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News Clips May 30, 2013

[ Amidst crippling crisis, spinning industry experiences growth ]
[ EU urges BD to update labour laws thru' JS to retain GSP ]
[ India: Pacific threat looms for textiles ]
[ World cotton trade to decline 12% in 2013/14 - USDA ]

Amidst crippling crisis, spinning industry experiences growth   [ top ]

EXPRESS TURIBNE, Imran Rana, May 28, 2013
FAISALABAD: In the midst of an overall depression in the textile industry, a development has sparked new life in the spinning sector. Mills are inundated with orders from China these days – to the extent that even operating at peak capacity cannot meet demand for the material. In fact, orders are pouring in so fast that some spinning companies have decided to expand their operations.

Spinning mills have actually been riding this wave for some months now, as more and more yarn is being demanded by China due to a spike in labour and raw material costs in the country. This has pushed Chinese yarn buyers to look to Pakistan and regional competitors for cheaper raw material.

“Crescent Cotton Mills already has three units up and running, while a fourth is in the process of being completed,” Crescent Cotton Mills Director Naveed Gulzar told The Express Tribune. Even as yarn exports continue to grow, it is difficult to say exactly how many companies will go for an expansion, he said, as that will be the decision of the individuals who run them.

Gulzar operates two mills in Punjab and another one in Sindh. His Sindh unit is performing better than the units located in Punjab, which Gulzar attributes to the relative abundance of gas supply in the southern province. “Our cost of production is lower by 60% in Sindh as compared to Punjab, because mills run on captive power plants which use gas as fuel,” he continued. “The cost is higher in Punjab due to the energy crisis and the cost involved in moving to alternative sources of energy,” he added.

A captive power plant typically generates electricity at the cost of Rs6.5 per unit, while the same unit costs a whopping Rs30 if generated using diesel as fuel, Gulzar said.

Omer Nazar Shah, CEO of Hassan Spinning Mills Faisalabad, agreed with Gulzar on his claim that units established in Sindh provide good returns because of relatively lower gas load-shedding in the province.

“Yarn has great demand in China, but 45% of our production has been affected due to the energy crisis,” he claimed. He added that even if companies run their mills at full capacity, they will be unable to fulfil the requirements of the Chinese market. China has been relying on imported yarn for the last few years, Shah said. “This is an ideal situation for Pakistan, which has produces yarn in surplus to its needs,” he added.

Spinners told The Express Tribune that even small Chinese cloth printing mills are currently consuming around a million metres of gray (uncoloured) cloth per day. In comparison, Pakistani mills which manufacture gray cloth produce, on average, only 500-1,000 metres of fabric per day.

EU urges BD to update labour laws thru' JS to retain GSP   [ top ]

FINANCIAL EXPRESS, Nizam Ahmed, May 30, 2013
The European Union (EU) has urged Bangladesh to update its existing labour laws through parliamentary amendments for retaining the Generalised System of Preferences (GSP) facility enjoyed by the country, officials in Dhaka said Wednesday.

The call was made when Foreign Minister Dipu Moni discussed the recent resolution of the European Parliament (EP) with EU Trade Commissioner Karel De Gucht in Brussels Tuesday, said a senior official at the Ministry of Foreign Affairs (MoFA).

The meeting was held on May 4, amid an outcry in the industry following the deadliest Rana Plaza collapse at Savar on April 24, which killed 1,127 workers and maimed scores.

The EP in a resolution last week threatened to withdraw the GSP facility for Bangladeshi exports, if the country fails to upgrade safety standards in workplaces, including the ready-made garment (RMG) factories, and to protect workers' rights by allowing trade unions.

However, the EU will take a final decision next month through deliberations whether to continue the GSP facility to Bangladesh or curtail it by imposing tariff charges, the officials said.

Bangladesh must take some visible efforts by starting improvement of safety standards to make factories fully compliant and amend the existing labour laws protect workers' rights, they added.

Garment manufacturers, government officials and labour groups have started concerted efforts to improve working condition at the garment factories in the light of the International Labour Organisation (ILO) guidance.The EU trade commissioner during the talks with Dipu Moni also urged foreign buyers, mainly garment importers of Europe, to continue buying products from Bangladesh, said the MoFA officials after receiving a note from the EU headquarters in Brussels.

The Bangladesh foreign minister during the talks also urged global brands and retailers including those in the EU, the United States and Canada to assist the government and all the stakeholders to upgrade the safety standards and workers' rights in the country's garment sector.

A joint statement, issued Tuesday after the meeting, said a recent meeting held among the representatives of the government, employers, workers and ILO officials in Dhaka had created a good opportunity to undertake improvement efforts in the garment sector.

