Indonesia textiles 'risk tariff barriers' in U.S.

Indonesia textiles 'risk tariff barriers' in U.S.

Zakki P. Hakim, The Jakarta Post/Jakarta

Indonesia risks losing competition in the U.S. 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 U.S. market, an
expert said.

Once the quota system is lifted, tariffs would become the main
factor determining access to the U.S. 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 U.S. market years ago, if it wants to
stay competitive," James told The Jakarta Post over the weekend.

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 percent
and 17.5 percent import duties for textiles and apparel
respectively to enter the U.S. market, while Thailand only pays 9
percent and 13.7 percent.

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 percent for its
apparel.

Thailand is now seeking to further cut the tariff under the
free trade agreement (FTA) with the U.S., which is now being
negotiated. Meanwhile, Mexico is negotiating for a zero tariff
under the North America Free Trade Area (NAFTA).

GIAT estimates 45 percent of Indonesia's textile and textile
products are at a high risk of being negatively affected by the
quota abolition and 20 percent 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 U.S. 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 percent
of total non-oil and gas exports last year.

Textile and apparel exports to the U.S. meanwhile, reached
$2.5 billion or 33 percent of Indonesia's total export to the
U.S. 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.

U.S. trade-weighted tariffs
on textiles and apparel 2001

Country Textiles Apparel

(%) (%)
Indonesia 9.3 17.5
Bangladesh na 15.5
Pakistan 7.8 15.8
Sri Lanka 9.1 16.2
Malaysia 9.3 11.1
Thailand 9.0 13.7
Mauritius 6.3 14.8
Mexico 1.3 1.3
China na 12.0

na: not available

Source: USITC 2004, OECD 1996