Garments & Apparel - Indonesia textiles risk tariff barriers’ in US

By: | at 08:00 PM | Channel(s): International Trade  

Indonesia risks losing competition in the US textile and clothing market after the abolition of the quota system on Jan. 1 next year, as the country should pay higher import duties for the commodity than other suppliers to enter the US market, according to an expert.
Once the quota system is lifted, tariffs would become the main factor determining access to the US market, said William E. James, a senior economist at USAID’s Growth through Investment and Trade (GIAT) project.
In anticipation 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 move, 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,” James said.
He said his organization had talked with the Indonesian government about the matter, but the latter had gave little, if any, response, while the stakeholders of the industry had been focusing their thoughts on different matters.
GIAT’s data shows that Indonesia now has to pay 9.3% and 17.5% import duties for textiles and apparel respectively to enter the US market, while Thailand only pays nine percent and 13.7%.
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% for its apparel.
Thailand is now seeking to further cut the tariff under the free trade agreement (FTA) with the US, which is now being negotiated. Meanwhile, Mexico is negotiating for a zero tariff under the North America Free Trade Area (NAFTA).
GIAT estimates 45% of Indonesia’s textile and textile products are at a high risk of being negatively affected by the quota abolition and 20% at medium risk.
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. Given this, it is important for Indonesia to negotiate for the lower tariffs to enter the US market.
The industry, which absorbs 1.2 million workers, was the second-largest contributor of foreign exchange earnings among non-oil and gas industries last year, after the electronics industry, with an export value of $7.03 billion or 16.22% of total non-oil and gas exports last year.
Textile and apparel exports to the US meanwhile, reached $2.5 billion or 33% of Indonesia’s total exports to the US in 2002.
The government has long voiced concerns over the situation in the nation’s textile industry, which has been fighting hard to compete with new suppliers at home and abroad. However, the government’s programs have thus far focused on how to provide the industry access to banking loans so that they can rejuvenate their machinery.
(The Jakarta Post)

American Journal of Transportation