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News Clips 21 September, 2013

[ Export of textile up 7.24pc in July-Aug ]
[ Pakistan may get European GSP Plus by year-end ]
[ Bangladesh Expected to Gain More Garment Work ]
[ India eyes cotton export duty, hopes to boost value-added textile sales ]
[ India: Government to aid textile start-ups via equity fund model ]
[ USA: Apparel pushes free trade on Hill ]

Export of textile up 7.24pc in July-Aug   [ top ]

DAWN, Mubarak Zeb Khan, September 21, 2013
ISLAMABAD, Sept 20: Pakistan’s export of textile and clothing products witnessed a 7.24 per cent growth in the first two months of the current fiscal year from a year ago.

Export proceeds from these sectors rebounded following substantial increase in export of raw cotton, showed data of Pakistan Bureau of Statistics here on Friday.

Export of textile and clothing surged to $2.305bn in July-August 2013 from $2.149bn during the corresponding month of last year. Textile and clothing products, which witnessed a negative growth, are cotton carded, knitwear, towels and art silk in July-August 2013 over the same months last year.

However, growth in exports in the first two months was mainly driven by bed-wear and readymade garments, which are valued-added products.

Exports witnessed a growth because of increase in export to the European market owing to preferential market access on selected products.

The European Union’s preferential package on import of 75 items was in operation since December 2012.

Depreciation of Pakistani currency is also one of the pushing factors in export proceeds during the first two months.

In terms of rupees, exports proceeds witnessed a growth of 15.45pc in July-August 2013 this year from a year ago.

A sector-wise analysis showed that export of low value-added products, such as cotton yarn, was up by 16.77pc, cotton cloth 7.71pc, made-up articles 6.47pc, yarn other than cotton yarn 3.43pc and other textile material 6.95pc in first two months of the current fiscal year over same month last year.

Export of bed-wear increased by 5.13pc, tents 1.89pc, and readymade garments 8.86pc in July-August 2013 this year over the same month last year.

Statistics showed that export of raw cotton witnessed a robust growth of 496.73pc in the first two months of the current fiscal year over last year.

Industry sources said that consistent supply of gas during the period under review to textile sector produced the desired results. The growth in yarn and fabric exports was mainly because of improved energy supply.

The total export proceeds witnessed a growth of 3.66pc to $4.09 billion in July-August 2013 from $3.945bn over the corresponding period of last year.

Pakistan may get European GSP Plus by year-end   [ top ]

NATION, September 17, 2013
LAHORE : European Parliament is most likely to grant GSP Plus status to Pakistan in its forthcoming meeting scheduled for Dec 2013. Danish Ambassador to Pakistan Jesper stated this while talking to LCCI’s President Farooq Iftikhar here at LCCI on Monday. After attaining the GSP Plus, he said, Pakistani exports to European Market would get a considerable boost, adding that Pakistan was a lucrative market having enormous investment potential due to low labour cost, rising middle class and a huge population of youth. The Ambassador said, “Our goal is to increase Danish exports of goods to Pakistan by 40 per cent in next three years. Denmark aims to increase trade ties with Pakistan. To better assist Danish companies on Pakistani market, the Embassy of Denmark in Islamabad will open a commercial section later this year.” He said that Denmark could provide state-of-the-art technology to Pakistan for energy and water conservation, water pumping and purification to help it overcome challenges in these areas.

Jesper Moller assured that all out support would be extended to Pakistan if Denmark-specific export strategy was put in place by the government of Pakistan. The Ambassador, however, stressed the need for a new mechanism to improve Pakistan’s perception that was keeping away all foreign investors in general and Danish businessmen in particular.

About Danish visa policy, the Ambassador clarified, “We have a very liberal visa regime for genuine Pakistani businessmen so that they explore Danish market and have first hand knowledge about available business opportunities there.” While, the LCCI President Farooq Iftikhar said that Danish businesses had strong grasp in areas such as wind, life science and health, energy efficiency and dairy production. “We wish to expand our relations by expanding trade and business”, he added.

He said that Pakistan had a great market potential with a very strong livestock base. Danish dairy was famous worldwide, and transfer of technology in this area would certainly be beneficial, he said, asserting that Pakistan was 5th largest milk producing country in the world, therefore, investment in dairy products would yield best results.

