Indonesia wary of TPP’s ‘yarn-forward’ rule
February 23, 2016 - Indonesia
The Indonesian Textile
Association’s (API) believes the textile industry stands to gain if Indonesia eventually joins the Trans Pacific Partnership (TPP) agreement, but concedes that the yarn-forward clause could be a catch.
“If there’s one thing that we need to watch out when we join the Trans-Pacific Partnership (TPP), that’s the yarn-forward clause,” said API Advisory Board Chairman Benny Soetrisno said at a press conference.
Soetrisno said that while the US-led TPP would likely bring more benefits than harm to the local textile industry, the country
had to boost the industry’s readiness at all stages of the manufacturing process.
“There’s a provision in the TPP that will cut tariffs only for garment products made using materials sourced from the member countries,” he said.
Once implemented, the TPP is set to apply a “yarn-forward” rule of origin that requires textile and apparel products made using TPP members’ yarns and fabrics to qualify for zero-tariff in trades among the member countries.
The clause will also certainly apply to Indonesia as well if it joins the TPP which currently has 12 members. All the 12 signatories are now in the process of ratifying the deal in their respective countries, expected to take about two years.
Indonesia’s textile industry is considered to be the sector that will gain most should the country join the TPP in the coming years.
API chairman Ade Sudrajat argued that he was still upbeat that joining the TPP would benefit the country’s textile industry, but support from the government to develop the whole process of garment manufacturing was needed.
In terms of workers, Ade said the government could, for example, help textile companies build workers’ dormitories next to production plants.
While a number of business sectors have been reportedly making lay-offs to improve business efficiency, many garment manufacturers have experienced workforce shortages to support expansion.
The API has estimated that textile exports will surge significantly, particularly if the country joins the TPP.
Indonesia’s textile exports increased from $8.6 billion in 2005 to $12.7 billion in 2014, well behind the performance of Vietnam, which booked $26.2 billion from textile exports in 2014 from only $5.3 billion in 2011.
Ade said that his association estimated that the TPP could more than double Indonesia’s textile exports in a decade as the US is one of its major markets.
The Industry Ministry’s Director for textiles, leather, footwear and various industries, Muhdori, said that the textile industry was ready for the partnership as it was already properly structured .
The Industry Ministry’s data show that in 2014, Indonesia imported a total of $8.6 billion textiles in the form of fibre, yarn, fabric, garments, tapestry and other textile products, with a big chunk estimated to come from China, which is not a TPP member.
Vietnam, which is one of the TPP signatories, had raised concerns about the yarn-forward rule of origin as it still imports some types of fabric from China. (SH)