Trade Restrictions in India

Trade Restrictions in India

TradeRestrictions in India

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Thetextile and clothing sector in India is protected locally by thegovernment. Cotton production in India is cheaper and probably thelowest in the world behind other major producers like Brazil, Japan,and Thailand. It is, therefore, a favorable source of textilematerial for business. However to protect the local producers, thegovernment use various methods including trade restrictions, exporttax equivalent, and quotas. Multi-Fiber Agreement of 1974 governs thetextile and clothing industry in India and came into operationsprimarily to protect the interest of American producers from boomingproducers including Japan.

Underthis agreement, India has come into agreement with the United States,Canada and countries of the European Union which subjected India’stextile and clothing products into high tariffs and export quotas.The aim was to restrict India in penetrating these markets given itscomparative advantage in production. But during the Uruguay round,India aimed at pushing for the complete abolition of these tariffsand quotas. This was not to be because countries in the west werereluctant since their cost of labor was high, hence, leading to avery high cost of production. Subsequent negotiations led toabolitions of this restriction imposed by the developed countries.

Abolitionof quotas and tariffs among the world trade organization members wasinitiated and was to be effective by the year 2005. Nevertheless,that does not mean full access to the Indian market becausenon-tariff barriers still exist. These barriers include restrictionsemanating from regionalization from economic blocks. Others arepolicies enacted regarding anti-dumping position of countries. Otherbarriers enacted include the quality control and modernization.Indian textile industry is increasingly cheaper due to the use ofmodern technology in production, and the western countries areinitiating restrictions to limit the imports and protect their localindustries.

References

Kar,M. (2015). The Indian textile and clothing industry: An economicanalysis.