1.0 Introduction:

The world textilestrade was regulated from 1960s and the regulation was more precise with theimplementation of Multi Fibre Agreement (MFA) in January 1974. A Short-TermArrangement (STA) in cotton textile trade was reached in 1961 under GeneralAgreement on Trade & Tariffs (GATT). Subsequent to this, a long-termarrangement (LTA) in international trade in cotton textiles was concluded in1968 by imposing 5 percent limit on imports of cotton products from thedeveloping countries. The MFA exempted textiles and clothing from GATTdisciplines, allowing industrial countries to place bilateral quotas and importof various textiles and garment product categories. The quota system wasdirected to protect the market of the industrial countries so as to allow themto restructure and adapt to competition from cheaper imports from developingcountries. The Uruguay round of Trade Negotiations under the framework of WorldTrade Organisation (WTO) has brought about changing in the textile trade. In theprocess of negotiation, the member countries agreed that MFA would be phasedout with the implementation of the Agreement on Textiles and Clothing (ATC).Accordingly, on January 1, 2005, the quota system was abolished and market wasopened up fully paving the way to unrestricted global trade in textiles andclothing.

As expected, the implementation ofATC has brought about structural changes in the international trade arena ontextiles & clothing. In the second year, after the phasing out of theAgreement, the structural changes in world trade of textiles and clothingcontinued unabatedly. The review of world merchandise trade during 2005 and2006 by leading exporters and importers reconfirms the importance of pricedevelopments and the outstanding trade performance of some countries like China and India. The export of T & C became skewed towards developing countries and theexporters from developed countries and those from advanced developing economieslost a part of market share, along with major developing suppliers in Central America (which mainly process textiles originating from developed countries). Thetrend became favourable for India and China, two major textiles and clothingproducers of the world. Indias exports continued to gain market share in EUimport markets despite eroding of preference margins in Generalised System ofPreference (GSP). Some smaller suppliers such as Vietnam and Cambodia, etc.expanded their textiles and clothing exports even faster than China and India; andthe share of least-developed countries in imports of the United States and theEuropean Union increased sharply in 2006. It has also been noticed a sharpincrease in the annual average growth of the exports of other Asean countriesto EU such as Bangladesh, Sri Lanka, Indonesia, Philippines, ASEAN 4 besidesNON-ASEAN country like Mexico. On the other hand, the re-shuffling of EU importshares shows some of the major traditional suppliers (e.g. Turkey, Romania,Morocco, and Tunisia) lost market shares while Asian developing countriesincreased their share (see Table-1, below).

The post quota phase has alsobrought about some interesting trends in the movements of textiles and clothingproducts. The position of EU as the most favoured destination of T & Cexports has been established. The total export from rest of the world to EU hasincreased to $183.6 billion in 2006, reconfirming EU as the largest market in T& C in the world leaving USA much behind. Japan and Canada have much smaller markets as compared to EU and USA (Table-1).

Table 1: Imports of textiles and clothing into major markets byorigin, 2006:
(Billion dollars and percentage change)

1. EU (25) includes intra-trade

2. ASEAN 4

Source:Global Trade Atlas and Eurostat, COMEXT database.

(iv) Though India receives a benefit of GSP in clothing, the margin remains at 20 percent of the import tariff which is loosing its preference on account of declining tariff levels. However, the neighbouring countries like Sri Lanka receives zero tariff market access to EU as they have been provided a special privilege under the new GSP plus scheme. The new GSP plus is awarded to a country who accepts the conditionalities imposed by EU for the good governance and sustainable development. Similarly, Bangladesh also gets zero tariff market access to EU market as it has the LDCs status. Pakistan, on the other hand, receives a similar treatment from US under the Arms Act of USA for fighting terrorism and other disruptive activities. The exports from these countries to EU have increased rapidly at a higher growth rate. The recent trend indicates Bangladesh has annual growth rate of 34 percent as against 24 percent in case of Sri Lanka. These preferential treatments to the neighbouring countries of Indian sub-continent have adversely affected the exports of EU destinations in fiercely competitive and shrinking margins in the export destinations.

