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Indonesian textile industry to face tough challenges in US market

Agencies

After the abolition of the textile quota system on January 1, 2005, Indonesia risks losing competition in the US textile and clothing market as the country would pay higher import duties for the commodity than other supplies to enter the US market, an expert said.

Mr William E James, a senior economist at USAID’s Growth through Investment and Trade (GIAT) project said, “Once the quota system is lifted, tariffs would become the main factor determining access to the US market.” In expectation of the abolition of the quota system, many countries had been negotiating for a low tariff for the commodity, while Indonesia had yet to make a similar step due to either lack of understanding or concern about the impact of the situation. “Indonesia should have made a strategy and negotiated for lower tariffs to enter the US market years ago, if it wants to stay competitive,” Mr James said. He said his organisation had talked with the Indonesian government about the matter, but the latter had given little, if any, response, while the stakeholders of the industry had been focusing their thoughts on different matters.

GIAT’s data represents that Indonesia now has to pay 9.3 per cent and 17.5 per cent import duties for textiles and apparel respectively to enter the US market, while Thailand only pays nine per cent and 13.7 per cent. Meanwhile, China, which is expected to expand its domination in the world’s textile market once the quota system is lifted, now pays a more competitive tariff rate of 12 per cent for its apparel. GIAT estimates 45 per cent of Indonesia’s textile and textile products are at a high risk of being negatively affected by the quota abolition and 20 per cent at medium risk. Mr James further said that the success of Indonesia in luring textile investors or in keeping the current producers in the country would depend, among other things, on Indonesia’s access to the market. It is important for Indonesia to negotiate for the lower tariffs. The industry, which absorbs 1.2 million workers, was the second largest contributor of foreign exchange earnings.