The impact of the FTA negotiation between India and the UK on the development of the Indian textile industry

An Indian think tank has written an analysis of the impact of the FTA between India and the UK on the development of the Indian textile industry. The key points are as follows:

1. British Prime Minister Johnson is visiting India to promote bilateral FTA negotiations. Trade between India and Britain is of great significance in India’s colonial history. Since the East India Company focuses on textile trade, the import of textiles from India has increased significantly, which has a great impact on the British domestic textile industry. posing a threat, the British Parliament invoked protectionist measures through the “Calico Acts (1700-1721)” to ban the import of most cotton textiles. This economic protectionism was mainly aimed at India, especially Bangladesh (Bangladesh at that time (the country had not yet seceded from India), India was the hegemon in the global cotton textile market at that time. Later, the British invented the power spinning machine to establish its competitiveness. The British Parliament abolished the Printed Cloth Act in 1774, and India transformed into an exporter of raw materials. By the 2010s, India’s competitiveness in textile trade continued to decline. By analyzing the proportion of India’s raw cotton exports to Bangladesh to India’s total cotton exports, it can be seen that India’s competitiveness has declined relatively. According to data from the World Trade Organization (WTO) , India’s cotton exports to Bangladesh accounted for 10.4% of total exports from 2003 to 2010, increased to 16.6% from 2011 to 2015, and increased to 27.6% from 2016 to 2021. Bangladesh imports a large amount of cotton from India, through labor-intensive Processing manufacturing was exported to the West to increase its value.

2. Bangladesh’s textile exports to the EU surpassed India in 2011. In 2019, Bangladesh’s textile exports to the EU were 2.5 times that of India. Huge exports It has brought significant economic benefits to Bangladesh and led to a growing gap in export growth between India and Bangladesh. According to World Bank (WB) data, Bangladesh’s average growth rate from 2011 to 2019 was nearly higher than that of India. 0.5%, and expanded to more than 1% from 2016 to 2019. The decline in India’s competitiveness is due to the fact that Bangladesh enjoys very low tariffs on a large number of its exports under the Everything But Arms (EBA) agreement offered by Western markets. The member countries of this agreement have the most tariff-free access to the West. market opportunities, the only major Western market that does not offer this offer to Bangladesh is the United States. The benefits of this preferential access to the market are significant. Bangladesh accounted for about 3% of the EU’s total textile imports in the early 2000s, which has now increased to about 14%, while its market share in the United States has also increased from 3% to 6-6% during the same period. 7%. Although India also enjoys “Generalized Preferential Tariff Treatment (GSP)”, duty-free access is limited compared with the EBA agreement. A report by the European Commission mentioned that the preferential tariff treatment enjoyed by India is almost one-third that of Bangladesh. Due to relatively high import tariffs, India has lost competitiveness relative to neighboring countries in these external markets, making India a This is happening again in textile raw material exporting countries.

Although Bangladesh is about to leave the Lowly Developed Countries (LDC) and will have to give up some preferences under the EBA agreement, other LDC countries can still enjoy preferential markets Enter and replace Bangladesh. All in all, in labor-intensive manufacturing, LDC countries that enjoy preferential market access and have cheap labor will influence India now or later. India’s goal of transforming into a manufacturing hub for high-quality jobs remains elusive in the short term, so negotiating an FTA with the UK is very important for India, as the UK has always been one of India’s major export markets for textiles and can provide a platform for India to reach a similar agreement with the EU. The agreement lays the foundation. The outcome of India’s demographic dividend depends on the development of manufacturing. This FTA will promote the development of labor-intensive manufacturing industries such as textiles in India and create high-quality employment opportunities, bringing reasonably paid jobs to most people.

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