Cotlook A Index - Cents/lb (Change from previous day)

05-02-2019 82.25 (-0.75)

05-02-2018 88.10

06-02-2017 85.75

New York Cotton Futures (Cents/lb) As on 07.02.2019 (Change from

previous day)

Mar 2019 73.63 (-0.03)

May 2019 74.83 (-0.03)

July 2019 76.25 (+0.21)

07th February

2019

Govt to identify powerloom clusters, launches project 'India

Textiles sector rues synthetics’ inverted duty structure

Exporters want Centre to refund State levies to stay competitive

Reduced budget outlay under ATUFS to hit textile sector’s

modernization

Bangladesh: Exports rise 7.92pc

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

Feb 2019 20750 (+200)

Cotton 15950 (-15) Mar 2019 21020 (+190)

Yarn 24745 (0) Apr 2019 21300 (+160)

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2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- Govt to identify powerloom clusters, launches project 'India

Textiles sector rues synthetics’ inverted duty structure

Exporters want Centre to refund State levies to stay competitive

Reduced budget outlay under ATUFS to hit textile sector’s

modernization

GST-hit textile traders begin campaign for Modi

Cotton prices may remain firm this year on low output

RCEP: India must exercise caution

Here's what to expect from RBI policy review today

Donald Trump’s new trade tariff plan may impact India

Bengal summit to help test industry pulse

Nagaland to get ‘Best Eri Silk Producing State’

------------------------------------------------------------------------------------------------ Brexit could spell economic peril for parts of the EU

Bangladesh: Exports rise 7.92pc

EAC REAFFIRMS PLAN TO DEVELOP EAST AFRICA’S TEXTILE

AND LEATHER SECTORS

Sweden fires up Fashion Revolution: The Future of Textiles

NLC Seeks Tax Waiver for New Minimum Wage

----------------------------------------------------------------------------------

NATIONAL

---------------------

GLOBAL

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3 CITI-NEWS LETTER

NATIONAL:

Govt to identify powerloom clusters, launches project 'India

(Source: Zeebiz, February 06, 2019)

Union Textiles Minister Smriti Irani Wednesday said the textiles ministry alongwith the

Clothing Manufacturers Association of India (CMAI) will identify powerloom clusters in

the country and go ahead in a big way for skilling of powerloom sector.

"CMAI, along with its members, has resolved that in conjunction with the textiles

ministry, powerloom clusters will be identified from which adequate resources for retail

businesses will procured, with assistance to powerloom weavers by the government,"

Irani said at a function here.

The government is going to go ahead in a big way for skilling of powerloom sector, in

synergy with CMAI, she said.

Textiles secretary Raghvendra Singh recalled that MoUs were recently signed with

industry players wherein government will facilitate sourcing of handloom products from

handloom clusters, based on requirements of industry, so that cost of production comes

down for weavers.

He said that specific discussions were held today with CMAI members, and it has been

decided that government and industry will work together for enhancing income of

weavers and generating employment.

Textiles minister also launched 'India Size' project and study of Apparel Consumption in

India, at the event.

A first-of-its-kind project, India Size aims to arrive at a standard Indian size for the ready-

to-wear clothing industry, on the lines of the standardized sizes available in countries

such as the US and the UK.

A size chart that is specific to Indian consumers' measurements will be developed. This

will help Indian apparel manufacturers to tailor their cuts closer to the actual body

measurements of consumers.

The India Size project will benefit manufacturers, consumers and will also generate data

for textile ministry.

The minister also launched a study of Apparel Consumption in India. Representing over

45,000 apparel manufacturers and retailers, CMAI will be conducting a study spread

across three to six months, for arriving at an accurate assessment of the total apparel

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4 CITI-NEWS LETTER

consumption in the country, thereby resulting in more accurate business projections,

better marketing strategies and investment into the industry.

The study aims to bridge the lack of accurate and reliable data on the size, spread, and

extent of the domestic market.

The study will attempt to come up with region-wise and product category-wise

consumption patterns in the country, to arrive at a statistically reliable database, which

could then become the foundation to study growth patterns in the coming year. The report

would be ready for release by July 2019.

Home

Textiles sector rues synthetics’ inverted duty structure

(Source: Kritika Suneja, Economic Times, February 07, 2019)

“At present, synthetic fibre is taxed at 18%, yarn at 12% and final output at 5%, creating a

tax structure where rate on inputs is higher than that on output.

The textiles industry has complained that the absence of refund on input tax credit on the

domestic sale of synthetic fabrics has blocked its working capital, while an inverted duty

structure makes the rate on inputs higher than that on the output.

“At present, synthetic fibre is taxed at 18%, yarn at 12% and final output at 5%, creating a

tax structure where rate on inputs is higher than that on output. This inverted structure

has made it easier to import synthetic textiles, (rather) than manufacture them

domestically,” said Sanjay Jain, chairman, Confederation of Indian Textile Industry

(CITI).

“Refund of inverted duty is allowed, but it is complicated and leads to working capital

blockage for months. Goods and services tax (GST) on capital goods is not refunded,” Jain

added.

Export of manmade yarn, fabrics and made-ups dropped 3% on-year in November, to

$371million. As per industry estimates, the inverted duty structure made imports 15-20%

cheaper for the domestic industry.

Sales of manmade textiles such as polyester and viscose,” said another industry

representative, requesting anonymity.

Another grouse of the industry is that rules do not allow refund or adjustment of goods

and services tax on services from output GST obligations, which has led to losses for small

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5 CITI-NEWS LETTER

and medium enterprises using job working services and having an inverted duty

structure.

“It is incorrectly framed and the refund rule needs to be rectified,” said Jain of CITI. To

resolve the issue, the industry has sought refund for unused input tax credit that lapsed

on July 31last year and extension of the refund to those selling in the domestic market.