(v) The EU market is being fast captured by the small emerging economies of the world like Vietnam, Cambodia and Jordan, etc. The recent annual growth rates of these countries are touching the roofs, for e.g. Vietnam, a non-entity yesterday is growing at a space of 51 percent while Cambodia at 19 percent. These economies are also posing steep competitions to the Indian exports in EU market.

(vi) It is plausible that many of the top items of Indias exports, which the EU currently imports, may begin to be imported from the acceding countries. This is because they would be available to EU at a much cheaper price due to preferential duty rates. For instance, some of the acceding countries say Estonia are also exporters of several types of textiles, cotton yarn and readymade garments to EU. These are a major export item from India to EU also. For instance, Estonia exported nearly US$ 36 million worth of cotton yarn to EU in 2002 whereas India exported cotton yarn worth more than US$ 300 million. Though the percentage share of India in the total imports of cotton yarn of EU is greater than that of Estonia, it is possible that the EU buys more that Estonia after its accession resulting in trade diversion for India. Besides them the acceding countries such as Turkey, Poland and Italy etc. who are strong in production of textiles & clothing have been able to capture a major share on account of their tariff rate advantage coupled with the contiguity criteria which helps them to reduce the cost of transportation and easy cross boarder transfer of goods.

(vii) The EU in the recent years has been imposing a plethora of Non-Tariff Barriers (NTBs) which are restrictive in nature. The Indian exporters are apprehensive of the fact that the increase in NTBs of new members due to accession to EU may prove to be more harmful and trade restricting than the Tariff Barriers. In view of the above, the Government of India should trade the path of bilateral and multilateral trade negotiations for easing out the restrictive trade of EU in the better export interest of India.

References:

1. Doing business Internationally, Danielle Medina Walker, Thomas Walker, 2^nd edition, 2002, ISBN 0-07-137832-4
2. Economic survey of Europe, 2005, ISBN 789211-169225
3. Enlargement of EU: Effect on Indias Trade, (May 2004), Economy and Political Weekly, Geethanjali Nataraj & Pravakar Sahoo.
4. Kui-Wai li Li (2003): "Relative Advantage of Manufacture Exports among World Regions: 1981-1999 Discussion paper no 853, Economic Growth Centre. Yale University, USA
5. Put your best forward, Series of book including Europe, Asia.
6. Siegfried Bender, Kui-Wai Li., (2002): The Changing Trade and Revealed Comparative Advantages of Asian and Latin American Manufacture Exports published with Economic Growth Center, Yale University, March 2002.
7. Trends in Europe and North America. The Statistical Yearbook of the Economic Commission for Europe 2003.
8. Utkulu and Seymen (2004): "Revealed Comparative Advantage and Competitiveness: Evidence for Turkey vis--vis the EU/15" paper presented in the Sixth Annual Conference ETSG 2004 Nottingham.
9. United Nations, UNECE, 2005, ISBN 9789211 169287
10. http://www.europa.eu/
11. http://export-help.cec.eu.int
12. http://madb.europa.eu/mkaccdb2/statistical_form.htm#
13. http://www.wto.org/english/res_e/statis_e/its2006_e/its06_bysector_e.htm
14. http://www.allianz-kulturstiftung.de/allianz_dt/bildung/asa05/ASA2005Manifesto.doc
15. http://www.wto.org/english/news_e/pres07_e/pr472_e.htm
16. http://mais.wordpress.com/2005/02/12/does-india-gain-from-the-enlarged-eu-market-ii-express-textile/
17. www.aepcindia.com
18. www.cbi.eu/marketinfo
19. www.oced.org. Online library OECD fact book 2006.

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Further with the expansion of EU and increase in disposable income and the preference pattern of consumers, the importance of this market is going to be pivotal in the coming years. EU market expanded to include 75 million potential consumers to make a total of 458 million people living in the EU in 2006 and making it largest market in the industrial world. For this reason alone, it represents a very attractive market for exporters from developing countries like India. This compares with 291 million populations in the USA and 127 million in Japan. Around 63 percent of EU population is in productive age group (55% for women and 71% for Men). It also coincides with highest employments rate in Denmark, the Netherlands, Sweden and UK. Some of the countries like Austria, Greece and UK have longest working hours, more productivity, larger disposable income and higher consumption ratios.

