LAHORE, Pakistan — Following a two-day strike last week to protest a 15 percent export tariff on yarn, Pakistan Federal Textile Minister Rana Muhammad Farooq is in negotiations in Islamabad with the All Pakistan Textile Mills Association executive committee, looking to resolve the dispute.

This story first appeared in the May 25, 2010 issue of WWD. Subscribe Today.

The association, representing some 300 yarn mills, was considering a two-day-a-week shutdown for the next two months to reduce the country’s export surplus, but those plans have been put on hold while talks are taking place.

The government had imposed the export tariff for 60 days starting May 13 as a relief effort for struggling knitting mills. Cotton prices have soared in Pakistan, which is the world’s fourth-biggest cotton producer, but relies heavily on Indian imports for domestic demand. India banned cotton exports last month, but lifted the ban on Friday, and there are fewer than 90 days left until Pakistan’s new cotton crop comes in, leaving Pakistani yarn mills to scramble in order to fill domestic orders.

Adding to the domestic yarn shortages and higher prices, Pakistani yarn mills were doing a robust business exporting to China after that country had a shortfall in cotton production last year.

According to figures released by Pakistan’s Federal Bureau of Statistics on Wednesday, for the nine months through April 30, cotton yarn exports grew to $1.2 billion from $916 million in the year-ago period, and pure yarn increased to $41 million from $20 million.

The government contends that the tariff will help improve the availability and stabilize the price of yarn in the domestic market for the benefit of knitting mills. Yarn and products of blended yarn that have been imported are exempt from the duty.

Mills also went on strike in March to protest the government’s restriction on yarn exports. The mills went to court and got exemptions from the quota, so the government replaced the quota with the tariff.

On Tuesday and Wednesday of last week, thousands of workers participated in street protests in Lahore and Multan, as they did last week in Faisalabad and Karachi, protesting the government’s tariff and looking to prevent layoffs. About 850,000 workers are employed in the yarn industry.

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