Home

Exporters want Centre to refund State levies to stay competitive

(Source: Amiti Sen, The Hindu Business Line, February 06, 2019)

With direct export sops under WTO scrutiny, Centre may look at expanding scope of RoSL

With India’s eligibility to extend direct sops to exporters coming under the World Trade

Organisation (WTO) scanner, the government is examining the industry’s suggestion of

expanding the scope and coverage of the Rebate of State Levies (RoSL), a scheme which

does not flout global trade rules as it involves refund of taxes and levies paid by exporters,

and is not a subsidy.

“At the consultations between exporters and the government, exporters made a case for

extension of RoSL scheme to more sectors as the policymakers are not too keen on giving

more direct export subsidies such as the Merchandise Export Incentive Scheme. The

suggestion for RoSL extension is under consideration,” a government official said.

The RoSL, a scheme under which exporters can claim refunds from the Centre for all the

levies and duties they pay at the State level, is extended only to exporters of apparel and

made-ups.

“The textile sector was most vocal about the need to extend the ROSL scheme to other

categories as well. The representatives claimed that their exports were under pressure and

needed the support,” the official said. The meeting between exporters and officials was

attended by representatives of all export promotion councils and bodies.

Exporters argue that due to the current State levies and duties on various products

including embedded taxes, a substantial amount of working capital gets blocked and

exports becomes uncompetitive. Since the government is not keen on giving more direct

export subsidies such as the one given under the MEIS, the ROSL becomes more relevant.

At present, bulk of the incentives to exporters is under the popular MEIS wherein the

government gives incentives to exporters equivalent to a certain percentage of their export

value in the form of duty credit scrips that can be used to pay customs duties and are freely

transferable.

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6 CITI-NEWS LETTER

WTO curbs

But with the WTO now ruling that since India’s per capita Gross National Income is over

$1,000 it is no longer eligible to give direct subsidies such as the ones offered under MEIS,

such schemes have to be phased out. “India’s exports have posted a growth of 10 per cent

in the first three quarters and there are expectations that exports will touch an all-time

high of $325 billion in 2018-19. The government wants to take all steps to ensure that

growth doesn’t go off-track,” the official said.

Home

Reduced budget outlay under ATUFS to hit textile sector’s modernization

(Source: Times Of India, February 07, 2019)

Modernisation in the country’s largest man-made fabric (MMF) textile industry in the city

will come to a grinding halt with Central Government reducing allocation under Amended

Technology Upgradation Funds Scheme (ATUFS) to Rs700 crore in the revised outlay for

the textile sector in 2019-20. The textile sector has been left in the lurch with the Central

Government reducing the outlay for it from Rs6,943 crore to Rs5,831 crore for 2019-20.

Moreover, the ATUF scheme and Rebate on State Levies (ROSL) have been reduced from

Rs2,300 crore to Rs700 crore and Rs2,164 crore to Rs1,000 crore, respectively.

Industry sources said backlog in the ATUFS would be over Rs2,000 crore as over 3,000

projects that got implemented are yet to receive subsidy due to complicated guidelines of

ATUFS. The government had earlier allocated Rs17,822 crore, including Rs5,151 crore for

ATUFS for the 13th Five Year Plan in order to clear long-pending committed liability.

Leader of power loom sector, Ashish Gujarati said, “ATUFS is lifeline of the textile sector.

With just Rs700 crore for the ATUFS, modernization in the textile industry will be

affected. The power loom weavers who have to repay loan instalment will face a difficult

situation.”

Power loom weavers stated that 1,500 files from Surat are pending for subsidy approval

at the textile commissioner’s office under the ATUFS for 10% subsidy. The weavers had

ordered machinery from foreign countries for taking benefit of the subsidy. The

complicated guidelines of ATUFS have resulted in non-reimbursement of the subsidy

amount to the weavers.

Federation of Gujarat Weavers’ Association (FOGWA) president Ashok Jirawala said,

“FOGWA has demanded a joint inspection team consisting of textile association,

MANTRA and textile commissioner’s office be formed to hold an open house with the

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7 CITI-NEWS LETTER

weavers who are yet to get the subsidy amount. Out of the total 7,000 files submitted for

subsidy under ATUFS, only 70 have been approved for disbursal across the country.”

Home

GST-hit textile traders begin campaign for Modi

(Source: Times of India, February 07, 2019)

The onslaught of goods and service tax (GST) may have adversely hit the textile business

of Surat, but traders here are bating for Prime Minister Narendra Modi and have already

started campaigning.

Many textile traders owing shops at Ring Road have printed bill-books and challans with

pictures of PM with slogans ‘Namo Lao Desh Bachao’ ‘Namo Again’, ‘Vote for BJP’ etc.

These traders are issuing bills to their counterparts across the country appealing them to

bring Modi back to power in 2019.

At least 25 textile traders have printed such bill books to send out a message to their

clients mainly in Uttar Pradesh, Delhi, Maharashtra, Kolkata, Tamil Nadu and

Hyderabad.

In 2014 Lok Sabha election, the textile traders in the city had supplied saris and dress

materials in the bags having Modi’s images and message ‘Sab Ka Saath, Sab Ka Vikas’.

They repeated this in 2015 Bihar Assembly election too.

There are over 165 textile markets in the city housing over 65,000 textile shops. The daily

turnover of the saris and dress material is pegged at Rs 110 crore.

Market sources said that around Rs 70 crore worth of saris are dispatched on daily basis

from Surat to various destinations including Delhi, Mumbai, Uttar Pradesh, Bihar,

Odisha, Kolkata, Punjab etc. Bihar and Uttar Pradesh account for Rs 15 crore worth daily

business in sari.

Textile trader Bharat Rangolia said, “GST and demonetisation had a very bad impact on

the trade, but things are settling down. Modi did not worry about vote bank while

implementing GST. My bill book has his picture and message ‘Namo Again’.”

