Ban of Cotton Exports – India might lose reliability as Trading partner

Cotton Plant

By- Staff Reporter | Date- March 09, 2012

The Government of India’s decision on March 5, 2012 to ban export of Cotton is being treated with shock and dismay in the International Trading Communities.

The International Cotton Association (ICA) has also expressed its disappointment, saying that the move will have far reaching consequences on world cotton trade. Being the second largest producer and consumer of cotton in the world, with a world market share of about 20 percent and being one of the largest exporters of global cotton, the actions taken by India will have serious consequences and a major detrimental impact on world cotton trade, the ICA said in a statement.

The International Cotton Trade Association on the other hand claims that the suspension of registration of cotton export contracts in 2010 by India has led to numerous arbitrations at the ICA, as many firms were unable to execute their contracts. Ironically a vast majority of such firms affected were from India itself.

It is to be mentioned that the ban has already led to a surge in New York Futures cotton prices. It is also expected that customers in many importing countries who are counting on Indian cotton to run their mills would suffer irreparable loss and damages.

Worst affected – Neighboring Bangladesh

The Government of India’s decision to ban export of Cotton is going to affect neighboring Bangladesh most adversely. Bangladesh, whose 76% of the total export earnings come from its much acclaimed garment sector depends hugely on cotton exports from India. Bangladesh government has termed as the decision as unfortunate.

Bangladesh’s Commerce Secretary M. Ghulam Hossain at a news conference yesterday accused that India has banned the export of cotton against the trade rules and regulations, violating the norms of international trade. He further confirmed that his ministry condemned the move of Indian government and has written to the Indian authorities for withdrawing the ban immediately, urging to take steps to release all agreements regarding cotton.

However Bangladesh was also seen to have started exploring back up plans. They ministry in conjunction with Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is exploring newer options in the world market where production is good and cost is low. Countries such as Australia, Uzbekistan and the US are also being considered. It is expected that a high-level delegation led by the commerce minister will go to Uzbekistan in first week of April to explore the possibility of importing cotton from the country.

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