EU’s Free Trade Agreement (FTA) with Vietnam has come as a big blow to India as it removes 99 per cent of customs duties enabling Vietnamese services and public procurement markets to EU companies. India’s neighbors including Bangladesh, Sri Lanka, Cambodia and Pakistan currently ship apparel to the European Union at zero duty while India’s trade agreement with the EU features a 9.6 percent tax rate. This adds to India’s already-stark disadvantage in other areas such as, logistics costs and further erodes its competitiveness vis-à-vis Vietnam, views Gautam Nair, Managing Director, Matrix Clothing.
Vietnam’s FTA with the EU will be another blow to the Indian garment exporters, says Raja M Shanmugham, President, Tirupur Exporters’ Association. According to him, India should adopt a long-term vision of promoting garment clusters, initiating structural reforms and tailoring policy interventions.
Federation of Indian Export Organisations (FIEO) has asked the Commerce Ministry to expedite negotiations on an agreement launched in 2007, but stalled since 2013 due to disagreements over key areas. India has also agreed to hold talks with the European Union. However, the EU has laid conditions to include government procurement, labor standards and sustainability in the FTA, which India finds difficult to accept.