Natthu Sharma, a trader dealing on the e-commerce platform, said, “In the last few days,

I have issued 200 bills carrying image of PM and a message to vote for him in 2019. I have

got 40 calls from my clients in many states appreciating this initiative.”

Apart from bill books, the traders sending textile goods to other states are using

specialized laces for packaging with the message ‘Namo Lao, Desh Bachao’.

Home

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8 CITI-NEWS LETTER

Cotton prices may remain firm this year on low output

(Source: Madhvi Sally, Economic Times, February 07, 2019)

Cotton prices are expected to remain firm this year due to lower production in the country,

apart from rising consumption in both the domestic and overseas markets, exporters and

analysts said.

Prices may rise by March end, when market despatches will reduce. A weakening of the

rupee will also help overseas demand for India’s cotton exports, they said. India shipped

about 25 lakh bales of cotton in the four months ended January to Bangladesh, Pakistan,

Indonesia, Vietnam and China.

“In 2019, due to tighter supply situation as well as robust export demand following trade

tension between the US and China, cotton prices will remain firm,” said Veeresh

Hiremath of Karvy Consultants.

He said China had offloaded most of its inventory and is importing from India. “A lot will

depend on trade negotiations which India has with China. It is a growing market for

Indian exporters,” he said. According to Atul Ganatra, president of Cotton Association of

India, prices are expected to go up by March end. “We have shipped 25 lakh bales from

October to January and we have kept a target to export 51lakh bales. This will be lower

than 68 lakh bales we exported last year,” he said. The CAI said production is expected to

be the lowest since 2010-11 at 335 lakh bales for the 2018-19 season due to lower rainfall

in the key cottongrowing states and pink bollworm attack. Analysts said buyers should

wait for prices to fall before March. “Prices are currently at Rs 20,500 per bale of 170 kg

each, which we expect to dip to Rs 8,500 per bale in the short term, before seeing an

upward movement to Rs 22,000 by March end or April,” said Hiremath.

Home

RCEP: India must exercise caution

(Source: Nilanjan Ghosh, The Hindu Business Line, February 06, 2019)

The regional pact goes far beyond trade liberalisation to impose a common set of rules on

investment and IPRs

India’s participation in the mega-trade agreement, Regional Comprehensive Economic

Partnership (RCEP), has long been debated and sentiments around the subject are quite

divided and divergent. Geethanjali Nataraj and Garima Sahdev (henceforth N-S), while

inferring that the long-term benefits of joining the bloc far outweigh the short-run costs,

state, “…if India wants its ‘Make in India’ to become a global success it must participate

positively to become a part of the Asian Value and Supply chain which either begins or

ends in India” (BusinessLine, January 7, 2019).

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9 CITI-NEWS LETTER

There have also been compelling arguments that RCEP will facilitate micro, small and

medium enterprises (MSMEs) to effectively integrate into the regional value and supply

chains.

Detractors to the above theses point out that India’s trade deficits with nations have

always widened after signing free-trade-agreements (FTAs) with them, citing the cases

with ASEAN, Japan, Korea, and Singapore, most of which are RCEP nations.

However, FTAs should not be judged on the basis of trade deficit only, but also through

the impacts on the participants in the commodity value-chain. At the same time, it has

also been pointed out that India’s vulnerable agriculture and dairy sectors, which are not

in positions to compete with Australia and New Zealand, will be exposed to vagaries of

global trade.

My contention in this article is, however, a bit different. I am not against India’s

participation in RCEP. Given that this is the first mega-trade, I intend to raise six

cautionary points, so that the costs of entering into this deal are considered.

This is to create the understanding that what is being perceived as long-term benefit by

N-S might turn out to be long-term costs.

My propositions are: a) regional trade agreements like RCEP need not always be

beneficial from the ‘Make in India’ perspective; b) impact on value chain from RCEP need

not be positive; c) issues of complementarity in trade are still unclear; d) issues with

services; e) raising relative trade barriers with non-members; and f) reduction in long-

run trade policy manoeuvrability.

For the time being, the geo-strategic issue of existence of China in this trading bloc is

being left out, as India has been getting into bilateral deals with China under the RCEP

umbrella.

On the issue that ‘Make in India’ will be a success with India’s entry in RCEP, the fact,

unfortunately, is that Indian manufacturing is not competitive enough to face the vagaries

of a free trade regime. Even after 27 years of liberalisation, inefficiency prevails due to a

host of unimplemented reforms in the product and the factor markets. Despite the

implementation of GST with the idea of creating more efficient supply-chains,

rationalisation of multiple GST rates is still a work-in-progress. Further, the compliance

with the existing complex norms of GST adds to the transaction costs.

Labour pangs

On the factor side, labour market reforms are incomplete. Labour productivity in

manufacturing is still one of the lowest in the world with spatially fragmented labour laws

are escalating the costs of doing business. Given this, Indian industry is hardly in a

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10 CITI-NEWS LETTER

position to compete in the level-playing ground in a free-trade region. If domestic

industry has to thrive, it needs protection as also the enabling conditions created by factor

and product market reforms. ‘Make in India’ aims to create enabling conditions for both

domestic and foreign industries, and attract foreign investments. In no way, it is

conceived at the cost of domestic industry. Complementarity in trade is the most critical

element to examine before getting into any trade agreement. Lack of complementarity

may make things work the other way round.

There is no assessment on this aspect placed in public forum in the context of RCEP.

Rather, the rise in India’s trade deficit with its FTA partners is attributed to imports of

final products that are cheaper than the domestically produced ones. On the other hand,

cheaper intermediate goods can rather help in making Indian exports competitive.