The trade commissioner told Dipu Moni that the EU was looking forward to see quick implementation of the resolution of the meeting.

"We, therefore, pledge to safeguard 'Everything but Arms' benefits through determined action to improve health and occupational safety standards in the export-oriented RMG factories in Bangladesh," the joint statement said.

GSP of the EU, currently the major export destination of Bangladesh, helped Bangladesh to expand its exports to the bloc.

The preferential trade agreement also contributed to boost Bangladeshi economy, employment, national and individual income, empowerment of women and reduction of poverty.

Both the Bangladesh foreign minister and the EU trade commissioner called upon all the relevant stakeholders to improve the working condition and overall situation of the country's garment sector.

"We express our resolution now to approach a period of deep engagement for all actors involved in the global value chain - global buyers, brands, governments and consumers - to work together in promoting a fair, ethical and responsible supply chain management across the industry," said the joint statement.

The EU trade commissioner asserted importance of amendment of the existing labour laws through a bill in the parliament, which will be in session from June 3 to adopt the national budget for the fiscal year 2013-14.

"We also look forward to an early adoption of the government's recent initiative to amend the existing Labour Law by the parliament, already recommended by the Cabinet," the joint statement said.

The devastating loss of workers' lives in recent factory fires and the Rana Plaza collapse calls for urgency to intensify ongoing efforts to work together in enhancing workers' rights and safety standards to improve the overall work environment and prevent similar tragedies in future, it added.

India: Pacific threat looms for textiles   [ top ]

BUSINESS LINE, Ritesh Kumar Singh, May 29, 2013
With all the brouhaha over China-India border issues and election in Pakistan, one issue that has received little attention in the Indian media is the proposed US-led Trans-Pacific Trade Pact (TPP).

This is understandable, as India is not party to the proposed trade pact involving Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the US. However, it has serious implications for India’s textile and clothing sector.

Textile and clothing accounts for roughly five per cent of India’s GDP, 15 per cent of its industrial output and export earnings and provides livelihood support to 55 -60 million people directly or indirectly.

Trade diversion

It is important to analyse the effect of TPP on India’s textile and clothing sector, as the US is an important export destination. When it comes to the export of readymade garments and made-ups, the US alone accounts for 30 per cent of India’s total exports. TPP will affect India’s textile and clothing sector (and of all non-TPP member countries like Brazil or China) in two ways. First, exporters from TPP member countries will get preferential access in the US market vis-à-vis exporters from non-TPP member countries, such as India. This will put India’s garment exports (to the US) at a disadvantage as US import duties on readymade garments are quite high with average duty at around 7.9 per cent; duties on some clothing items are as high as 32 per cent according to WTO tariff profile database.

Second, a key feature of the TPP – ‘yarn forward rule’ --- makes it mandatory to source yarn, fabric and other inputs from any or a combination of TPP partner countries to avail ‘duty preference’. This is likely to disrupt the well-integrated global supply chain in textile and clothing.

Implications for India

It will induce garment manufacturers in the TPP countries to source their inputs from TPP countries at the cost of non-TPP countries, even if the suppliers in TPP regions are not the least cost. This will be a clear case of trade diversion – moving trade away from more efficient producers to less efficient producers.

Though this rule is ‘primarily’ aimed at restricting the benefits accruing to Chinese manufacturers of yarn and fabrics from further opening of the lucrative US markets for clothing, it will create a comparative disadvantage for all non-TPP member countries, including India.

India’s textile and clothing sector is under severe pressure from slowing demand in key export markets, and backdoor entry of Chinese goods via Bangladesh under South Asian Free Trade Area that allows duty-free import of garments from Bangladesh into India.

Clothing retailers hit

The likely exclusion from US’ GSP benefits is another headache for the sector. If this were not enough, to comply with its commitments to WTO, India will have to phase out its export incentives in textiles and clothing.

Export competitiveness is deemed to be achieved if a country’s global export share of a specific product group (defined as a section heading of the ITC-HS) is 3.25 per cent or more in two (consecutive calendar) years. India’s share in world export of textile and clothing (falling under section heading XI of the HS) already crossed this limit in 2007. As a result, India will have to phase out its export sops for the sector by 2015. Only 17 per cent of the textile and clothing exports under NAFTA and Central American Free Trade (CAFTA) have gone through the ‘yarn forward rule’. Yet, US trade negotiators are pushing it in the proposed TPP. Clearly, the move seems to be protectionist, aimed at reviving indigenous textiles industry at the cost of the foreign, but it will limit the freedom of clothing retailers to choose their suppliers. In the process, it will also disrupt the global textile supply chain of which India is a part.

