exceptional flexibility . A rough reckoning reveals that it may amount to exports worth Rs. 300 crores.