Export Subsidies Will Make Waves

This week India is sparking more global interest thanks to an export subsidy that could have some detrimental effects in India and across the globe.

Globecot’s Ed Jernigan recently weighed in on the situation, saying Thursday’s announcement of the subsidies would make waves worldwide.

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“Around the cotton world, there is much discussion and conjecture regarding the situation in India. Yesterday’s announcement by the Indian government to provide a 5 percent export subsidy has many traders nervous. It is already reported that Indian lint prices have softened overnight as a result. This has fueled more conjecture regarding the CCI and the fate of its millions of bales of stocks.

“While the Indian stocks are providing a ceiling of sorts over the market, the real fear is that the ceiling will move materially lower, taking the AWP with it. There is already much wailing and gnashing of teeth from the Indian textile sector regarding the new export subsidy. They are concerned that cheap Indian lint will be sold abroad, putting them at a disadvantage. Certainly, the Uzbeks are watching the CCI very closely, being that they have a large unsold volume as well,” Jernigan writes.

The Americans will be watching the new subsidies and their effects as well, as an export promotional program was forcibly removed from the American industry in recent years due to stipulations from a WTO trade deal. The most recent Indian legislative move will probably be reexamined at the next convening of the Doha Trade talks, scheduled for later this spring. As always, we will be watching for further developments.

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