Pakistan also has a huge potential for exporting surgical and sports items, he said and added that inexpensive agricultural land was abundantly available in Pakistan and enormous size of consumer market would certainly attract attention of Danish companies interested to expand their businesses in the sub-continent.

He mentioned that Pakistan largely produced high quality of fresh fruits and vegetable, leather goods, fish, textile products, readymade garments and bed linen etc.

“The total Muslim population of Denmark is well over 200,000 and export of Halal Food items from Pakistan to Denmark can cater to the needs of the Pakistani’s and the Muslim community residing there,” he observed.

Farooq Iftikhar said that energy was the most important issue in Pakistan right now as it was the backbone of every activity, so the Danish investors had a great opportunity to invest in this sector through joint ventures with local firms or a sole project by Danish investors.

He also invited attention of the Ambassador towards strong wind corridors in many parts of Pakistan including Sindh, Northern Areas and South Punjab, and sought Danish investment and cooperation for energy production through this resource. The LCCI President also stressed the need for exchange of business delegations between the two countries to boost the two-way trade.

Bangladesh Expected to Gain More Garment Work   [ top ]

WALL STREET JOURNAL, Christina Passariello, September 16, 2013
Retailers are betting on Bangladesh's garment industry more than that of any other country in the coming years, new research shows, despite recent deadly factory accidents that have put their reputations at risk.

Bangladesh's $20 billion garment business came out ahead of smaller rivals Vietnam and Cambodia in the ranking of countries with the highest potential for future sourcing, according to a new study by consulting firm McKinsey & Co.

"Bangladesh is still No. 1," says Achim Berg, a partner in McKinsey's German office, and the author of the study. "Recent events present a challenge for everyone, but there's no alternative for doing big production volumes."

The new research shows that production capacity and price appear to trump safety and labor when it comes to choosing where to source clothes. Bangladesh has suffered more industrial disasters than any other garment-producing country. But its low minimum wage and high number of garment factories have made it a magnet for global retailers.

Retailers including Hennes & Mauritz AB, Wal-Mart Stores Inc., Gap Inc. and Zara parent Inditex SA are grappling with how the public perceives their role in Bangladesh's problems. Labor unions have pointed fingers at retailers for turning a blind eye to safety violations in factories. The companies have formed safety pacts aimed at improving working conditions—but which also help improve their image.

For now, China remains the world's largest garment producer by far, with more than $150 billion in annual exports. But its minimum wage is four times the $39 monthly base rate of Bangladesh. Bangladesh is tied with Italy for the No. 2 spot for current exports; Italy is historically a major producer of fashion and accessories but is declining in importance. Eighty percent of the retailers participating in the survey plan on reducing their sourcing from China in the next five years, primarily because of rising labor costs.

Mr. Berg conducted his poll of 29 European and American retailers representing global sourcing volume of $40 billion in July and August, not long after the April collapse of the Rana Plaza factory building near Dhaka, which killed more than 1,100 workers. The collapse—the latest and most deadly in a string of disasters—forced many retailers to reconsider their sourcing. Some, such as Walt Disney Co. are withdrawing from Bangladesh.

The South Asian nation has plenty of drawbacks. Retailers are facing safety compliance issues and labor unrest, the McKinsey study showed. Massive strikes that delay garment production and deliveries are increasing ahead of a national election in the coming months. In addition, the Bangladeshi government has committed to raising the minimum wage, meaning labor costs could increase there too.

Retailers are hoping that Myanmar, Bangladesh's poor neighbor, could grab a share of global garment production. In the McKinsey survey, Myanmar emerged as the country with the fourth most potential, after Bangladesh, Vietnam and Cambodia—a "real surprise," says Mr. Berg. He says the finding represents "pure desperation and hope" rather than a realistic expectation that the rural country will become a significant manufacturer any time soon, since there are very few factories or trained seamstresses.

Other potential emerging manufacturing countries, such as Haiti and Ethiopia, where H&M has been looking to build production, are still so marginal they don't register on the survey.

Bangladesh counts about 5,000 factories, more than double the number in Vietnam and 20 times as many as in Indonesia. But even with such large capacity, midsize retailers are getting shut out of the country. "The big players bundle their volumes with fewer suppliers and as a consequence block up whole factories," says Mr. Berg.

