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Monday, 22 October, 2001, 17:14 GMT 18:14 UK
Pakistan textiles deal angers India
textiles factory
The textile industry is a key earner for India and its neighbours
By Sanjeev Srivastava in Bombay

Indian garment exporters have warned of plunging earnings following last week's decision by the European Union to remove all tariffs and offer increased quotas to clothing exports from Pakistan.

Pakistan is India's main competitor in the garment markets of EU and US.

Indian clothiers fear the EU's move will hurt Indian exporters all the more, as both countries offer the West more or less similar clothing lines.

Both India and Pakistan are cotton producing nations, and their garment industries are largely based around cotton and knit wear products.

"If the US also offers similar concessions to Pakistan, then the Indian garment exporters are doomed as nearly 70% of our exports go to European and American markets," Rajiv Takru, director-general of India's Apparel Export Promotion Council, told BBC News Online.

Pakistan's gain...

Under the EU's new conditions, imports from Pakistan will be increased by 15% until 2004.

The rise in quotas is expected to boost Pakistani exports to Europe by $1bn over the next four years.

The removal of tariff is also likely to eliminate duties to the tune of $150m a year.

"Pakistan's gain will be India's loss," Mr Takru said.

The other two major South Asian garment exporting countries - Sri Lanka and Bangladesh - already enjoy a duty free access to these markets.

India's fears

The garment export industry, worth nearly $6bn a year, brings in 17% of India's foreign exchange earnings, and the prospect of these earnings being reduced because of trade concessions to Pakistan has raised fears within the Indian government.

India's textile secretary, Anil Kumar, convened a meeting of senior textile ministry officials and representatives of garment exporters Monday afternoon in Delhi to discuss possible measures the government can take to save the situation.

"The government has decided to take up the issue with relevant EU officials," Mr Takru told the BBC.

"But it will be a long and tenuous process and even if we manage to get a favourable order, like securing similar concessions for Indian exporters, much damage would have been already caused."

Bad timing

EU's concessions to Pakistan, which Indian officials believe is the result of Pakistan emerging as a front ranking ally of the West in the fight against terrorism, has come at an inopportune time for Indian garment exporters, who were already feeling the pinch of a global slowdown.

According to Raju Goenka, president of the India's Apparel Export Promotion Council (AEPC), exports were already down 18% in the first half of the current financial year.

"Now exports are almost certain to dip further," he said.

This new face off with developed countries is causing considerable frustration in the Indian textile exporters' lobby, which has also been trying to fight what it views as an unfair deal to the developing world in terms of trade concessions.

According to Arvind Pradhan, a senior AEPC director, developing nations have been getting a raw deal under the World Trade Organisation regime.

"We have long been promised that a number of quantitative restrictions will go and the quota system will be phased out gradually in textile exports," Mr Pradhan said.

"But nothing of significance has been moved out of the quota regime."

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