Apparel industry studying India EU FTA
Sri Lanka’s apparel industry believes that the newly signed trade agreement between India and the European Union could threaten the local competitiveness globally.
The challenge Sri Lanka could face as a result of this trade deal between the two blocs could be the impact of the duty free access to the EU based on certain fabrics and secondly whether there’s any restriction on manufacture of garments with fabric from India, Joint Apparel Association Forum (JAAF) Spokesman Yohan Lawrence said.
Currently Sri Lanka purchases fabrics from China and India with the latter’s fabrics being provided duty free access to the EU since it is a regional state within the SAARC countries.
He noted that this trade agreement between India and the EU could have challenges for Sri Lanka but the details of the Free Trade Agreement need to be looked at.
With this agreement, India would become a competitive state for Sri Lanka when trading to the EU.
Should the duty free access to the EU be curtailed as a result of the fabric being imported from India it would mean Sri Lanka would not become competitive enough when entering the EU market. A spokesperson for MAS Holding said with India gaining tariff-free access, some EU buyers and brands may shift orders towards Indian suppliers because Indian garments will potentially be cheaper on a landed-cost basis (no tariffs) than Sri Lankan goods that do not fully qualify for EU preferences or have higher logistical costs.
Buyers often source based on price, lead time, and compliance (e.g. sustainability standards). If Indian suppliers improve cost competitiveness due to the FTA and also meet compliance requirements, they may take share from Sri Lankan exporters.
However, it is too early to predict how much this could impact Sri Lankan exports to the EU, and details of the trade deal and the EU regulations are yet to be published.
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