The year 2006 has also seen economic boom in Europe. It indicated an increase in employment, rise in income and an increase of middle class. CBI (Center for Promotion of Import from Developing Countries) reports that the Europeans are enjoying higher living standards as the (i) household income has increased steadily over the past 30 years, (ii) the rapid growth of mass retailers and cut price outlets freed up flow of consumer money and which is redirected to more discretionary spending (iii) European women, who are significantly drivers of New luxury spending, are working, more and playing more influential role in purchase decision (iv) EU consumers are more highly educated than ever and enjoying a differential threshold in their life styles and to influence the comfort spending as well s essential spending.

From Indias point of view, EU is a strategic trading partner. Indias relations with EU were upgraded to a strategic partnership at the 5th India-EU Summit in 2004. The New Delhi Summit of September 2005 under the Presidency of UK adopted a Joint Action Plan to strengthen political dialogue, enhancement of economic policy dialogue and cooperation to promote trade and investment. Further more, India has established strategic partnerships with individual countries like UK, France and Germany. Prime Ministers visit to France in September 2005 and the French Presidents return visit to India in February 2006 have provided new momentum to this relationship. The importance of EU as trading partner is visible from the fact that nearly one quarter of Indias exports are directed to the member countries of this important trade block.

Table 2: Indo-EU Export/Import Basket - 2005

Source: European Commission

Some precise product groups further dominate the export basket of the country. India s export basket comprises of mainly Textile and Clothing (27.82 %), Engineering goods (12.01%), gems and Jewellery (10.08%), Metal and metal product (8.38%), Chemicals and allied (9.17%), Leather and leather goods(8.37%), Mineral products(6.18%) on the other hand. EU export basket comprises of mainly engineering goods (33.91%), Gems and Jewellery (31.28%), Metal and metal product (10.2%), Transport equipment (6.82%), Chemicals and allied (7.44%). There are number of areas where the position of both EU and India has considerably similar and appeared divergence in some other areas.

The EU continues to be Indias largest trading partner. In present scenario, the clampdown on Chinese textile imports by the US and EU has positively influenced Indian textile exports but not to the extent, a hype was created. Not only did Indian textile exports to the American and European markets show record growth during 2004-06, but also it made impressive inroads into the markets of other EU states like Spain, the Netherlands and Italy etc. India's share of the global textiles market is only around 4.3 percent against China's 17 percent. But the Indian apparel sector alone has more than 27,000 manufacturers, 48,000 fabricators and around 1,000 manufacturers/exporters. India is planning to achieve export revenue of US $50 billion by 2010 from a $21 billion now. EU being the largest export market for India in textiles and clothing, one needs to understand the export competitiveness of clothing that alone makes a share of about 45 percent of Indian T & C export basket to EU.

2.0 Motivational facet:

Clothing offers a more value added market and the competition in the world market is becoming intense in the sector. Since more than 45 percent of the clothing trade of India is carried out with them, it is important to study how India will be positioned and perform in the quota free enlarged EU market. This research paper, therefore, seeks to reason out the post quota performance of Indias clothing competency in EU from a real data obtained from many credible sources.

     I.      To understand the EU as an export market, enlargement scenarios, EU trade policies, demographic developments and their changes in lifestyles and to sketch out business cultural etiquette when it comes to successful export to EU.

    II.       To assess the comparative market sizes between pre and post quota period.

    III.       To examine Indian clothing competitiveness in EU market after globalisation.

3.0 Method of analysis:

The study examines Indian clothing competitiveness by each major clothing product categories in terms of gaining and loosing its export advantage in EU market over the years and presents a comparative picture of the competitiveness in pre and post ATC periods. This research defines all activities involved in each process by calculating Revealed Comparative Advantage (RCA) and Unit Value Realisation (UVR). This has been done by using export figures of both India and world as a whole in the respective product category to EU market during last six years. The research is an analytical and descriptive one, which sheds light on the nature of trade, issues and exports competitiveness. We explain below some of the indices used in the process of analysis:

i) Revealed Comparative Advantages (RCA):

The concept of revealed comparative advantage (Balassa 1965, 1977, 1979, 1986) pertains to the relative trade performance of individual countries in particular commodities. On the assumption that the commodity pattern of trade reflects the inter country differences in relative costs as well as in non-price factors, this is assumed to reveal the comparative advantage of the trading countries. The factors that contribute to movements in RCA are economic, structural change, improved world demand and trade specialization. The index of Revealed Comparative Advantage (RCA) has a relatively simple interpretation. If it takes a value greater than unity, the country has a revealed comparative advantage in that product. The advantage of using the comparative advantage index is that it considers the intrinsic advantage of a particular export commodity and is consistent with changes in an economys relative factor endowment and productivity. The disadvantage, however, is that it cannot distinguish improvements in factor endowments and pursuit of appropriate trade policies by a country. For the purpose of analysing the export competitiveness of Indian apparels to EU, the RCA(1), RCA(2) and RCA (7) have been taken into consideration.

