Analysis of the Indonesia-Japan economic partnership agreement

Abstract

After a free trade agreement (FTA) is established and enters into force it is important to find out its effect. The actual impact of an FTA may be different from expectation. This study aims to identify the impact the Agreement between the Republic of Indonesia and Japan for an Economic Partnership, so called the Indonesia-Japan Economic Partnership Agreement (IJEPA) to both countries, Indonesia and Japan. This study presents an ex-post evaluation to assess the economic impact of IJEPA on trade and welfare. The study focuses on the economic effects of preferences on trade. This study uses quantitative methods of Free Trade Agreement Trade Indicator. Statistics data is collected mainly from The United Nations Commodity Trade Statistics Database (UN Comtrade) and from other sources. This study shows that Quantitative analysis on trade creation and trade diversion to the trade statistics shows that IJEPA did not create trade diversion which indicates no effect on economic welfare. Meanwhile analysis on trade volumes and terms of trade (observed values) indicates that IJEPA give positive impact on economic welfare to both countries, Indonesia and Japan. But when the trade volumes and terms of trade was analyzed using extrapolated values with pre-IJEPA growth rate the results indicate that IJEPA give negative impact of both countries economic welfare.