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The Prevalence of non-tariff measures in the European Union and its impact on India's textile and clothing exports: a case study of the regulations based on SPS and TBT notifications

Student name: Ms Arpita Singh
Guide: Mr Nitya Nanda
Year of completion: 2015
Host Organisation: Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi
Supervisor (Host Organisation): Dr Murali Kallummal
Abstract: With the beginning of phasing out of the quota system developed countries often have been accused of restricting imports using higher NTMs especially on sectors where developing countries are competitive. In this paper, we have attempted to analyse the coverage of NTMs (SPS and TBT) imposed by the European Union and the impact on comparative advantage of Indian T&C sector exports over the years. The study reveals the extensive application of NTMs, with full coverage of majorly TBTs with objective of consumer health and protection. Apparel sector has been subjected to maximum notifications. The coverage of SPS is minimal and confined few products (Silk, Wool and Cotton) with objectives of animal and plant health. However, India remains competitive in this sector with an overall MRCA of more than 1 across majority of the textile and clothing product lines. The export function estimated for the period of 1988-2013 for chapters with highest and lowest TBT notifications using autoregressive model depicts that GDP (PPP) has a stronger relationship with export quantity than relative price for both Chapter 61(Art of apparel, not knitted) and Chapter 60(knitted fabric). Cumulative NTMs have a significant but small impact exports of Apparel, where as its not significant for knitted fabrics. Further we have checked for a structural break in the years of highest notifications, 1996 and 2009 using time series analysis. The structural break analysis using Chow test depict no break or displacement except for the chapters with highest NTMs in the year 2009 coinciding with the increased application of TBTs and financial crisis. Despite the increased application of NTMs the demand for Indian T&C products has been on the rise over the years owing to the increased incomes and bilateral trade between India and EU. It can also be argued that the compliance with NTMs (SPS and TBTs) has improved the efficiency and competitiveness of the Indian T&C products and improved the standing in t European market. Keywords: NTMs, SPS, TBT, MRCA, Textile and Clothing, Competitiveness, Structural Break