A focus group of the Indonesian Chamber of Commerce (KADIN) has requested the government to continue the policy of protecting the local industry in light of the China-US trade conflict and the alarming increase in imports. Non-tariff barriers can effectively protect the domestic industry, said KADIN deputy chairperson for industry Johnny Darmawan was speaking at the Non-Tariff Measures Group Discussion Forum last month.KADIN’s views match the statement of the incoming minister of trade AgusSuparmanto that reducing trade deficit is one of the tasks assigned to him by the president.

Suparmanto said he will have a more selective policy towards imports as a way to improve the trade balance deficit, according to Indonesian media reports.The focus group observed that the rapid flow of imported goods entering Indonesia has reduced the competitiveness of the domestic manufacturing industry. The problem has been exacerbated by the provision of various subsidies from the governments of the exporting countries, document manipulation by exporters, transfer of tariff posts (circumvention) and undervaluation.

The types of manufactured products that have been regulated in the import policy include steel, tyres, textiles and textile products (TPT), ceramics, electronic goods, footwear, flat glass and cosmetics. In general, the products whose imports are regulated are downstream products or finished goods or consumer goods.A case in point is the Indonesian textile industry. Moody’s rating agency predicts that China’s yarn, fabric and garment products will enter Indonesia in a greater volume. Since the US applies tariffs on textile products made in China of 25 per cent, similar products from Indonesia are levied only 10-15 per cent.

Due to these tariff differences, Moody’s sees an opportunity for Beijing producers to shift its textile products to Southeast Asia countries, including Indonesia. This in turn will create excess supply of textiles, and with abundant supply, prices will fall, which will create a blow to Indonesia’s own manufacturing sector.The Indonesian Textile Association (API) has shown that 9 factories already closed down due to tougher competition from imported products in the period of 2018-2019. As a result, 2,000 workers were now out of jobs. These factories have lost their ground to the rush of imported textiles and textile products from overseas.

There is a need to close loopholes that would allow general importers to import fabric raw materials. Previously, import permits were only granted to textile producers and even that was limited to raw materials such as filament yarn and fibre that in turn may not be traded.