The Effectiveness of Safeguard Measures in Elevating the Competitiveness of Domestic Industry: Case Study of Indonesia's Textile Industry

Abstract

Temporary trade barriers, such as safeguards, is a measure to rescue the economy in such a way as to protect domestic industries from foreign competitors. Safeguards provide opportunities for domestic industries to make structural adjustments and reshape their business process to increase their competitiveness during the validity period. Indonesia's government has imposed safeguards for most textile sub-industries, from the upstream industry (yarn and fibres) to the downstream garment industry and other related textile industries. This paper aims to evaluate whether the application of safeguards meets its objectives in improving the competitiveness of domestic industry against its foreign competitors with a long observation period. It is found that the effectiveness of the application of safeguards was limited to rescuing the trade balance. In terms of export competitiveness, safeguards have not been effective in increasing the export competitiveness of the textile industry in the world market.