The issue of trade liberalisation with services is still a matter of contention among RCEP

nations. In the FTAs with East and South-East Asian economies, beginning with

Singapore in 2005 to the last one signed with South Korea in 2011, India has been

insisting on capitalising on its pool of skilled labour from improved access to employment

opportunities in these economies. This has been expected to come about by increasing the

ease of movement of professionals through the liberalisation of what is called Mode 4 in

services trade. To this end, India has been willing to trade up its remaining tariff policy

manoeuvrability in the manufacturing industry (and even in the agricultural sector).

Under RCEP, India has sought binding commitments to simplify services trade. However,

given the conditions of the manufacturing and agriculture sectors, it is definitely not a

good idea to sacrifice their causes for services. This is prone to promote a skewed nature

of sectoral growth.

Preferential trade pacts

Axiomatically, “preferential trade agreements” (PTAs) are not really the best moves for

“small” economies (ones that are “price-takers” than “price makers” in the global

economy).

India, despite its huge population and increasing income levels, is a price-taker in global

trade, especially in commodities. Neither could the nation wield forces to affect global

commodity prices, nor does it have world-class global price discovery platforms. For such

a price-taking economy, a preferential reduction of trade barriers with partners in a PTA

tantamounts to raising the relative trade barrier against non-member countries.

On the other hand, RCEP in the long run goes far beyond trade liberalisation. In its

attempt to harmonise foreign investment rules, intellectual property rights (IPR) laws,

and several other laws and standards, beyond what has been agreed by developing

countries at the WTO, it takes away an economy’s ability to customise trade policies

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11 CITI-NEWS LETTER

according to the needs of specific time periods. This will be another long-term cost that

the Indian economy has to bear.

Therefore, there are several costs that may arise in the short and long run, and they need

to be accounted for before India launches for RCEP.

The writer is Director, Observer Research Foundation, Kolkata.

Home

Here's what to expect from RBI policy review today

(Source: Gopika Gopakumar, Live Mint, February 07, 2019)

The Reserve Bank of India’s Monetary Policy Committee under its new

chairman Governor Shaktikanta Das will announce its policy decision on Thursday. The

market will keep a close watch on the governor’s statement to see if he is a hawk or a dove.

With the majority expecting the MPC to keep rates unchanged, Mint takes a look at the

five things that could be on the rate-setting committee’s radar.

1) What will be the MPC’s rate action?

The MPC is expected to keep the policy repo rate on hold due to the persistent fall in

inflation and the expansionary budget. A Mint survey of bank treasury heads revealed

that the majority expect the RBI to maintain the status quo with a change in stance to

neutral. The remaining expect a cut in the repo rate by 25 basis points. This is line with

the findings of a Bloomberg survey which showed that 30 of 38 economists expect the

RBI to keep the repo rate on hold, while eight expect a 25 bps cut. In the previous policy,

former RBI governor Urjit Patel had said that there is a possibility of a rate cut if upside

risks do not materialize.

2) Will the MPC revise its inflation target?

Since the last policy in December, consumer price inflation has eased to 2.19%,

undershooting the MPC’s projection of 2.7-3.2% for the second half of the current

financial year. Core inflation, which excludes volatile items such as food and fuel, has,

however, remained stubbornly high at 5.7%. Oil prices have remained unchanged

compared with levels seen around the December policy. The MPC could also take note of

the expansionary budget and the potential impact of increased rural spending on

inflation. The interim budget has proposed a relief package of ₹75,000 crore under which

the government will transfer ₹6,000 per year to farmers who own up to 2 hectares of

land.

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12 CITI-NEWS LETTER

3) What are the growth concerns before the MPC?

Until now, the MPC has remained sanguine about domestic growth prospects. The major

driving force for the economy has been the public sector entities, which have outpaced the

government in capital expenditure. However, the government is being criticised for

spending too much money on revenue expenditure that leaves little money for creation of

capital assets. On the global front also, growth is expected to slow down due to trade

tensions between the US and China and tighter financial conditions. The International

Monetary Fund cut its world economic growth forecast for 2019 and 2020 citing weakness

in Europe and some emerging markets. Domestic gross domestic product growth

decelerated faster than anticipated in the second quarter (July-September) to 7.1% from

8.2% in the first quarter (April-June).

4) Will the RBI highlight issues related to NBFCs?

Risks to financial stability have increased, with non-banking finance companies in a

liquidity crisis following defaults by Infrastructure Leasing and Financial Services. Recent

allegations raised by Cobrapost that Dewan Housing Finance Ltd (DHFL)

diverted ₹30,000 crore loans could also have a negative impact on the housing finance

sector. Credit growth has, therefore, slowed down with NBFCs and HFCs slowing down

disbursements. While the liquidity crunch has eased, concerns still remain about the

repayment ability of some of these players and their asset liability management.

5) Will the MPC statement flag concerns about the fiscal deficit?

The interim budget pegged the revised fiscal deficit for 2018-19 at 3.4% of GDP, against

the initial target of 3.3%. While the slippage is marginal, risks of future slippages cannot

be ruled out and may prevent the RBI from cutting rates. The budget raises serious doubts

about India’s ability to narrow the deficit to 3% of GDP by 2020-21, which the government

has committed to in the Fiscal Responsibility and Budget Management Act. Rating agency

Moody’s said the unexpected fiscal profligacy could lead the RBI to contemplate a slower

path to monetary easing than warranted.

Home

Donald Trump’s new trade tariff plan may impact India

(Source: Hindustan Times, February 06, 2019)

The United States Reciprocal Trade Act, if signed into law, could have consequences on

bilateral trade with countries like India.

US President Donald Trump on Wednesday vowed to rectify “calamitous” trade policies

and sought to expand his power to impose reciprocal tariffs which could have implications

on bilateral trade with countries like India.

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13 CITI-NEWS LETTER

Trump during his annual State of the Union address told Congress that Washington’s

aggressive trade negotiations with China would mean an end to its alleged “theft” of US

jobs and wealth.