• Revealed Comparative Advantage (1): Balassa introduced his famous RCA index in 1965; Liesner (1958) had already contributed to the empirical literature of RCA. In this sense, Liesner (1958) is the first empirical study in the area of RCA. The proposed simple measure of RCA by Leisner is the following:
  RCA1 = Xij / Xnj (1)
  
  where X represents exports, i is a country, j is a commodity ( or industry), and n is a set of countries (e.g. the EU).

• Revealed Comparative Advantage (2): A comprehensive / advanced measure of RCA was later on presented by Balassa (1965). This is a widely accepted and afterwards modified measure of RCA in the literature. It is expressed as follows:
  RCA2 = (Xij / Xit) / (Xnj / Xnt) = (Xij / Xnj ) / (Xit / Xnt) (2)
  
  Where X represents exports, i is a country, j is a commodity (or industry), t is a set of commodities (or industries) and n is a set of countries.

• Revealed Comparative Advantage (7): Vollrath (1991), on the other hand, offered mainly three alternative ways of measurement of a countrys RCA. These alternative specifications of RCA are called:
  the logarithm of the relative exports advantage (ln RXA)
  Vollraths second RCA measure is the logarithm of the relative export advantage (here as RCA7):
  RCA7 = ln RXA = ln RCA2 (3)

RCA2 measures a countrys exports of a commodity (or industry) relative to its total exports and to the corresponding exports of a set of countries, e.g. the EU. A comparative advantage is revealed, if RCA2 >1. If RCA2 is less than unity, the country is said to have a comparative disadvantage in the commodity / industry. It is argued that the RCA2 index is biased due to the omission of imports especially when country-size is important.

ii) UVR (Unit Value Ratio)

It refers to the relative export price and changes in UVR represent the gains/losses in export prices in the specific manufacturing product group (relative to prices of all EU imports in that group). UVR is represented as follows:

iii) HS lines examined:

The paper tried to analyse the export trend of India during the period 2001 2006 at the 8-digit Harmonised Classification (HS lines) basis on apparel products. The chapters covered in the study are:

Chapter 61 : articles of apparel and clothing accessories, knitted or crocheted

Chapter 62: articles of apparel and clothing accessories not knitted or crocheted.

Chapter 63: other made-up textile articles; sets; worn clothing and worn textile articles; rags.

iv) Data:

The product wise values of Indias and world export to EU and available in the EUROSTAT Helpdesk are used as basic tool to derive the real trade data. These item wise raw data are analysed by using the simulated revealed comparative analyses mode along with the trend of Unit Value Realization (UVR). While selecting products of these 3 chapters, we have censored those items which have less than 2 percent share in the Indian export basket of that chapter; the rest of the products at 8-digit, its lines have been analysed.

4.0 EU as an Opportunity:

The EU does have motto, "Unity in diversity", which was officially proclaimed on the 4th May 2000 in the European Parliament. The motto has further strengthened with the adoption of European constitution. However, in order to preserve unity and diversity, an additional step has been taken in form of federal Europe. Federalism as a form of governance brings about a shift of the locus of the service provision to the level of the unities composing the federation, leaving the centre with coordinative functions. The greater economic integration of member countries and an adoption of uniform constitutional mechanism have facilitated more free flow of commodities and services among the member countries. The relatively more integrated European Union has brought about the following positive impact on intra and international trade.

(i) The integration brought about elimination/reduction in technical barriers to trade among the member countries and elimination of queues in the border crossing. Some other factors like intra member countries trade have also boosted the prospects of internal and international trade.

