IE-CEPA, is this good for Indonesia ?

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In the over expanding growth of global economic, every nation has divided into many different levels. In this case there is one classification where there are so-called developed countries, countries developing, and poor countries. Developed countries master various productive sectors that drive the pace of their economic growth. Availability of experts and technology that adequately support developed countries to grow in a more advanced direction. Meanwhile, developing countries have weaknesses which caused them difficult to build the economy, lack of experts and technology is one of them. In some developing country, they have extraordinary rich natural resources. Lack of experts and capital is the main problem for them to drive the pace of their economic growth.

For some nation like Indonesia, which have rich natural resources but lack of capital to process. Opening new trade possibilities with developed countries is the key to keep up. One of the highlighted agreement recently is Indonesia – EFTA Comprehensive Economic Partnership Agreement (IE-CEPA) that held in Bali, Indonesi. Negotiations between Indonesia and four EFTA member countries Switzerland, Liechtenstein, Iceland and Norway, lasted for eight years. The lE-CEPA agreement covers issues of goods trade, service trade, investment, intellectual property rights, sustainable development, origin and customs provisions, trade facilitation, trade security, business competition, legal, and cooperation and capacity building. besides exchanging goods, the main agreement is to improve the legal framework conditions for investors from the EFTA States and Indonesia investing in each other’s markets. This is achieved by granting non-discriminatory rights of establishment (“commercial presence”) in economic sectors not covered by the chapter on trade in services. In certain of these economic areas, the Parties have included reservations to national treatment based on restrictions in their national legislations. The Chapter is subject to periodic review regarding the possibility to further developing the Parties’ commitments.

So far Indonesian trade agreements with EFTA countries are limited with Iceland, Norway, and Switzerland.

Total imports: EUR 530 million

HS 84 Machinery, mechanical appliances, 86 million

HS 30 Pharmaceutical products, 71 million

HS 27 Mineral fuels, oil, 48 million

HS 85 Electrical machinery, 44 million

HS 29 Organic chemicals, 43 million

Others, 232 million

Total exports: EUR 523 million

HS 64 Footwear, 111 million

HS 85 Electrical machinery, 74 million

HS 62 Woven apparel or clothing accessories, 51 million

HS 61 Knitted apparel or clothing accessories, 36 million

HS 09 Coffee, tea, maté and spices, 21 million

Others, 235 million

Imports average growth rate over the last five years: 8.8%

Exports average growth rate over the last five years: -1.9%

Source : http://trade.efta.int        

PROS and CONS

With this agreement has been finalized some pros and cons came along with that. This agreement will contribute to the process of modernizing the Indonesian economy. Moreover, EFTA countries have their own advantages in the fields of technology, energy, education, transportation, finance, chemistry, fisheries and others. Also, goods market access between Indonesia and EFTA will be broader, including services and investment and economic cooperation and capacity building. In trade of goods, Indonesia will gain increased market access to EFTA, including fishery products, industries (textiles, furniture, bicycles, electronics and car tires), as well as agriculture (including coffee and oil palm).

The signing of this agreement took place amid the weakening of world trade and continued uncertainty in trade between countries in 2019 and subsequent years. The five countries gave a positive signal to the world that friendly economic relations through a preference agreement remained the best choice to encourage economic growth.

But with the opening of new trade channels, it will increase competition between domestic products and foreign products, so that it can trigger a weakening of domestic producers. So how to deal with that ? with growing a sense of love and pride in using domestic production, because at the same price or even cheaper than foreign products, we can get products that are the same quality as foreign products.

By : Rifqi Pratama Putra
Mahasiswa PKN STAN

 

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