Indonesia & co. welcome US' TPP withdrawal

While Vietnam and Malaysia will not be too happy about the US' withrawal from the Trans Pacific Partnership (TPP), other Southeast Asian countries like Indonesia, the Philippines, Cambodia, Laos, Thailand and Myanmar can breathe a sigh of relief as they are now on par regarding trade conditions with the big US market.

Especially Southeast Asia's textile and garment industry is hoping for a long-awaited break after the US' decision to leave TPP because the agreement concerns a reduction of numerous duties between the member states for several products like agricultural produce, automobiles and textiles. While Southeast Asian countries were subjected to 10 percent import duty, Vietnam and Malaysia as TPP members were exempted but will not be so lucky now.

Indonesian textile and garment exporters in particular are looking west ecxpectanctly because the US is the most important export country for them: In 2016, around 36 percent of overall Indonesian textile and apparel exports went here, and this figure is expected to rise to 39 percent or 4.8 billion US dollars this year.

"The US' decision to quit the Trans Pacific Partnership pact will benefit our textile industry. We can now compete at the same price point as the other textile exporters," said Ade Sudrajat, chairman of the Indonesian Textile Association (API) according to the Jakarta Globe.

The difference can already be felt, just one week after the US decision. Indonesian textile and garment manufacturers have already noticed increased interest by potential buyers from the US in their products and pricing. "In terms of enthusiasm, things are already a lot better than last year," confirmed Sudrajat.

Vietnam and Malaysia will have to figure in the additional 10 percent when doing business with the US to make sure not to incur losses. However, they can still take advantage of similar preferential duty rates when doing business with other TPP members like Australia, Japan, Canada, Mexico and New Zealand.

Not to forget the EU market which, as low and mid income countries, waives import duties for Vietnam and Myanmar. As a G20 member, Indonesia is not as fortunate and does have to pay the corresponding duty, which is currently at 12.5 percent. Thus, it feels the strong competition from its small but entrepreneurial neighbours in this market. However, Indonesia and the EU are currently in talks to rectify the situation.

The new US president, Donald Trump, signed a decree on 23rd January 2017, only three days after his inauguration, for the United States to withdraw from the Trans Pacific Partnership.

Photo: Edith G. via Flickr