International rule governing textiles and apparel trade are undergoing transfomation. The Multi-Fibre Arrangement (MFA) is being phase out, and as of January 2005 textiles and apparel trade will be conducted under World Trade Organization (WTO) rules. For Indonesia, this present challenges and opportunities. The global trading system is incrasing seeing the indroduction of preferntial trade agreements (PTAs) that liberalise trade amongf members but discriminate againts non members. Major markets are negotiating new PTas that divert trade away from low cost non number producers there to take advantage of liberalised quotas and the intergration of textile and apparel products into the tariff based trade system as of 2002. With rising domestic production costs, increased local government interventions and poor tax administration, Indonesian producers face a 'double squeeze'. This paper outlines the key challenges confronting the sector and makes recommendations for sustainting exports in coming years.