Pakistan’s Textiles Miss US Market Opportunity

Pakistan’s textile sector is confronting formidable barriers, stifling its ability to seize the US market share vacated by India due to tariffs on Indian textiles. Despite expectations of growth, soaring production costs, deteriorating cotton quality, and policy shifts have impeded sector expansion, according to a news report.

Critical challenges include high tariffs on Pakistani textile exports, flood-damaged cotton crops, and revisions to the Export Facilitation Scheme (EFS).

The US has imposed a 29% effective tariff on Pakistani textiles, comprising a 19% additional tariff and a 10% base tariff, rendering Pakistan’s products less competitive against regional rivals like China and Vietnam.

Javed Bilwani, President of the Karachi Chamber of Commerce and Industry, questioned the feasibility of competing in the US market, stating, “How can we compete when production costs are so high that selling in the US market becomes unviable?”

Compounding the issue, floods have devastated cotton crops, reducing both quantity and quality. Pakistan’s cotton output is projected to plummet to five million bales this year, worsened by ongoing flood impacts. While the government has yet to finalize a comprehensive damage assessment, exporters emphasize that cotton quality is a graver concern than production volume.

Additionally, outdated agricultural practices and inferior seed quality have further degraded cotton quality, hampering efforts to produce yarn and textiles that meet export standards.

Experts stress that enhancing cotton quality through research and seed innovation is vital for the textile sector’s sustainability.

Recent changes to the EFS have exacerbated the situation. Previously, the scheme permitted duty- and tax-free imports of raw materials for export production. However, new regulations exclude cotton, yarn, and grey cloth from zero-rating, requiring exporters to pay taxes upfront. This shift strains liquidity and elevates production costs, further undermining export competitiveness.

Despite the opportunity presented by India’s reduced US market access, Pakistan’s textile sector continues to falter. Experts warn that without advancements in cotton quality and supportive government policies, Pakistan risks missing critical export opportunities.