India eyes cotton export duty, hopes to boost value-added textile sales   [ top ]

REUTERS, September 12, 2013
NEW DELHI, Sept 12 (Reuters) - India could slap a 10 percent duty on cotton exports as early as Thursday as it wants to boost overseas sales of value-added textiles to take advantage of a weak rupee and help reduce a yawning current account deficit, government sources and industry officials said.

It hopes the tax would encourage the sale of more cotton in domestic markets, which would be used to make textiles and garments that could be shipped overseas, generating more money than simple cotton exports.

India, the second-biggest cotton producer after China, is expected to have a bumper harvest this year as ample rains are likely to increase yields. The government will decide how much is surplus and available for export. Any curb on cotton exports could boost flagging global prices.

The government is trying to reduce its current account deficit, which hit a record 4.8 percent in the year ending March 31, 2013, taking advantage of what is otherwise a damaging fall in the rupee of some 16 percent against the dollar since June 1. Other measures being discussed for approval at a cabinet meeting later on Thursday include raising India's access to World Bank loans by $4.3 billion and a long-standing plan to build two microchip factories with government subsidies to attract an estimated $4 billion investment.

India earned about $8.94 billion from cotton exports in 2012/13, equivalent to some 2.97 percent of total exports.

Cotton sales overseas were already expected to drop by a fifth to about 10 million bales of 170 kg each in the marketing year that ends this month because of high domestic prices and a lack of interest from China, which has massive stocks.

The Cotton Association of India (CAI) on Thursday increased its estimate for Indian cotton output in the year starting this October by 0.3 million bales to 37.5 million, compared with 35.7 million a year ago. Domestic consumption is likely to be 27-28 million bales.

"The government is taking steps to promote value-added textile exports. Any kind of duty on cotton exports would hit overseas demand for Indian cotton and would reduce farmers' returns," said Arun Kumar Dalal, a trader from Ahmedabad, a key cotton market in Gujarat.

India's agriculture ministry favours unrestricted cotton exports to support farmers, while the textile ministry opposes that as it wants to protect the domestic textile industry.

Demand from India's domestic yarn and textile industry has already pushed domestic prices above export offers. Rival supplies from South Africa and Pakistan are available at 86-90 U.S. cents per lb compared with New Delhi's 91-93 cents per lb.

And cotton purchases by China, India's biggest buyer, fell 36 percent in the first seven months of this year. The United States is the No. 1 supplier to China ahead of India.

Measures discussed on Thursday could also include other steps for increasing cotton availability for textiles mills, which have been complaining of higher prices for the fibre, said government sources directly involved in decision making.

India's government has scrambled to find ways to prop up the rupee, which hit a record low last month, and curb its current account deficit by promoting exports and reining in imports of non-essentials such as gold. ($1 = 63.30 rupees)

India: Government to aid textile start-ups via equity fund model   [ top ]

THE ECONOMIC TIMES, Yogima Seth Sharma & Dilasha Seth, September 17, 2013
NEW DELHI: In a move that aims to replicate the success of India's IT entrepreneurs, the government is planning to fund and provide workspace to start-ups in labour intensive sectors.

The idea is to give a boost to manufacturing and ensure steady supply of skilled workforce in sectors that have huge export potential, a senior government official told ET on condition of anonymity. The official said the start-ups will be funded through a dedicated equity fund on pure venture capital model. The project will be tested in the textile sector where space will be provided to entrepreneurs at textile parks while funds will be given through the state-supported Textile Equity Fund.

"The textile ministry is working with SIDBI to launch the first state-supported, dedicated Textile Equity Fund in the next three months, which will ensure easy availability of equity for start-ups as well as expansion for smaller enterprises," the official said. "Going by the experience of the IT sector, the expectation is that after the initial success, markets will provide adequate financing for the equity needs of the textile sector."

If successful, the model will be replicated in leather and toys industries. A decision to this effect was taken at a recently held meeting of the Committee on Manufacturing, chaired by Manmohan Singh.

Although apparel exports from India clocked double-digit growth in the current fiscal and production grew 45% in the first five months, Indian textile exports are facing tough competition from Bangladesh in the US and the EU markets.

