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Is It Worthwhile for Indonesia to Rush into a Free Trade Deal with Japan?

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  • Oyamada, Kazuhiko

Abstract

This report represents a preliminary attempt to refine some basic ideas on the potential impact Indonesia might experience from a free trade arrangement with Japan, using a forward-looking, multi-regional, multi-sectoral applied general equilibrium model of global trade to capture growth effects through capital accumulation paying attention to the changes in the patterns of interregional capital flows that might happen even before the policy change occurs. The simulation results revealed that the welfare gains of rushing into trade liberalization with Japan are not so large. This makes out that taking time over negotiations might be the best choice for Indonesia if the government places priority on convincing the Indonesian people that a free trade deal with Japan will definitely bring positive effects, while proceeding rapidly might be the answer if the country is serious about recovering the welfare levels that might be lowered by free trade arrangements among Malaysia, the Philippines, and Japan.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/531/3/ARRIDE_Discussion_No.92_oyamada.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 92.

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Date of creation: Mar 2007
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Publication status: Published in IDE Discussion Paper. No. 92. 2007.3
Handle: RePEc:jet:dpaper:dpaper92

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Related research

Keywords: Applied general equilibrium; Economic growth; Forward-looking; Free trade agreement; Interregional capital flows; International trade; International agreements; Trade policy; Indonesia; Japan;

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