“We are now making it clear to China that after years of targeting our industries, and

stealing our intellectual property, the theft of American jobs and wealth has come to an

end,” Trump said in his address to the joint session of the US Congress.

“Therefore, we recently imposed tariffs on $ 250 billion of Chinese goods -- and now our

treasury is receiving billions of dollars a month from a country that never gave us a dime.

But I don’t blame China for taking advantage of us, I blame our leaders and

representatives for allowing this travesty to happen.

Trump said he has great respect for Chinese President Xi Jinping and his administration

was working on a new trade deal with China. “But it must include real, structural change

to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs,”

Trump said. To build on American incredible economic success, he said one priority is

paramount — reversing decades of calamitous trade policies. So bad.

“I am also asking you to pass the United States Reciprocal Trade Act, so that if another

country places an unfair tariff on an American product, we can charge them the exact

same tariff on the same product that they sell to us,” Trump said.

The United States Reciprocal Trade Act, if signed into law, could have consequences on

bilateral trade with countries like India.

The Reciprocal Trade Act would give him authority to levy tariffs equal to those of a

foreign country on a particular product if that country’s tariffs are determined to be

significantly lower than those charged by the United States.

It would also allow Trump to take into account non-tariff barriers when determining such

tariffs.

Trump has been alleging that many countries all over the world have taken advantage of

the US.

India in February last year slashed the customs duty on imported motorcycles like Harley-

Davidson to 50 per cent after Trump called it “unfair” and threatened to increase the tariff

on import of Indian bikes to the US.

During a White House event on the Reciprocal Trade Act in January this year, Trump

flashed out a green colour board with examples of non-reciprocal tariffs from various

countries, including from India. “Look at motorcycles as an example. (In) India, it was

100 per cent. I got them down to 50 per cent, just by talking for about two minutes. It’s

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14 CITI-NEWS LETTER

still 50 per cent vs 2.4 per cent (on imported motorcycles to the US). Again, other than

that, it’s a very fair deal,” the president had said.

Trump at that time also pointed out to the high tariff by India on import of wines. “India

has a very high tariff. They charge a lot of tariffs. You look at whisky... India gets 150 per

cent, we get nothing,” he had said. The Reciprocal Trade Act is likely to face an uphill fight

in Congress, where many lawmakers in both parties have opposed Trump’s trade policies.

A bipartisan group of lawmakers introduced legislation to limit Trump’s ability to use

national security as a rationale for tariffs. The business community is rallying behind the

bill.

Home

Bengal summit to help test industry pulse

(Source: The Telegraph, February 07, 2019)

Govt to present a “shelf of 150 investable projects” in 17

sectors before potential investors.

The annual edition of Bengal’s showcase business

summit, which begins on Thursday, will test chief

minister Mamata Banerjee’s pull among India’s top

industrialists as the two-day event unfolds within days

of a high-decibel political standoff with the Centre and

about three months before the general election.

Reliance Industries chairman Mukesh Ambani will be

the top draw at the fifth edition of the Bengal Global

Business Summit 2019 that will also see participation from JSW Group’s Sajjan Jindal

and Rajan Mittal of Bharti Enterprises, apart from a host of foreign delegates.

Ambani is expected to outline his plan for the 40-acre plot Reliance Jio took up in Silicon

Valley at Rajarhat where a telecom equipment unit may come up. He will also have a one-

on-one with Banerjee.

Around 12 nations will be “partner countries” at the summit with the UK, Italy and Poland

joining the event at the Biswa Bangla Convention Centre in Rajarhat along with

Luxembourg, which will be participating in a business summit in India for the first time.

“There is a palpable expectation that Banerjee’s Trinamul Congress may play a pivotal

role in the formation of the next government in Delhi. Businessmen, who always hedge

their bet among various political combinations, would not let such an opportunity go

abegging to meet and greet her,” a city-based industrialist said.

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15 CITI-NEWS LETTER

The West Bengal Industrial Development Corporation, the nodal agency in charge of

holding the summit in association with Ficci, along with other entities of the state

government, however, is not banking on the optics of investment jamborees alone.

Under the leadership of Amit Mitra, who wears several hats in Banerjee’s ministry,

including finance, industries and information technology, the government will present a

“shelf of 150 investable projects” in 17 sectors before potential investors to pick and

choose from.

All put together, they represent an investment opportunity of $17.8 billion, or Rs 125,000

crore, according to a booklet that will be made available on Thursday.

The areas of highest investment potential are MSME and textiles, multi-product

industrial parks, power and mining, chemicals, iron and steel and logistics and port,

contributing to almost 90 per cent of the total opportunity in the state.

The Tajpur port, which was slated to be developed jointly with the Centre, will account

for nearly one-sixth of the total opportunities. Last month, the Bengal cabinet decided to

walk out of the project and develop it alone with a private partner. Investors will keenly

watch for an announcement on this project.

There is also a possibility that an announcement regarding the container port at Kulpi

could be made at the event.

However, Banerjee’s high-pitched opposition to Prime Minister Modi will spell one

casualty. Union ministers are unlikely to attend the summit. None of the ministers have

confirmed their participation even as invitations were sent to all, sources in Nabanna said.

“This year we invited them. Suresh Prabhu has sent a video message. I have no issues.

Because government is government and it is a constitutional obligation. I wish to keep in

touch with the Centre always,” Banerjee said.

Investors will also look out for the success stories other than mere optics before

committing their money. For instance, Luxembourg decided to join the event primarily

because of the two companies already operating out of here.

“In Bengal, we have, among others, two companies — Ceratizit and Amer-Sil Ketex — who

have an impressive track record in their domain in the country,” Jean Claude Kugener,

ambassador of Luxembourg, said while explaining why it chose Bengal first. Luxembourg

is heading a delegation of six companies.

