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Free trade pacts enthuse Indonesian textile units

Indonesian textile and garment makers want greater economic partnership with European and Pacific Rim countries in order to boost the country’s exports. Indonesian companies hope to have a boost in demand from the partnerships’ participating countries.

Garment makers basically welcome any partnership with other countries as long as they help reduce both tariff and non-tariff barriers for Indonesian textile products. Indonesia’s textile exports increased from $11.2 billion in 2010 to an estimated $22.65 billion last year, with import value always below export value.

Indonesia is a member of the Association of Southeast Asian Nations (ASEAN). Indonesia is one country that has been quite active in concluding free trade agreements. Indonesia has FTAs with trading partners that account for 67 percent of its total trade. For context, Chile, Peru, and Mexico have FTA coverage ratios of more than 80 per cent, while Canada, Singapore and New Zealand are at more than 50 per cent.

For small economies there are at least two positive outcomes to be derived from regional trade agreements. The first is an expansion in investment. While the direct impact on trade might be debatable in the beginning, rising investment usually follows. Second, regional agreements can drive unilateral domestic reforms.