Cotton May Be New Dispute for India, Pakistan

Pakistan is fighting back after India banned raw cotton exports last month, creating a new bone of contention in an already frosty relationship.
New Delhi says it imposed the ban to ensure its own garment and textile industry has adequate supplies after a poor global harvest of raw cotton, especially in China and the U.S.

Getty Images A farmer rests on sacks of cotton at a market in southern India.

“It’s a slap on the face of free trade in the global economy,” said Mohsin Ayub Mirza, a textile manufacturer in Karachi and chairman of the Pakistan Readymade Garments Manufacturers & Exporters Association.
Pakistan argues that India should honor contracts for 200,000 cotton bales for which letters of credit have already been issued, says Ikhtiar Baig, a Karachi-based garment producer and federal adviser to the government on the textile industry.
“Pakistan is against India’s ban on cotton exports,” Mr. Baig added.
India, like the U.S., is an important exporter of raw cotton. Pakistan and China, despite producing large amounts of cotton, are among the biggest importers because of their large yarn spinning and garment industries.
The two governments are discussing the issue. Separately, in a step forward on Tuesday, both countries said that their foreign ministers will meet in Islamabad in July.
Pakistani garment and textile producers admit they are facing much bigger problems than India’s ban alone. The U.S. Department of Agriculture expects cotton mills to consume 115.9 million cotton bales this year while production will only be 102.9 million bales. Local yarn producers have taken advantage of global cotton shortages to sell their products at high prices in China.
That has exacerbated shortages of yarn in the local market, forcing some textile and garment businesses to shut down and putting people out of work. Yarn prices are up almost 100%.
Tens of thousands of people took to the streets in Karachi and Faisalabad on Tuesday to call for an immediate ban on yarn exports. While peaceful for now, the protests risk further destabilizing India’s neighbor.
But political and business tensions between India and Pakistan don’t appear to be affecting cultural relations. Pakistanis love Bollywood and an Indian film star was chosen as the face of this year’s summer collection of one of Pakistans leading cloth producers — Faisalabad-based Firdous Textile —  although some wonder whether marketing in Pakistan should be using home-grown talent.

http://blogs.wsj.com/indiarealtime/2010/05/12/cotton-may-be-new-area-of-dispute-for-india-pakistan/?mod=wsj_india_main