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16 CITI-NEWS LETTER

Nagaland to get ‘Best Eri Silk Producing State’

(Source: Morung Express, February 06, 2019)

Nagaland has been selected as the ‘Best Eri Silk Producing State” in India.

Sharing the information on the social media platform Twitter on February 5, the state

Chief Minister Neiphiu Rio lauded the officials and staff of the Department of

Sericulture for the achievement.

The award will be given by Union Minister of External Affairs Sushma Swaraj at the

Ministry of Textiles’ Mega Silk Event on February 9.

“Happy to know that #Nagaland will be awarded the “Best Eri Silk Producing State” in

#India…Congratulations to the officials & staff of Dept. of Sericulture…” Rio tweeted.

Meanwhile, according to the schedule of the event shared by Central Silk Board, the

‘Mega Silk Event’ will be held at Vigyan Bhavan, New Delhi February 9 under the theme

“Surging Silk” with Swaraj as the chief guest.

She will also honour ‘Best Achievers’ who have significantly contributed to the silk

industry as well as ‘Best Performing States’ in implementation of ‘Silk Samagra’ and

‘Growth of Silk Industry.’

The event presided by Textiles Minister Smriti Zubin Irani will also feature the release of

‘Seri-states of India 2019: A Profile’ and ‘Melange Fabric,’ product made from silk waste.

Swaraj will also launch a mobile application – ‘E-Cocoon’ at the event.

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17 CITI-NEWS LETTER

GLOBAL:

Brexit could spell economic peril for parts of the EU

(Source: The Tribune, February 06, 2019)

For the more than 120 workers at the Pedrosa & Rodrigues garment factory in

northwestern Portugal, events in another country 2,000 kilometers (1,200 miles) to the

north could jeopardize their livelihood.

Sales to Britain make up about half of this family business’s annual revenue of about 14

million euros ($16 million). But the U.K.’s impending departure from the European

Union could make “Made in Portugal” labels less attractive once borders go back up

between Britain and the 27 other countries in the bloc.

“The worst-case scenario is losing 7 million euros” a year, says Ana Pedrosa Rodrigues,

the company’s client relations manager. “It would be extremely worrying.”

Companies like Pedrosa & Rodrigues fear they could be part of the collateral damage from

Britain’s withdrawal from the EU’s single market, which guarantees no tariffs on trade

and free movement for goods, workers and money. As Brexit-inspired economic

adjustments ripple across the bloc, small countries like Portugal could feel a lot of

economic pain, although the extent of the disruption remains unclear because the terms

of Britain’s divorce deal with the EU remain unresolved.

Some economic forecasts have produced scary numbers. The Portuguese government

says Brexit could wipe out up to 26 percent of Portuguese exports of goods and services

and shave 1 percentage point off the country’s GDP.

The Organization for Economic Co-operation and Development, a policy adviser to

developed economies, estimates that if Britain leaves without an agreement on new trade

terms with the EU, it could reduce the EU’s GDP by around 1 percentage point by 2020.

That’s more than half a year’s economic growth at current rates. It could be three times

worse for Britain, the OECD says.

The OECD notes that some countries, sectors and businesses across the EU will feel more

pain than others.

A report last year by the European Committee of the Regions, an EU advisory body,

identified Ireland as the likely major casualty of Brexit due to its geographic proximity to

Britain, which historically has tied them together commercially.

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18 CITI-NEWS LETTER

Some German regions, such as Stuttgart, that rely on auto industry exports to Britain

could also feel the economic shockwaves, it said. Chemical and plastics companies in

Belgium and the Netherlands are at risk, too.

In Portugal, which has had close ties with Britain since the Treaty of Windsor in 1386, the

textiles sector based in the northwest is one of the country’s most exposed industries. It

is largely located in what is one of the poorest regions of Portugal and western Europe.

The textile companies already have felt a chill, with sales to Britain dropping by more than

3 percent since the 2016 Brexit referendum, according to Paulo Vaz, director-general of

the Portuguese Textile and Clothing Association, which represents about 500 companies

in the sector.

He puts that down to the weak pound, which makes purchases from countries like

Portugal that use the euro more expensive, and cautious spending by British consumers

at a time when their financial future is uncertain.

He says these are tense times for Portuguese companies, especially with the U.K. playing

such a central role in the local textile industry.

“We’re talking about a market that is our fourth-largest, that’s worth around 450 million

euros ($516 million) a year to us and that was growing, and that now can be severely

harmed by all this,” Vaz said, referring to Brexit.

For some businesses, the British market is their lifeblood.

The two-story Pedrosa & Rodrigues factory sits amid green fields on the fringes of a small

town in Portugal’s industrial heartland, where textile companies are an economic

mainstay and provide about 130,000 jobs.

Inside, there is a hum of sewing machines, a hissing of irons and a rumble of high-tech

cloth-cutting machines. Ana Pedrosa Rodrigues remembers sitting as a child on the

running boards of these machines after her parents started the company with five

employees in a garage in 1982.

Ana and her two older brothers recently joined their parents at the company. The other

employees include husbands and wives, fathers and sons, brothers and sisters.

Generations of workers are common in the industry. Almost all of the workers live in

town, many of them within walking distance, and have served on average of 19 years.

Pedrosa & Rodrigues has prospered in part by selling “affordable luxury” brands to some

of Britain’s well-known fashion labels. The company makes ME+EM T-shirts that can be

found at Selfridge’s in London and produces some of the All England Club’s range of

Wimbledon tennis wear. In an ironic twist, it also delivers to British brand L.K. Bennett

— a label occasionally worn by British Prime Minister Theresa May.

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19 CITI-NEWS LETTER

Every Friday, workers stack dozens of brown cardboard boxes at the factory’s loading bay

and place them on trucks for the 2-3 day trip to warehouses in central Britain.

