One of the main objectives of international trade agreements is to reduce or eliminate trade barriers. This study is expected to become one of the additional studies on the impact of ACFTA with new added value. The impact of ACFTA trade on the Indonesian economy includes many aspects that can be further developed in the analysis, such as GDP, employment, investment, inflation and international trade.
The level of production, consumption and the level of consumer utility depend on the endowment and the type of products available in the economy. On the other hand, the excess demand for a product can be met by imports from other countries, so that consumers can choose a consumption package that generates higher utility. Differences in a country's production function will help determine the direction of the country's trade.
The overall effect can be positive, negative or neutral, it depends on the size of trade creation and trade diversion. Leaders of the ASEAN countries and China signed a framework agreement on comprehensive economic cooperation Phnom Penh November 4.
METHODOLOGY
- Computable General Equilibrium Model
- Analysis Flow
- Setting of GTAP Model Simulation
- Correlation Test on International Trading Indicator
- Data
A form of the function (henceforth we refer to it as the nest), which is often used, is a Cob-Douglas function where the parameter indicating the proportion of the constituent components is assumed to be fixed. If the relative price of a good changes, the user √ let's say for consumption - will also undergo changes to maintain the nominal proportion in accordance with the previously determined amount (relative share). In the production process, labor, capital, land form the composition of the primary input to follow the shape of the nests of CES, thus allowing the substitution of the three primary inputs.
How to link a savings to investment depends on the theories and the empirical facts that can be changed based on the purpose of the research. This simulation setting is critical and one of the important components is the closure, which is the division of variables to be placed as an endogenous or exogenous variable. The first phase is the process of aggregation and disaggregation of the countries and commodity categories.
For the period, the analysis is divided into two periods: Period I, in 2001-2004, which can be regarded as the period before the introduction of the ACFTA. In general, closures used in the simulation follow the standard GTAP closure, namely: 4. To view the map of Indonesia's competitiveness and the challenges and opportunities resulting from the establishment of a forum for international trade, ACFTA, for international trade in Indonesia, resumes analysis using various trade indicators: (i) Revealed Comparative Advantage (RCA), (ii) Intra-Industry Trade (IIT), (iii) Index of Export Overlap (IEO), and (iv) Index of Export Similarities (IES).
This test is necessary to determine whether there are similarities in the competitiveness scale of the two countries in the observed pairs. The signs of SRC indicate the direction of the relationship between the independent variable X and the dependent variable Y. The size of the IEO is used to measure the degree of competition, which is indicated by the share of exports that overlaps between the total exports of the two economies.
The Index of Export Similarity is used to measure the degree of similarity between the composition of export products from two economies. The coverage of countries in GTAP's database reaches 113 countries with 57 details on the commodity sector. Meanwhile, for the analysis of the indicators of international trade, we use data from UNCOMTRADE, which mainly includes import export data for the countries covered by observation, which are ACFTA members.
RESULT AND ANALYSIS
Calculation Result with GTAP Model
The GTAP simulation results for measuring the impact of trade (trade effect) as a whole (net effect) for ACFTA member states are shown in Figure III.5 and Figure III.6. With the changing dynamics of exports and imports as a result of tariff changes in the scope of the ACFTA is reflected in (Figure III.8). After the introduction of ACFTA, the simulation results show a large change in total exports and imports, namely 6.4% and 11.5%, respectively.6.
For Indonesia, the impact of net creation with 2.0% is caused by the trade creation with 10.3% and the trade diversion with 1.5% (Figure III.5 and III.6). From the simulation of the impact to the balance of payments Indonesia, there is an increase in total imports by 2.3% or more compared to the increase in exports by 1.8%. Thus, Indonesia's trade surplus overall decreased by 2.3% or USD247 million (Figure III.9 and see Appendix 1 for full results of net creation with the calculation of total export-import and the net exports).
As an illustration, Indonesia's exports (GTAP level database) to ROW trading partners amounted to 74%, or much larger than exports to other ACFTA members at 26% (Figure III.10). From the simulation results we obtained the change in Indonesia's import and export, with trading partners among ACFTA members, each increased by 11.7% and 9.1%. With exports increasing more than imports, the impact on Indonesia's trade surplus marked an increase of 6.5% or USD 253 (Figure III.9).
