India-US Trade Deal: Zero Tariff Access for Apparel Exports with US Raw Materials
Commerce Minister Piyush Goyal announced on Thursday that Indian apparel exports to the United States will receive zero tariff access, provided the raw materials are procured from America. This clarification comes in response to concerns raised by Indian exporters following a recent US-Bangladesh trade agreement that included similar provisions.
Context of the US-Bangladesh Trade Deal
The US-Bangladesh trade deal, announced earlier, has lowered tariffs on Bangladeshi products to 19%, which is slightly above the 18% duty applied to Indian goods during the Donald Trump administration. However, a key provision in the joint statement is expected to significantly boost Bangladesh's textile shipments to the US. This has raised concerns among Indian exporters about losing their anticipated competitive edge in the market.
The joint statement reads: "The United States commits to establish a mechanism that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate. This mechanism will provide that a to-be-specified volume of apparel and textile imports from Bangladesh can enter the United States at this reduced tariff rate, but this volume shall be determined in relation to the quantity of exports of textiles, e.g. US produced cotton and man-made fiber textile inputs, from the United States."
Goyal's Clarification on Zero Tariff Clause for India
Piyush Goyal has now clarified that Indian exports will also benefit from the same zero tariff arrangement. He addressed concerns in Parliament, stating, "He (Rahul Gandhi) spread another lie in the Parliament that Bangladesh has got more benefits from the trade than India. Just as Bangladesh has a facility that if raw material is purchased from America, then if you process it and make cloth and export it, then it will be available at zero reciprocal tariff. India also has the same facility and India will also get it. Right now, our framework agreement is being made. When the interim agreement is finalised, then you will get to see this in the fine print."
Goyal emphasized that the India-US trade deal, which reduces tariffs on Indian exports to 18%, does not impact sensitive sectors such as agriculture and dairy. He highlighted that the interests of Indian farmers have been fully protected in the agreement.
Protection of Indian Farmers' Interests
Goyal detailed that the trade deal excludes most products from Indian farmers, ensuring their livelihoods are not harmed. He said, "I want to clarify that India's interests and the interests of Indian farmers have been fully protected in the US-India trade deal. Most of the products of Indian farmers, our dairy, poultry, rice, wheat, soybean, and maize, banana, strawberry, cherry, orange, vegetables, ethanol, tobacco, meat, pulses, millets, bajra, ragi- almost 90-95% of the produce of farmers is outside the US trade deal."
He added, "...which is the need of India, which we import even today, which will not cause any harm to the farmers in our country - we have opened such commodities to America in a calibrated manner as per a well-thought-out strategy. In a way, a very good US trade deal is made in the interests of farmers."
Implications for the Textile Industry
The zero tariff clause is expected to:
- Boost Indian apparel exports to the US by reducing costs.
- Encourage sourcing of raw materials from the US, potentially strengthening bilateral trade ties.
- Level the playing field with Bangladesh, addressing competitive concerns.
This development is part of ongoing efforts to finalize an interim trade agreement between India and the US, with further details expected in the coming months.
