India needs to seal FTA with EU even if it has to compromise: Amitabh Kant
India should enter into a free trade pact with the European Union (EU) even if the country has to "compromise", otherwise, benefits from rising wages in China will go to nations like Bangladesh and Vietnam, a top official said on Friday.
Highlighting significance of apparel exports in job creation, Niti Aayog CEO Amitabh Kant said, "It is better to compromise on wine and cheese and on large vehicles to push for our apparel exports with Europe so that we can penetrate these global markets because this is one sector which will enable us to create large-scale jobs."
Kant spoke at the launch of a World Bank report titled 'Stitches to Riches? Apparel Employment, Trade and Economic Development in South Asia', which estimates that rising wages in China present a huge opportunity to the apparel sector in India, with a possibility of creating up to 1.2 million jobs in the country.
"Even a 10% rise in Chinese apparel prices could create at least 1.2 million jobs in Indian apparel industry," the report added.
The negotiations for the Bilateral Trade and Investment Agreement (BTIA) between India and the 28-nation bloc have been held up since May 2013 as both sides are yet to bridge substantial gaps on crucial issues, including data security status for the IT sector.
Launched in June 2007, the negotiations for the proposed BTIA have hit many hurdles, with both sides having major differences on crucial issues like intellectual property rights (IPR), duty cut in automobile and spirits, and a liberal visa regime.
The report also cautioned that Trans-Pacific Partnership (TPP) accord a trade agreement between 12 Pacific Rim countries including the US will likely have a far-reaching impact for key sectors in South Asia, including apparel, pointing out that a reduction in tariff and non-tariff barriers could lead to trade diversion for South Asia, including the textiles and apparel sector.
According to the report, women are expected to benefit the most as their share in the total apparel employment is much higher than in other industries. Even the 1% increase in expected wages in the textiles and apparel industry could raise the probability of women entering the labour force by 18.9%.
Onno Ruhl, World Bank Country Director, India, stressed that the country needs a million jobs a month and female labour force participation has to increase.
"Rising costs of apparel manufacturing in China provide a window of opportunity for India to focus on apparel in productively employing its huge working-age population," said Ruhl.
At a time when nearly 10 lakh people are expected to enter the workforce every month for the next three decades, export-oriented apparel production in India and other South Asian countries has the potential to create more and better jobs, stated the report.
It emphasised on the need for India to move quickly to ease import barriers of man-made fiber, facilitate market access and encourage foreign investment to reach more end markets, which would also yield dividends for other light manufacturers like footwear and toys.
Referring to the inordinate delay at Indian ports in Customs clearances for outward shipments, Kant said, "Why should it take three days to export goods? Exports should be allowed to move in three hours, not three days."
He said further, "We need to cut out this paperwork. We have been able to bring it down from 9 documents to three, but we need to bring it down to just one document and allow exports to move freely. The turnaround time at ports and bringing in much greater economic efficiency is really critical for us."
Kant pitched for the trade agreements to be comprehensive and integrated which need to involve massive investments and intellectual property rights.
According to the report, although China remains the world's largest apparel exporter, apparel as a share of its total exports in 2012 accounted for only 7.1%, about half of the 15.6% in 1990.
The potential decrease in Chinese exports presents a huge opportunity for South Asian countries, which currently account for 12% of global apparel exports, said the report.