(ii) The formation of European Union also gives rise to the implementation of common policies reflecting unity in diversity. Entry of the acceding countries into the union is based on a common satisfying three Copenhagen criteria i.e. i) political (stable institutions that can guarantee democracy, the rule of law and human rights, ii) economic (a functioning market economy, iii) legal (the ability to embrace the obligations of membership and adhere to the aims of political economy and monitoring union). The last criteria refer to aspects of economic policy in central bank independence, liberalised capital markets and free trade. The implementation of these basic fundamentals have brought about a sea change on the prospects of international trade that has been reflected in the going import and export of goods and services in the recent years. Their common currency i.e. EURO shared by 12 member states, representing two third of the EU population. Euro is now one of the world most important currencies. Diversity in Unity legitimised the Union by enabling every country to recognise his place in terms of increasing freedom of movement, competitiveness and economic growth.

(iii) EU members and enlargement:

At the present scenario, the internal borders between member states and the EU as a whole system is valid for 27 members states instead of 25. The 27 member states in 2006 were Belgium, France, Germany, Italy, Luxembourg, Netherlands (Joined 1952), Denmark, Ireland, UK (joined 1973), Greece (Joined 1981), Portugal, Spain (joined 1986); Austria, Finland, Sweden (Joined 1995); Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovenia (Joined 2004). EU has presently emerged as the largest regional trading block in the world with strong economic and political powers. Bulgaria, Romania and Turkey are expected to join EU in this decade. Now the group consists of 29 countries including two candidate countries Croatia and Turkey.

(iv) Finding way to trade EU trade policy:

There are numerous, often confusing rules for exporters to be aware of with regard to international trade and trading with EU specifically. Its function is to setting procedure for handling trade disputes. There is also fund provided for legal assistance to the exporters from developing countries, even if the concerned issues are beyond WTO rules.

(v) Trade Preference: To encourage the growth and prosperity of developing and Least Developed Countries (LDCs), the European Union is also implementing plethora of schemes like New EU-GSP. It provides a special preference to exports of developing countries and hence enhances the possibility of better trade with them. This system allows access to the EU market with total or partial exemption from custom duty for manufactured textiles and clothing exported by developing countries. Hence, the developing countries in general, and LDCs in particular, could better utilise these options for boosting their export prospects and economic growth.

5.0 India's Clothing performance in EU:

India has been a substantial producer of textiles and clothing; and contributes about 14 percent to the manufacturing, 4 percent to GDP and 17 percent to the export earnings. Abundance of raw materials and low wage manpower, design capability are some key competitive factors in favour of the industry and garment production is dominated in the textile and clothing sectors though silk, man-made fibre textiles and clothing are also well grown in the country. Though apparel sector was reserved under the small-scale sector till recently, the sector has been vibrant and capable to produce almost all types of products in the value chain. Currently, apparel exports constitute about 45 percent of total exports, followed by cotton textiles (30%), textiles from man-made fibres (10%) and textiles handicrafts (10%).

Table 3: Export Trend of Indian Textiles & Clothing Products to EU (Chapter wise)

Figure in the brackets is the percentage of the total export. Source: EUROSTAT

50: Silk ;51: Wool, fine or coarse animal hair, horse hair yarn and woven fabric; 52:Cotton; 53: Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn ;54: Man-made Filaments ;55: Man-made staple fibres ; 56: Wadding, felt and nonwovens; special yarns; twine, cordage, ropes and cables and articles thereof ; 57: Carpets and other textile floor coverings; 58: Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery ;59: Impregnated, coated, covered or laminated textile fabrics; Textile articles of a kind suitable for industrial use ; 60: Knitted or crocheted fabrics 61: Articles of apparel and clothing accessories, knitted or crocheted; 62: Articles of apparel and clothing accessories not knitted or crocheted, 63: Other made up textile articles; sets; worn clothing and worn textile articles; rags

India has significant presence in EU market and is one among the top ten suppliers. The export basket is heavily tilted in favour of clothing items and that too a larger concentration is on the Chapters 61 and 62, more that 72 percent of the export basket to EU is from these two chapters. Out of all items of 61 and 62 chapters, only 15 items (4 from Chapter 61 and 11 from Chapter 62) have are seen and shown very strong positions even after the globalisation. Out of top ten categories of import to EU market, which took a share of more than 48 percent of EU clothing market, India has been able to remain in the top ten suppliers.

