The agreement to eliminate the export tariff on Indonesian textiles and textile products (TPT) to the United States (US) to 0% through the Tariff Rate Quota (TRQ) scheme has not been fully welcomed by industry players. Despite the opportunity for more open market access, the domestic upstream industry faces significant challenges in meeting the volume requirements for raw material imports from the US to compensate for the export quota.
The Chairperson of the Indonesian Filament Fiber and Yarn Producers Association (APSyFI), Redma Gita Wirawasta, stated that the current utilization rate of the spinning industry is still below 50%. This situation makes it difficult for the industry to increase cotton imports from the US as stipulated in the memorandum of understanding (MoU) signed in Washington, D.C.
Under the latest agreement, the size of Indonesia's textile export quota to the US is highly dependent on the volume of raw material imports from the United States, such as cotton and synthetic fibers. This means that the greater the import of raw materials from the US, the greater the export quota that can be enjoyed under the 0% tariff. However, the industry's weak absorption capacity is a major obstacle.
Normally, the national spinning industry is capable of absorbing up to 300,000 tons of cotton. However, under current conditions, actual cotton imports from the US are estimated at only around 75,000 tons. Meanwhile, the US requires Indonesia to import at least 150,000 tons of cotton to obtain a larger export quota. This gap is burdening industry players.
According to APSyFI, the fundamental problem suppressing upstream industry utilization is the flood of illegally imported textile products and dumping practices, particularly from China. These products enter the domestic market at very low prices, eroding the market share of local producers. As a result, many factories choose to reduce production capacity for efficiency amidst what is considered unfair competition.
In a depressed domestic market, encouraging the industry to increase cotton imports from the US is no easy task. Redma emphasized that before targeting an increase in import volume, the government needs to first improve the industrial climate, including monitoring illegal goods and dumping practices that harm national businesses.
The 0% tariff agreement itself is part of the economic cooperation agreement titled "Agreement Toward a New Golden Age Indo-US Alliance," signed by President Prabowo Subianto and President Donald Trump. The agreement includes tariff exemptions on 1,819 tariff lines for Indonesia's leading products, ranging from textiles and palm oil to electronic components and semiconductors.
Previously, the Indonesian textile and textile industry was hit by multiple tariffs reaching 29% in the US market. This contributed to a decline in national export value from US$4.8 billion to US$4.5 billion. Importers in the US also complained about the high costs resulting from the additional tariff burden.
However, industry players believe that the 0% tariff incentive through the TRQ mechanism is not an automatic solution. Without fundamental improvements in the upstream sector—especially increasing the utilization of spinning mills—Indonesia risks not being able to maximize available export quota opportunities. The industry hopes that international trade policies can be balanced with strengthening the domestic market so that the benefits of this agreement are truly felt throughout the national textile supply chain.