US Ban On Xinjiang Cotton Can Benefit India

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The US Customs and Borders Protection agency has banned cotton and cotton products from Xinjiang Production and Construction Corps (XPCC) as they have forced 1 million detained Uighur Muslims to work in the state.

XPCC is one of the largest cotton producers in China and accounts for around 17% of Xinjiang’s economy. In 2019 alone, the United States imported around US$ 11 billion worth of cotton and cotton products from China.

Kenneth Cuccinelli, Department of Homeland Security Secretary, who administers the border agency called ‘Made in China’ a ‘warning label.’ During a press conference he said: “The cheap cotton goods you may be buying for family and friends during this season of giving – if coming from China – may have been made by slave labour in some of the most egregious human rights violations existing today in the modern world,”

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To Cuccinelli’s statement, China’s Foreign Ministry spokeswoman Hua Chunying replied that “US politicians concoct false news about forced labour so as to suppress Chinese firms and China. All workers in Xinjiang opt their occupation on their own and sign labour contract with firms based on the standard regulation and free will.”

China’s loss, India’s gain
According to credit rating agency, ICRA, the US ban may work in India’s favour. In its report, the agency noted that several major Indian apparel exporters have already begun receiving increased orders, or are engaging in deliberations with international buyers, with the intention of filling the vacuum caused by the ban.

Covid-19, the global pandemic has awoken firms to the importance of diversifying their supply-chains with many already working towards shifting to a ‘China + 1’ model. The US ban on XPCC products is only likely to expedite this transition.

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Even before the US ban, prospects for India’s cotton exports were bright. As per the Indian Cotton Association’s estimates, cotton exports are expected to rise as high as 65 lakh bales in the current fiscal year against the June estimate of 40 lakh bales, signifying a staggering 63% improvement. In the previous year, data from the Cotton Corporation of India showed that India exported 50 lakh bales of cotton.

Key to the improved prediction has been the increased demand for surgical gown and mask production, coupled with lower input prices domestically. The latter has enabled India to compete more aggressively in the international market.

Industry experts have also noted that India is expected to have ample surplus for increased exports in the current fiscal. This comes against the backdrop of the US revising downwards its cotton production figure from 17.06 million bales in September to 17.05 million in October – a reported result of increased drought in its main cotton-producing regions, and damage to crops caused by several hurricanes.

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