Context:
India may gain a competitive advantage in European Union textile markets as Bangladesh is set to lose its Least Developed Country (LDC) trade benefits, while the India-EU Free Trade Agreement (FTA) could provide India with duty-free access.
Key Highlights:
- Trade Structure
- India exports mostly intermediate textile products like yarn and fabric to the EU.
- Bangladesh dominates the finished garment segment.
- Market Trends
- India’s share of EU garment imports declined from 6.5% in 2009 to 4.4% in 2023.
- Bangladesh’s share rose from 6% in 2000 to 26% in 2023.
- Changing Trade Environment
- Bangladesh may lose Everything But Arms (EBA) benefits in 2029 after graduating from LDC status.
- The India-EU FTA could eliminate EU tariffs of about 12% on Indian garments.
Relevant Prelims Points:
- Everything But Arms (EBA)
- EU initiative granting duty-free, quota-free access to all products from Least Developed Countries.
- Most Favoured Nation (MFN)
- WTO principle ensuring equal trade advantages among trading partners.
- GSP+ Scheme
- EU scheme granting tariff reductions to developing countries that comply with international conventions on human rights, labour standards, and environmental protection.
Relevant Mains Points:
- Opportunities for India
- Potential expansion of textile exports to the EU.
- Scope for reviving India’s garment manufacturing sector.
- Structural Challenges
- Higher production costs and logistics inefficiencies.
- Fragmented supply chains and infrastructure gaps.
- Policy Measures Required
- Improve supply chain efficiency and port logistics.
- Encourage investment in garment manufacturing clusters.
- Strengthen trade agreements and export incentives.
- Way Forward
- Leverage the India–EU FTA to expand textile exports.
- Improve quality standards and production competitiveness.
- Invest in labour-intensive manufacturing sectors.
UPSC Relevance:
- GS Paper III: External trade, textile industry, export competitiveness.
- GS Paper II: India–EU relations and trade agreements.