"However, this would require textile ministry to tweak their guidelines for textile parks as well as finance the development of flatted factories in textile parks where workspaces would be made readily available to entrepreneurs on rent, hire purchase as well as sale," said the official, who was present at the meeting of the high-level committee. India imported toys worth over Rs 1,200 crore during 2012-13.

"Most of the toys come from other countries, mainly China. We can very well produce these in the country. So we are looking at a similar policy for toys and leather", said the official. An inter-ministerial group under the textiles secretary is working on a time-bound action plan to implement the decision. The other members of the group include representative of the Planning Commission and the Department of Expenditure and Financial Services.

The National Manufacturing Competitiveness Council along with Planning Commission member (industry) and the chief economic advisor will act as a steering group to facilitate the implementation of the action plan. The textile ministry will commence work on five pilot projects for development of flatted factories in existing textile parks this year. It will shortly finalise the quantum of equity fund as well as additional financing for setting up the flatted factories.

About 40 textile parks have already been set up in the country, while another 20 were announced last year to enhance the competitiveness of the sector. Textile contributes about 14% to industrial production, 4% to the GDP and 17% to the export earnings. The sector is the second-largest employment provider after agriculture.

USA: Apparel pushes free trade on Hill   [ top ]

POLITICO, September 20, 2013
A small army of clothing-industry executives has fanned out across Capitol Hill this week, pinning down 240 members of Congress for individual and group meetings to talk free trade.

They are the representatives of at least 50 apparel manufacturers and retailers who have taken up a new strategy in an attempt to get their way in the blockbuster Trans-Pacific Partnership, as U.S. negotiators are becoming more difficult to reach.

The U.S. apparel industry has formed a single coalition and set about the goal of finding friends who will push negotiators to insist that rules be included in the trade deal that help them sell cheaper products. They’re asking for signatures on letters, urging members of Congress to call President Barack Obama’s top trade negotiators and more — and trying to gin up attention along the way, tweeting about each meeting and even placing newspaper ads.

The timing of their lobbying push is critical. Top negotiators are meeting in Washington, D.C., this week and will gather again in Bali, Indonesia, in early October for a major round of talks. Their goal is to conclude the deal by the end of this year, which means key decisions on the most contentious remaining elements of the 12-country free trade agreement must come soon. As a result, opportunities for industries, free traders, fair traders, environmentalists and others to influence U.S. Trade Representative Michael Froman and his negotiators’ approach to the deal have all but expired.

So what next? Lobby Congress.

Lawmakers don’t play an official role in trade talks but still make key decisions, such as whether to give President Barack Obama the “fast-track” authority he needs to complete a deal without the threat of amendments. That’s where Congress finds its leverage — and rather than waiting until it’s time to cast those votes, industries with much on the line want members to start using it now by making clear that their votes are contingent on specific negotiating objectives.

“At this point, the ramp-up for industry is about making sure Congress insists that the negotiators come back with what is a good deal,” said Welles Orr, a former top U.S. trade official.

The fight within the clothing industry offers the best window into industries’ new efforts to lean on Congress.

The industry’s two sides — textiles (who make the fabric) and apparel (who turn it into clothing and then sell it) — are fighting over the final makeup of complicated provisions of the pact that address two key questions: which Asian clothing imports eventually would no longer face tariffs and when those tariffs would be eliminated.

Trade pacts typically require that all parts of the clothing production process — from the “yarn forward” — take place within countries that are party to those pacts. As a result, at least part of the more expensive “upstream” part of the process, which involves producing yarn and turning it into fabric, has remained in the United States while low-wage production jobs have moved to countries like Honduras.

If those yarn forward rules are relaxed in the Trans-Pacific Partnership, it could allow another huge textile-maker — China, for example — to sell its fabrics to companies in Vietnam and Malaysia for production into T-shirts, shoes and more. Though China isn’t participating in the trade talks, those countries are, and they could then sell apparel into the United States without tariffs. In other words: Textile businesses with about 500,000 employees in the United States would be met with an influx of Asian competition.

Negotiators are now haggling over the pact’s textile rules, as well as broader “market access” questions, such as what tariffs will be eliminated and when. With Froman pointing to the end of this year as his goal to finalize the deal, time is running short. “This is a make-or-break stage,” said Augustine Tantillo, president of the National Council of Textile Organizations, one of many industry groups that has much at stake in the Pacific trade talks. The association’s members are underscoring that point in meetings with more than 200 lawmakers, Tantillo said.