But interestingly the categories in which India did not find a place in the league of top ten suppliers are high value added items such as Jerseys and pullovers, trousers including sports wear and womens and girls over coats. These categories are highly demanded items and control a major market of clothing (at least 55% of top ten products; in value terms). However, the seven categories, where India has significant presence, have been able to consolidate its position in all categories.

6.0 Competitiveness Analysis:

For the purpose of analysing the competitiveness of Indian clothing products to European Union, efforts are made to identify the products at 8-digits HS lines of three apparels chapters i.e. 61 (knitted and crocheted apparels), 62 (non-knitted apparels) and 63 (furnishings) along with the export to the union (in value terms). A close view on the export performance of the products showed that only 8 products from chapter 61, 12 products from chapter 62 and 9 products from chapter 63 have a export share of more than 2 percent in the export basket of Indian clothing exports. Since other products have a very negligible presence, only the products, which have more than 2 percent export shares in the Indian product basket have been taken into consideration for analyses.

A comparative analysis of the data during the quota period and post quota period on the basis of Revealed Comparative Advantage (RCA) and Unit Value Realisation (UVR) have brought about some interesting findings. In some products, the Indian export basket is able to maintain the comparative advantage over the period whereas in some other cases, the phasing out of quota enhanced the competitiveness of the product and the export to the European Union. Accordingly, the competitiveness has been segregated into four different strata i.e. (i) All time RCA, (ii) Decreasing RCA but still RCA, (iii) RCA before quota but RCD after quota, and, (iv) All time RCD during 2001 to 2006.

(i) All time comparative advantage: Among the chapters, 15 products are experienced comparative advantage both in quota and post quota period in the export basket of India. The products, which enjoyed increased competitiveness over the year, have also experienced a better unit value realisation. The UVR for most of the products like womens/girls wear like cotton and knitted shirts, man-made fibres, cotton dresses, shawls, scarves, mufflers, etc. have been very impressive. In some cases, even if Indian products are enjoying comparative advantage like flexible intermediate bulk containers, sacks and bags, the unit value realization appears to be declining over the period. It might have a neutralizing effect on the competitiveness of these products in the coming years. At the same time, the variation of UVR is quite promising in some of the products like T-shirts, mens/boys cotton and knitted shirts, women wear like man-made blouses, etc. In some other products, the variation is minimal.

Table 4: Categories, which have all time, revealed comparative advantages (2001-2006)

(ii) Declining comparative Advantage: In this segment, the products are able to sustain the comparative advantage both in quota and post quota period in the European market but could not able to maintain the same pace of advantage. The performance of the UVRs of these products during the six year period is uneven and so also the co-efficient of variation is not quite satisfactory from the Indian export point of view. It may be due to the fact that these products could not able to cope up the increasing competition from the countries like China, Bangladesh on the one hand and the competition arising out of the integration of the countries like Romania, Poland and Turkey in the European Union on the other hand as in Table 4 below.

Table 5: Categories, which have decreasing, RCA in time period (year by year) but still RCA

(iii) Products at disadvantages in the post quota phase: The segment provides a concerned trend for these products, as the phasing out of quota and subsequent exports has experienced loss of market either from the external competitors or from the member country competition of the European Union. The UVR of these products are low and he CV shows high variation levels, indicating fluctuating UVRs in the market. However, for womens/girls cotton knitted shirts (61061000), the unit value realisation appears to be good even if the variation is quite low. Hence, the phasing out of quota has not brought a cheer to these products in the European market.

Table 6: Categories, which have RCA before the quota but have RCD after quota.

(iv) Comparative disadvantage both in quota and post quota period: Phasing out of quota has not created any conducive atmosphere for these Indian products to the European markets as the comparative disadvantages accompanied with low unit value realisation has created a greater challenge for these products in the most preferred market of the world. The products are womens or girls body wear, cotton trousers; mens or boys suites or jackets, blazers, trousers, track suites, sky suites and other garments. It appears, these products are loosing their market shares in the European market due to the quality aspects.

Table 7: Categories, which have all time RCD (2001-2006)

The three most important factors affecting the export competitiveness of Indian apparels can be (i) the growing competition with the countries like Bangladesh, China, Vietnam, etc. (ii) competitions arising out of newly included countries like Poland, Romania, Turkey into the European Union, (iii) the changing preference pattern of the consumers of the European Union and (iv) the quality parameters stipulated by European Union on the products of export interest of India from time to time.

