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

Kazuhiko Oyamada

No 92, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

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.

Keywords: Applied general equilibrium; Economic growth; Forward-looking; Free trade agreement; Interregional capital flows; International trade; International agreements; Trade policy; Indonesia; Japan; 応用一般均衡; 経済成長; 前向きの; 自由貿易協定; 地域間資本移動; 貿易; 国際協定; 貿易政策; インドネシア; 日本 (search for similar items in EconPapers)
JEL-codes: C68 D58 D90 F15 F41 O41 (search for similar items in EconPapers)
Date: 2007-03-01
New Economics Papers: this item is included in nep-int and nep-sea
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 92. 2007-03-01

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