On November 22, the Australian Parliament formally approved the Australia-India Economic Cooperation and Trade Agreement, which means that both India and Australia will take action on it in the short term. Official sources said the agreement may come into effect in December.
It is reported that the agreement significantly reduces tariffs on Australian products exported to India, mainly targeting mutton, wool, coal, lobster and other products. In addition, the agreement agreed to phased tariff reductions on red wine, fruits and some agricultural products, but it did not include dairy products and chickpeas that Australia valued. India’s export products that have received zero-tariff treatment account for 96.4% of the total value, covering more than 6,000 industries, including textiles, leather, furniture, jewelry and machinery. India will use this agreement to obtain Australia’s rich mineral resources, and Australia will obtain more mineral orders as a result, so that both parties will achieve the goal of reducing their dependence on China. Indian Industry and Commerce Minister Goyal said the agreement is expected to create more than 1 million jobs.
So what impact will the entry into force of the Australia-India Economic Cooperation and Trade Agreement have on my country’s cotton textile industry? Industry analysis mainly includes the following aspects:
First, because Indian textiles and clothing have the opportunity to be exported to Australia with zero tariffs, they will seize the market share of Chinese companies in Australia, and a large number of Australian textile and clothing orders have been transferred to India. Although China-Australia relations have been tense in the past two years, economic and trade exchanges between China and Australia have been very active. In 2021, China will continue to remain Australia’s largest goods trading partner, import source and export market. According to Chinese statistics, bilateral trade volume will reach approximately US$231.2 billion in 2021, a year-on-year increase of 35.1%. From January to October 2022, the total value of China’s exports to Australia was US$64,455,447,800, a year-on-year increase of 21.8%. Although some Australian clothing companies and buyers have followed the United States in imposing an import ban on Xinjiang cotton, my country’s cotton textiles and clothing exports occupy an important position in Australia. The entry into force of the Australia-India trade agreement will cause my country’s exports of clothing, home textiles, home furnishings, labor protection and other supplies to Australia to be impacted by Indian companies.
Second, Indian yarn mills will expand the import of Australian cotton, thereby improving the quality indicators of cotton yarn, gray fabrics, clothing, etc., upgrading product quality, and intensifying competition with Chinese companies on a global scale. Compared with Indian cotton, Australian cotton has obvious advantages in terms of fiber length, strength, consistency and spinnability, and is suitable for spinning cotton yarn with a count of 40S and above (Australian cotton with a count of 1-7/32 and above can partially replace long-staple yarn) cotton), and Australia’s cotton output may be close to 6 million bales in 2022, with sufficient export supply. Affected by multiple factors such as repeated epidemics, tense Sino-US trade relations, and the US ban on Xinjiang cotton, since the second half of 2021, not only orders for high, middle and low-end textiles and clothing have been “flying southeast”, but some high value-added and high-profit orders have also flowed to India, Countries such as Vietnam and Indonesia have increased the consumer demand for high-grade and high-index cotton in Southeast Asian countries, paving the way for Australian cotton to enter India.
Despite this, the industry generally believes that this is a “temporary trade agreement.” That is to say, India agreed to sign a temporary trade agreement with Australia to avoid being bound for a long time. Moreover, India is a relatively closed market. It remains to be seen whether the Australia-India Economic Cooperation and Trade Agreement can achieve the goal of achieving mutual benefit and win-win outcomes for both parties. In addition, India’s domestic cotton consumption demand will continue to decline in 2022/23 due to factors such as commodity inflation, a sharp decline in European and American textile and clothing orders, high cotton prices, and wide fluctuations in the rupee exchange rate. It is not easy to concentrate and expand the procurement of medium and high-quality Australian cotton.