7.0 Growing Constraints:

(a) Tariffs : No doubt, EU is a strategic trading partner for India, the restrictive measures in terms of tariffs and non-tariff barriers imposed by European Union from time to time for Indian exports interests in general, and T & C products in particular has created obstacles during the recent years. In terms of tariff barriers, the union is practicing Tariff Peaks, Tariff Escalations and High Tariffs for the import of textiles & clothing products as in fig.1 shown below. The simple average tariff for non-agricultural products is just 3.9 percent in the EU, whereas it is 7.94 percent for T & C products. Similarly, the tariff escalations (low tariff for raw materials and high tariffs for finished products), peak tariffs (tariff rates three times the national average) imposed by the member countries are also creating barriers for free flow up textiles & clothing products. In EU, about 5 percent of tariff lines are peak tariff and the rate varies upto 86 percent for some products.

(b) Non-Tariff Barriers (NTBs): Another major issue posing a great threat to the Indias textile exports is Non-Tariff Barriers. The NTBs appears to be more systematically calculated move by EU to restrict the comparative advantage of T&C products in their domestic market. The major non-tariff barriers faced by the Indian exporters are in the areas of standards, testing, labeling and certification requirements (Sanitary and Phyto-Sanitary Measures) and technical barriers for trades. There is an innumerable measures applied by European Commission on the most stringent manner on imports from the developing countries like India. An estimation shows that the major NTBs is enforced on Indian exports varies from 50 to 150 in form of state trading, import levy, quota provision, anti-dumping, counter-veiling duties, rules of origin, etc. An estimation made by UNCTAD in 2001 on Non-Tariff Barriers has also authenticated the issue of non-tariff barriers as shown in Table 7.

Table 8 : Non-Tariff Barriers to India-EU Trade 1999

Source: UNCTAD, Trains data base, Spring 2001

The above table clearly shows that an increasing number of Indias exports to EU are covered by NTBs. Nearly 23.37 percent of the total exports of India to EU are covered by NTBs. The maximum NTBs are in the area of carpets (86.2 percent), textiles and clothing (65.85) and leather (31.35) and even the tariff on these items are high as compared to other items. Further, these NTBs are non-transparent and hence more restrictive in nature than tariff barriers. In order to add fuel to the fire, the European Commission has adopted the mandatory registration of chemicals and products using chemicals stems under the Registration, Evaluation, Authorisation and Restriction of Chemical (REACH) in June 2007. It further is restricting the Indian export interests to European Union.

(c) Social Requirements: This relates to working condition and health and safety of employees. International Labour Organisation (ILO) is the principle body dealing with standards. In addition more or more EU importers are requesting social requirement from their developing countries supplier, their own CSR has there own trading performance and supply chain. Such as: Product labels including management system such as BSCI And SA 8000

(d) Other Measures: Legislative Requirements: These are demanded through regulation and directives. The main EU legislative requirements are based on Consumer health and safety and Environmental. The Non-Legislative Requirements are EU buyers often demand additional requirements to fulfill with EU legislation. Manufacture have there own standard but when trading with EU, it is preferably to use EU or international standard (ISO standards, CEN standard in Europe). Other requirement could be an ISO 9000 management system on quality Environmental and consumer health and safety like Okotex for garment etc.

8.0 Conclusion:

(i) The recent years India has been able to take larger market shares of EU in respect of Textiles & Clothing exports. The market size of 3.8 million Euro in 2001 has increased to 5.3 billion Euro in 2006.

(ii) A competitive analysis has clearly brought out the fact that the Indian export basket is contracting in its product diversification and focuses more on specialised items. This indicates a clear vertical specialisation of the product basket and sometimes specialisation helps strengthening the foot in the export market. It may be mentioned here that most of the specialised products come mostly from the Chapters 61 and 62.

(iii) Though India figures in the top ten products of EU Textiles & Clothing imports, but has a poor position, so far as the high value product export is concerned. The categories include jerseys & pullovers, trousers including sportswear and womens/girls overcoats etc. India needs to improve the market access for these items to get better UVR and export earnings.