The way forward

That explains the strong opposition of clothing retailers (e.g. JC Penny, Levis and Gap) and their associations (e.g. TPP Apparel Coalition) to the yarn forward rule. To deal with this, the US trade negotiators have come up with the idea of ‘short supply list’ – that will give some flexibility to clothing retailers in sourcing their inputs (which are not available in TPP region) from non-TPP countries.

India’s best bet can be the conclusion of WTO Doha round at next Ministerial in Bali, which will deflate the interest of TPP member countries in the trade pact. Unfortunately, that seems unlikely, given the American disinterest in the round. Joining TPP can help India’s textile and clothing sector, but accepting US-promoted WTO-plus proposals on IPR, investment protection, services and state-owned enterprises will not find favour with policymakers or India Inc. Getting India’s vulnerable products in TPP’s ‘short supply list’ is yet another option that can be explored.

India’s market for premium apparel is growing at 10-12 per cent a year. India can consider sponsoring its own yarn forward rule in the Regional Comprehensive Economic Partnership (of which it is a party) that will find support from China, the biggest loser of the rule.

Going forward, India can leverage it to negotiate with the US for dilution of the TPP’s yarn forward rule.

The likely loss in export of textile items to TPP countries will have to be compensated by gains in other markets. Here, tweaking the rules of origin to stipulate utilisation of yarns and fabrics of Indian origin as a pre-condition for allowing duty free import of garments from Bangladesh will help India’s fabrics export. It will also check backdoor entry of Chinese fabrics into India via Bangladesh.

India needs to continue pushing its exports to non-traditional emerging markets of Africa, Asia CIS and Latin America. The textile and clothing sector is heavily protected in Mercosur countries with import duties as high as 35 per cent on many items.

Expediting the conclusion of India-Mercosur Comprehensive Economic Cooperation Agreement will help counter the impending trade diversion because of the yarn forward rule under TPP.

Some kind of product differentiation (e.g. voluntary carbon labelling) will protect our textile and clothing exports in the US despite the impeding post TPP comparative cost disadvantage vis-à-vis TPP partner countries like Vietnam.

World cotton trade to decline 12% in 2013/14 - USDA   [ top ]

FIBRE2FASHION, May 29, 2013
World 2013/14 cotton trade is forecast to decline 12 percent from a year ago, to 39.5 million bales, due to a combination of lower exportable supplies and China’s policy-driven lower demand for foreign cotton.

The 2013/14 forecast will represent the third-consecutive-annual decline in global trade as major exporters such as Australia, Brazil, India, and the United States anticipate sharply lower exports.

Australia is forecast to export 4.7 million bales in 2013/14, down 10 percent from the preceding year, leaving its share of world exports unchanged from the previous year’s 12 percent.

Brazil’s 2013/14 exports are forecast at 2.8 million bales, down 37 percent (1.7 million bales) from the previous year, due to lower supplies available from the 2012/13 crop. India is forecast to export 5.5 million bales in 2013/14, a reduction of 1.7 million bales (24 percent) from a year earlier, partly driven by competition from its growing domestic textile industry.

The United States—the world’s leading cotton exporter—is forecast to export 11.5 million bales in 2013/14, a 13-percent decline from a year earlier, due to the sharply lower expected 2013/14 crop. The African Franc Zone and Central Asia are forecast to export nearly 4.3 million bales and 5.3 million bales, respectively, in 2013/14—up 13 percent from a year ago in the AFZ, but unchanged in Central Asia.

Imports are forecast to increase in Bangladesh, Pakistan, Mexico, and Turkey, but not by enough to offset sharp 2013/14 decreases in China and India.

China’s 2013/14 imports are forecast at 12.0 million bales, down 34 percent from the previous year, as growing official reserve stocks—in defense of cotton producer minimum support price—create less need for foreign cotton.

In forecasting China’s 2013/14 imports, the USDA took into consideration current reserve release prices and import quota policies. The 2013/14 projection puts China’s share of global imports at 40 percent, down 14 percentage points from the previous year. India is forecast to import 1.0 million bales in 2013/14, down 700,000 bales (41 percent) from the preceding year.

Bangladesh and Indonesia are forecast to import 3.8 million bales and 2.5 million bales, respectively, in 2013/14, up 4 percent and 2 percent from the previous year.

Pakistan and Turkey are forecast to import 3.1 million bales and 4.0 million bales in 2013/14, an increase of 13 percent and 8 percent, respectively, from a year earlier. Imports by Mexico and Thailand are forecast at 1.2 million bales and 1.6 million bales, respectively, up 20 percent and 5 percent from the previous year.