“Once they understand the impact of various proposals, we believe they will actively engage with the executive branch,” Tantillo said of Congress. “This period is especially important for us.”

To counter textiles’ message about jobs, the apparel industry organized its 240 meetings on Tuesday and Wednesday. During those meetings, its 50 executives, who flew in for the lobbying push, are touting supply-chain jobs in sales and other areas and pressing a simple argument: Cheaper clothes is a good thing.

“Everybody wears clothes, and so everybody benefits when their clothing is less expensive — or when you can put additional quality into it because you don’t have to pay that extra duty that goes into it,” said Steve Lamar, the lobbyist for the American Apparel and Footwear Association.

Apparel lobbyists are also arguing that the United States agreeing to eliminate its tariffs for imports in the industry could be the key to unlock concessions on other areas, such as intellectual property rights, from other countries.

“Apparel is a bellwether for what we’re going to do overall. Everybody is looking to the U.S. — we’re a leader, and if we don’t meaningfully address our sensitive industries, that’s going to be a sign that other countries don’t have to address their sensitive industries,” said Stephanie Lester, the Retail Industry Leaders Association’s vice president of government affairs.

It’s not just the textile-versus-apparel fight that is shifting to Congress, though. Other groups are leaning on as many congressional allies as they can — with opponents of the pact playing a particularly vocal role.

A clear example came last week, when Rep. Rosa DeLauro (D-Conn.) hosted a panel that included a food safety advocate and a U.S. fishing industry representative. They briefed congressional staffers on seafood safety issues and what the invite said are “hidden dangers for U.S. customers.” They also underscored the potential damage to the U.S. fishing industry that increased tariff-free competition could cause.

Adding to the pressure from industries seeking protection from the deal is what National Foreign Trade Council President Bill Reinsch called a “newly blooming effort” by anti-free trade groups that are lobbying Congress to reject Obama’s request for fast-track legislation — also called trade promotion authority.

The latest of those salvos came in a report published Tuesday by the Center for Economic and Policy Research, a group funded in part by labor unions, many of which are fighting the Pacific Rim deal. It concluded that the deal would barely budge the U.S. economy while driving down pay for most workers. Liberal groups seized on that report and its criticism was echoed as the AFL-CIO, which finds some strong allies among congressional Democrats, approved a resolution during its convention in Los Angeles that warned of its likely opposition to the Pacific Rim deal.

But it’s not just opponents of trade deals who are lobbying Congress.

Free-trade advocates who support broad liberalization and the elimination of tariffs have launched a lobbying effort of their own — this one focused on localizing the potential benefits of the Pacific Rim deal.

The Business Roundtable, the U.S. Chamber of Commerce, the National Foreign Trade Council and other organizations have attended hundreds of meetings with members of Congress in recent months — especially freshman members with limited records on trade issues and sophomores who voted for agreements with South Korea, Colombia and Panama and can now be pitched on the “fast-track” authority used to secure up-or-down votes without amendments for those deals.

Those groups also formed a coalition dubbed “Trade Benefits America,” which is touting the benefits of free trade by rolling out state-by-state analyses of top export industries in an effort to drum up regionalized media attention and catch lawmakers’ eyes. The coalition has pitched the prospect of increasing Maine’s $600 million in paper product exports per year, Arizona’s $3 billion in semiconductors shipped overseas annually, Alabama’s $5.9 billion in motor vehicle exports and more.

It’s an attempt to address a practical problem: When trade deals near finalization, it’s easier for industries threatened by the deals to come by the specifics needed to make their case than those advocating for the deals because of the more vague prospect of jobs that could come.

“We’re getting to the stage of this where everybody who perceives themselves as having lost — i.e., they didn’t get what they wanted — they’ll go into their members and complain. That’s what the debate will be about,” said Reinsch, who before taking the helm at the National Foreign Trade Council was a top Commerce official under President Bill Clinton.

“Somebody always has to lose. Nobody gets 100 percent so you know there’s going to be unhappy people, and the trick is to make sure there are more happy people,” Reinsch said.