At the moment, the trucks drive straight across the EU’s open borders. If they are shut,

the paperwork, delays and tariffs could add 12 percent to the cost price.

A loss of British business would translate, inevitably, into job losses— and not just at this

company, Ana Pedrosa Rodrigues says.

“We are at the front end of a supply chain, and the losses would have a knock-on effect

for our suppliers,” she said. That includes the fabric producers, dying companies, printers

and embroiderers. Most of them are their neighbors. “Nobody would escape the impact.”

Sofia Cardoso, a 43-year-old employee of Pedrosa & Rodrigues whose husband also works

for a textile company, refuses to be gloomy, saying the sector has built up a lot of resilience

over its long history.

“We’ve been through crises before and we’ve survived,” she said. “I think we’ll get through

this one too.”

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Bangladesh: Exports rise 7.92pc

(Source: The Daily Star, February 06, 2019)

Exports fetched $3.68 billion in January, up 7.92 percent year-on-year, on the back of

robust growth of garment shipments.

With January proceeds, export earnings in the first seven months of the fiscal year come

to $24.18 billion, up 13.41 percent from a year earlier and comfortably past the periodic

target of $22.41 billion.

The jump in receipts come despite four major export earning sectors -- leather and leather

products, jute and jute goods, home textiles and shrimps -- logging in lower shipments,

according to data from the Export Promotion Bureau.

Earnings from leather and leather products, the second biggest export earner after the

garment, dropped 11.71 percent year-on-year to $626 million between the months of July

last year and January this year.

Export of jute and jute goods, which account for part of the livelihood of tens of thousands

of growers, tumbled 24.66 percent to $498 million during the period.

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20 CITI-NEWS LETTER

The sector hit a rough patch earlier this fiscal year in the face of waning demand for

economic slowdown in Turkey, one of its biggest market, and anti-dumping duty slapped

by India.

Export of shrimp, which is grown in the southwest and southeast costal region by more

than 8 lakh farmers, also continued to suffer for ample production of vannamei shrimp

in other countries, particularly in India.

Processors bagged $257 million in the July-January period, which is 12.37 percent lower

than a year earlier.

Home textiles exports declined 0.79 percent to $494.09 million.

And yet, a 14.51 percent spike in shipment of garment products helped the overall earning

scenario to remain positive.

The apparel sector, which typically accounts for more than 80 percent of total export

earnings, logged in $20.21 billion in export receipts in the first seven months of the year.

Agricultural products extended additional support to the growth in export earnings.

Export of agricultural products such as dry food, vegetables and spices rose 61 percent to

$579 million in the seven months to January.

In addition, export earnings from petroleum bi-products, pharmaceuticals, plastic

products, paper and paper products, cotton and cotton product, specialised textiles,

footwear other than leather and engineering products increased in the first seven months

of fiscal 2018-19.

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EAC REAFFIRMS PLAN TO DEVELOP EAST AFRICA’S TEXTILE AND

LEATHER SECTORS

(Source: Venture Africa, February 07, 2019)

The East African Community (EAC) has reaffirmed plans to develop a strong textiles and

leather sector in East Africa. The announcement was made at the 20th Ordinary Summit

of the EAC Heads of State in Arusha. This shows the determination of the member states

to offer citizens competitive options in regional textiles and footwear in the face of

neoliberal globalisation.

Tanzania’s government also plans to boost its cotton exports to $150 million by 2020, up

from the current $30 million, according to the country’s Deputy Minister of Agriculture,

Ms Mary Mwanjelwa.

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21 CITI-NEWS LETTER

Meanwhile, Rwanda has already launched a multi-agency task force to embark on a

training programme targeting local factories and small and medium enterprises in leather

processing. The country’s government wants manufacturers to adopt cleaner production

technologies.

“Nothing should hold us back from achieving our regional goals in trade and other sectors

of development,” explained New EAC Summit, Chair and Rwandan President, Paul

Kagame. He was speaking at the Arusha International Conference Center in Tanzania.

Kagame recently took over as Chair of the Summit from President Yoweri Museveni of

Uganda.

The Summit received a report of its Council of Ministers covering the period from 23rd

February 2018 to 31st January 2019 and commended the council for the progress made

in the implementation of the programmes and projects of the community. Among other

things, the Summit directed the Council to review relevant policies and harmonise the

framework for the importation of goods into the EAC within three months with a view to

supporting the growth of local industries.

Also speaking at the event, outgoing EAC Summit Chair, Museveni stated that business

within the East African Community will grow with a reduction in the cost of power,

transport, labour and interest rates. He also expressed confidence in the EAC’s ability to

drive its agenda. Leaders at the event concluded that if managed properly, their ambitious

policies will soon take root and improve the livelihoods of millions of people across East

Africa.

Prior to this time, the EAC members states had agreed on a phase-out plan and eventual

ban on the importation of used clothes and leather products by 2018 to support

industrialisation and job-creation in the region. Textile industry players in the region

were challenged to start making garments that require low-level technology and skills.

Regional sector players and governments were called to put in place programmes that will

help stimulate a localised value chain.

Emphasis was laid on the region’s cotton industry, which was said to be facing huge

challenges including low yields, low ginning out-turn ratio and inefficient value addition

which was affecting its competitiveness.

When the EAC resolved to prioritise the development of a competitive domestic textile

and leather sector to provide affordable clothes and leather products in the region, this

was a positive step towards determining its own development path. However, the laissez-

faire economic liberalism has impeded the inward-oriented structure which hoped to

offer domestic protection and privileges.

