INDIA which still refuses to honour its cotton export deals signed with Pakistani importers in the post-flood period has now given a new twist to the unpleasant episode. It has informed Pakistan that it is ready to lift the ban on cotton exports if the latter resumes its onion exports through rail and land routes.
According to a report in Indian daily The Hindu on January 10, the commerce ministry officials say that this bargain has been conveyed to Islamabad by their external affairs ministry. “The Indian side has conveyed to the Pakistani counterparts that it was ready to revisit the cotton export ban and ceiling issues, if the gesture is reciprocated by Pakistan through the removal of the ban on the movement of onion,” a senior official said. It is, to say the least, an outright unethical approach.There is no denying that holding back the commodity, already purchased by the Pakistani importers only because the global prices have risen, is an utter violation of the Article XI of the GATT agreement which prohibits export bans that benefit domestic industries.
India has been the second largest exporter of cotton in the world. By imposing the ban, the Indian government has created turmoil and panic in the world market. If exporters failed to deliver on time, importers have a right under the law provided in Letter of Credit (LC) to go into arbitration and sue them in England. But majority of Pakistani importers avoid this way since that the process involves much waste of time. Some importers from Pakistan, China and the US have, however, gone for arbitration in their disputes with Indian exporters, he added.
On January 6, Pakistan banned onion exports to India by land which irked New Delhi for this pushed up onion prices in that country. “Now we are waiting for a positive response from the Pakistani side, and we could have a second look at the cotton export ceiling and ban to ease the situation there,” the Indian official said.
The flash floods in August and September submerged more than one million acres of fertile land. The areas in south Punjab and interior Sindh, which together produce the largest amount of cotton, were the most affected. Pakistan`s textile industry has been hit by the suspension of cotton sale of about one million bales by India. This cotton was urgently needed to meet export orders and also to tide over the shortage between November and January but India`s Textiles Commissioner suspended fresh registrations for exports. The cotton exports were banned by the textile ministry on April 19. But many contracts were signed by exporters prior to the ban, which came into effect in April. Many of these were of buyers from Pakistan and Bangladesh.
India opened registration for cotton exports of up to 2.5 million bales on December 31 last and plans to export 2.5 million bales by February 25. Of the 5.5 million bales being surplus, three million bales have already been exported.
According to APTMA officials, Indian traders have, for the fifth time in the current season, backed out of their export commitments to Pakistan and want fresh negotiation on prices. The export deals were signed in October but were cancelled five times because the prices in the international market registered a big rise each time. The Indians were unwilling to sell cotton on agreed prices to Pakistanis, although it was morally wrong.
During the last five months, Pakistan has placed orders for about one million bales at rates ranging from $0.71 per pound to $1.52, but Indians have so far delivered only 67,000 bales at rates between $1.45 per pound and $1.52 and at a time in December when the price in international markets was 20 cents lower than the agreed price. Despite all these hassles, Pakistani importers prefer to buy cotton from India because it takes only one day to reach Pakistan compared with 44 days in case of the US, Brazil or Argentina.
Meanwhile, the American Apparel & Footwear Association (AAFA) has appealed to the US secretaries of state, defence, agriculture, commerce and the US Trade Representative Ron Kirk to take immediate action to stop the government of India from continuing its export ban on cotton or from extending the ban to cotton yarn or other products using cotton.
Since April 2010, India`s ban on the export of cotton has inflated the price of cotton all around the world to its highest price in 150 years, says AAFA President and CEO Kevin M. Burke in his petition. In the last eight months alone, the price of cotton has more than doubled to around $1.40 per pound. This will very soon translate into higher clothing and footwear prices for hard working American families at a time when they can least afford it, he said.
He said that the skyrocketing price of cotton has also sent the domestic US apparel, footwear, and textile manufacturing industry that supplies to the US military into disarray. On their face, the Indian government`s actions are blatantly discriminatory and illegal. The US apparel industry, he argued, faces a Hobson`s choice of trying to absorb the rising costs, putting in peril the fragile economic recovery of the US apparel industry and the hundreds of thousands of the US workers they support, or to pass on those rising costs in the form of higher prices for the Americans
At the global level, cotton production estimates are 115.9 million bales for the year 2010-11 against 100.41 million bales last year. Main producer at the world level is China with production estimates at 32.5 million bales, followed by India 25.4 million bales, the US 18.7 million bales, while in the case of Pakistan, market estimation is 10 million bales instead of 11 million bales claimed by the ministry of food and agriculture.
Brazil is likely to produce 6.8 million bales, Uzbekistan 4.7 million bales, and other small countries would add about 17.7 million bales. The International Cotton Advisory Committee in August 2010 forecast about 114.4 million bales demand at global level for the current fiscal.
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