India’s Export Ban Benefits No One, Including Textile Industry
March 16, 2012 It’s bad enough that the global cotton industry has suffered from the Indian government’s surprise export ban on March 5. What adds insult to injury is that there’s no evidence than anyone, anywhere, benefitted from the decision – not even India’s domestic textile industry, the supposed beneficiary of the government’s decision. Finally, the fact the India rescinded the ban just a few days later – at least to allow the export of the 2.5 million bales that were registered before it was enacted – not only failed to reassure the market, it added to the uncertainty and confusion.
“There is no evidence that the actions of the Indian government have helped its spinning industry, yet there is obvious proof of the damage done to the other segments of the Indian cotton industry,” Jordan Lea, chairman of Eastern Trading Co. and former head of the American Cotton Shipper’s Association, told Cotton International. “The reversal of the ban has only damaged India’s situation more because it gives the impression that no one knows who is in charge, or how these decisions are made.
“India badly needs to restore its credibility, and actions such as these obviously do not accomplish that goal. Risk management is tough enough without having to dodge unpredictable export bans issued by federal governments,” he said.
While many assume the export ban was driven by pressure applied to India’s government by the national textile association, that is inaccurate, according to Terry Townsend, executive director of the International Cotton Advisory Committee (ICAC). After there was a rush of export registrations toward the end of February and the first few days of March, it was the Southern India Mills Association that pressured the government to intervene. Ironically, mills in the south didn’t have the financial resources to make bulk cotton purchases even after the domestic prices dropped once the ban was announced.
The only possible beneficiaries of the ban are countries that have an exportable surplus: Uzbekistan, Brazil, and possibly Australia. India grows cotton with a wide range of qualities, but Shankar 6 is a very desirable variety and makes up the majority of India’s exports. West Texas produces cotton with similar characteristics but growers there suffered through a severe drought last season. West Africa also produces a similar variety but they are sold out, and Australia’s cotton is only now approaching harvest.
The fact that not even those whom the ban was intended to protect – India’s spinning and textile industry – seem to have benefitted from the government’s decision, gives Lea hope that the lesson has been learned this time.
“The negative response from within India is coming from those who have the country’s own best interests in mind,” Lea says. “I like to think that before such an action is taken again, the Indian government will examine more closely the significant downside for all parties involved.”
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