Meanwhile, Indonesia's import and export transactions with trading partners from the ROW showed negative growth at -1.7% and -1.3% each, reducing the trade balance by 3.5% or USD 499 million. Based on Figure III.9 above, it has been shown that the simulation results in the growth of the trade balance have fallen by 2.3%. However, to facilitate tabulation, the 42 tradeable commodities can be further aggregated into 6 types of main tradeable commodities as shown in Table III.2 and III.3 (the conversion table of 6 types of primary tradeable commodities and 1 service product is shown in Appendix 5).
From Figure III.12 and table III.3 we can see that the simulation results of total net exports in 42 commodities (tradable) grew by 0.5%.
The Analysis Result on International Trade Indicator
The use of RCA and IIT indicators together, among others, is presented in the work of Yumiko (2005). RCA in calculating the analysis of this section uses the data of the trading partners of the market in the ACFTA region as the total exports of Indonesia. The purpose of the coverage is to portray the RCA competition of Indonesian goods in the ACFTA market.
Based on the quadrant map, as reflected in figure III.13 - III.14, quadrant I is also called the main quadrant where goods with RCA above 1 and have a high connection in the trade chain with ACFTA partner countries. region based on IIT indicators. In the two observation periods that are periods I and II, from Figure III.13 √ III.16 we can get a general picture that there is a tendency to reduce the quality of competition of Indonesian export goods in the ACFTA region. Based on the distribution model of goods in the two periods, as shown in figure III.13 and III.14, we can see the development of shifts in the weight of exports per quadrant.
Some of Indonesia's major commodities that remain in the main quadrant are oil, motor vehicles, textiles and beverages. Relatively ideal conditions occur if the development indicates a greater increase in export share in quadrant I. The complete results of composition and extent of the commodity per quadrant as measured in the RCA and IIT matrix are presented in appendix 6.
Meanwhile, a more pessimistic result is shown when oil and gas commodities are excluded from the calculation of RCA and IIT indicators. Using the data in the second period, the share of export commodities in the first quadrant decreased from 19% to 12%. The high index of IES of some relatively advanced countries in the ASEAN countries with China is also in line with the development of the Chinese export ratio which is relatively high in industrial products.
With the intensity of the competition indicators and the SRC test for the RCA indicator, we have obtained more evidence for the conclusion that the decrease in the intensity of competition between China and Indonesia is associated with the structure of export commodities that are not compatible with each other. compete, which is comparable to the export commodities of other ASEAN members.
CONCLUSIONS
13 Blue box represents the index size of exports to the world market and the red box represents exports to the ACFTA market. Result analysis of IEO and IES indicators in the two observation periods leads to the conclusion that the degree of competition intensity of Indonesian export goods to the ACFTA region bilaterally with individual ASEAN countries is decreasing. With such low homogeneity, the level of competition with other ASEAN countries for the Chinese market is relatively reduced.
Trade with other countries in the region, which has hitherto been intertwined, may be on the decline. From the results of GTAP model, we obtained the estimates of ASEAN countries» exports to the ASEAN region which decreased by 4.9%, including Indonesian exports which decreased by 4.4%. The results of this paper show that the export commodities of China and ASEAN countries tend to indicate the decline in the level of commodity comparison.
From the Spearman Rank Correlation test results on RCA indicators, it generally shows a more complementary relationship between China's export goods with ASEAN countries. The challenge grows as one component in the formation of export share comes from the oil and gas sector. If we remove the oil and gas export commodities in the calculation, the share of primary commodity exports that initially reached 19% will drop to 12%.
To take advantage of the ACFTA agreement on export development, we need a strategy to move the basket of commodities, especially non-oil exports, from Quadrants II and IV to Quadrant I. As for potential raw materials with high RCA but need high added value, generally natural resource-based raw materials need further processing in the form of product diversification and higher value products. Meanwhile, in connection with the challenges faced by the frenzy of Chinese products, we must use the imported goods from China with medium and high technology to come.
Furthermore, we expect that the direction from the AFCFTA cooperation can improve the welfare of the region and especially for Indonesia.
