India keen for free trade deal with UK as EU angers New Delhi by slashing rival’s tariffs

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Commerce and Industry Minister Piyush Goyal said New Delhi wanted to discuss a preferential trade agreement with the UK with the ultimate goal of a free trade agreement. It comes after the EU and Vietnam struck a free trade agreement which sees 99 percent of customs duties being eliminated in a move designed to open up Vietnamese services and public procurement markets to EU companies.

Vietnam’s FTA with the EU will be another blow to the Indian garment exporters

Gautam Nair

Textile and clothing manufacturers in the southeast country are among those expected to benefit most from the EU deal.

It joins neighbouring countries Bangladesh, Sri Lanka, Cambodia and Pakistan which currently ship apparel to the EU at zero duty.

But India, whose trade agreement with the EU features a 9.6 percent tax rate, has been left seething.

Gautam Nair, Managing Director at Matrix Clothing, one of the country’s largest apparel exporters, said: “The clear tariff differential in the EU market will add to our already-stark disadvantages in other areas such as logistics costs and further erode our competitiveness vis-à-vis Vietnam.”

“Vietnam’s FTA with the EU will be another blow to the Indian garment exporters.

Raja M Shanmugham, President of the Tirupur Exporters’ Association, said:

“What we need is no quick-fixes but a long-term vision.

“Promoting garment clusters, initiating structural reforms and tailoring policy interventions accordingly will be a way forward.”

The fresh blow comes after India’s readymade garment exports to the EU dropped from €4.47bn to €4.31bn last year.

Aside from the tariffs, textile industry experts have identified India’s higher logistics costs as one of the main obstacles to its continued growth.

The coronavirus crisis has already wreaked havoc in the Indian textile and garment industry with millions of workers put on lockdown as the pandemic swept the across the country.

European Commission data shows Bangladesh’s exports rose from €12.62bn to €15bn, Cambodia’s from €2.71bn to €3.30bn and Pakistan’s from €2.23bn to €2.70bn.

Vietnam’s garment exports to the EU went up from €2.61bn to €3.29bn.The World Bank forecasts the free trade agreement will help raise Vietnam’s GDP by 2.4 percent and lift exports 12 per cent by 2030.

Tran Tuan Anh, the minister of industry and trade has said the agreement will speed the reduction of poverty in Vietnam.

A spokesman for the European Chamber of Commerce in Vietnam said: “The EVFTA is now more important than ever, as trade wars and a global pandemic disrupt normal business operations on an unprecedented scale.

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“This agreement represents a true ‘win-win’ not just for European and Vietnamese enterprises; but also for citizens on both sides.

“Now, the next step is to ensure a smooth and effective implementation.”

Nguyen Thi Thu Trang of the Vietnam Chamber of Commerce and Industry said the deal will drive businesses to reignite their export activities after market demand declined owing to the coronaviorus pandemic.

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