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22 CITI-NEWS LETTER

Cotton production, processing and trade were said to be highly influenced by policies of

major producing countries through price support, tariff protection, production subsidies

and stockpiling that destabilise cotton prices. As the result of liberalisation, policy shifted

towards export-led growth in textile and garment which has not developed the sector;

instead, Tanzania’s cotton leaves the country unprocessed and second-hand clothing, as

well as cheap and illegal imports, have flooded the country.

The development of the industry under those trade dispensations failed to significantly

develop full value chain production in Tanzania from cotton through spinning, weaving,

knitting, design and finished goods production processes.

Kenya has the largest garment sector amongst the EAC countries and produces

predominantly for the US. EAC countries including Tanzania lack a sufficient domestic

garment production base to meet domestic needs with local or regional production.

Certainly, this move aimed at developing the textile and garment industry indicates EAC’s

desire to articulate and implement an African approach for the best utilisation of African

resources within the region, with a greater focus on domestic consumption. Producing

affordable clothes and leather products in the region for local consumption could assist

in the reduction of poverty, stabilise employment and improve the social wellbeing and

the dignity of East African communities. It could also acknowledge and include informal

sector traders in regional value chain developments.

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Sweden fires up Fashion Revolution: The Future of Textiles

(Source: The Business Mirror, February 07, 2019)

THE Embassy of Sweden in Manila, recently launched Fashion Revolution: The Future

of Textiles expo at the Metropolitan Museum of Manila, spearheaded by Ambassador

Harald Fries.

Curated and produced by the Swedish Institute, with the help of researchers and

sustainability-minded fashion experts, the exhibition highlighted Sweden’s active role in

promoting sustainability in fashion, as well as the major environmental challenges facing

it as one of the most polluting industries of the world.

Running until April 30, the exhibition is supported by major Swedish brands H&M

Philippines, BabyBjorn and Houdini Sportswear. H&M Philippines features key pieces

made out of sustainable textile from their Conscious Collection, while Houdini and

BabyBjorn exhibit clothing and baby carriers that are all made out of recycled or up-cycled

products.

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23 CITI-NEWS LETTER

According to the embassy of Sweden, the world’s population consumes about 62 million

tons of clothing per year—equivalent to a small suitcase full of clothes per person—and

only 20 percent is reused or recycled. Since 2000 global clothes production has more than

doubled, and the average person now buys 60 percent more items of clothing every year,

and keeps them for about half as long as they did 15 years ago.

It also said that it takes 10,000 to 30,000 liters of water, and 2 to 4 kilos of chemicals, to

produce 1 kilo of treated cotton. Fifteen to 30 percent of the plastic pollutants in the

oceans consist of microplastics, and 35 percent of those come from washing synthetic

textiles.

Fries expressed hope for consumers to become more conscious and mindful of their

consumption of fashion: “The better informed people are, the greater the pressure that

can be exerted on companies to act sustainably.”

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NLC Seeks Tax Waiver for New Minimum Wage

(Source: This Day Live, February 06, 2019)

The Nigeria Labour Congress (NLC) has advocated for the amendment of the present

income tax law so as to exclude the new minimum wage of N30,000, recently passed by

the House of Representatives, from taxation.

In a motion submitted by the National Union of Textile Garment and Tailoring Workers

of Nigeria (NUTGTWN) at the plenary session of the 12th delegates’ conference of the

NLC in Abuja, the union noted that there was a “twin assault on the real income of

Nigerian workers caused by unrestrained devaluation of naira and high rate of inflation.”

The union also expressed concern that the process for the new minimum wage was taking

too long and urge its parent body, NLC, to discuss strategies and plans for effective

implementation of the new minimum wage particularly at the state level.

The General Secretary of NUTGTWN, Issa Aremu, noted that it was important to put

pressure on the Federal Inland Revenue Service to raise the tax bar in such a way that

N30,000 minimum wage would fall below taxable income. He also called for tax holidays

for some categories Nigerian workers.

He said, “Now that we have raised the minimum wage to N30,000, we must impress it on

the FIRS to raise tax bar so that the new minimum wage will be protected. If you tax

minimum wage of N30,000, we may as well go back to N25,000 or N27,000 by default.

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24 CITI-NEWS LETTER

The Deputy Speaker of the House of Representatives raised the point and I think labour

must push the agenda to protect the new minimum wage.

“The N30,000 is actually a compromised amount from N56,000 earlier proposed so it

must be protected. If the Federal Government can give 10 year tax holiday to companies,

why not give the same to workers? Given the collapse of income, today, Nigerian workers

deserve tax holidays. We are not asking for this because we consider our job as charitable,

what workers have in their pocket is what will turn the economy around. That is what we

will use to purchase goods in the market and pay rent. For economic recovery, it is good

for workers to have sustainable purchasing power or disposable income that is off the tax

hook.”

On his part, the General Secretary of NLC, Peter Ozo-Eson, said that the income tax law

needed to be amended to protect workers purchasing power.

Ozo-Eson said, “Given that the N30,000 we agreed as a compromised minimum wage is

so low, ideally, it should not be taxed but I believe that the correct way to do it is to amend

the income tax law in order to raise the exemption bar if the N30,000 will fall within.

“The law should be amended to ensure that the minimum wage level is below the taxable

income. Under the present law, if you earn N18,000 a month, your tax is zero. There is a

tax table but with N30,000, under the existing exemption guideline, there will be some

little tax because it will be slightly above the exemption tax. What needs to be done is to

have an adjustment to the schedule so that the exemption is placed above the minimum

wage,” he said. Meanwhile, the NLC President, Ayuba Wabba, was Wednesday re-elected

for a second term.

Wabba, who was returned to office unopposed at the 12th delegates’ conference of the

NLC in Abuja is also the president of the International Trade Union Congress.

In his acceptance speech, Wabba pledged to redouble his efforts in protecting the interest

and rights of the Nigerian workers.

He also said that it was important to address the global imbalance where more people live

below poverty line despite the growing global wealth.

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