ASEAN - China Free Trade Area

      ASEAN-China Free Trade Area (ACFTA) is a free trade area between the Assocation of Southeast Asian Nations and the People's Republic of China. The framework agreement was signed in Phnom Penh, Cambodia on 4 November 2002 by eleven heads of government. The framework agreement was came into effect on 1 January 2010 as ASEAN-China Free Trade Area. In the framework agreement, all of the members agreed to increase their economy cooperation with:

• invalidation of tariff and not tariff barriers in trade transactions
• progressive liberalization of goods and services
• build a competitive and open investment regime in order of ACFTA

        This free trade area are the third largest trade volume after the European Economic Area and the North American Free Trade Area. The agreement reduced tariffs on around 7000 products categories or 90 percent of imported goods to zero. There are China and the six members of ASEAN which is already take the effect of the reduction: Brunei Darussalam, Indonesia, Malaysia, Singapore, Thailand, and Philippines. The other four countries will join the suit in 2015. All the members in the agreement would like to could identify ways in which the ACFTA could assist domestic economic reforms in all of the participating countries.

              Indonesia as one of the member of the free trade agreement is look upon this opportunity to increase their numbers of entry of goods to China market.With regard to the Indonesia-China trade relationship, the tariff barriers are actually being lowered and eliminated since 2005. However, this has not necessarily been in line with the improvement of Indonesia’s trade performance. In the beginning this free trade agreement was made anxiety in Indonesia. As you know, even prior to the implementation of this free trade agreement, the Indonesian market had been flooded by cheap, often illegal, imports from China. Even though the agreement involves trade with ASEAN, the effects for the countries still receives little attention.  When Indonesia products was hard to compete with imports from China that sell a lower prices with reasonable quality, it made anxiety situation in Indonesia companies. Some efforts was needed to made Indonesia products can compete with China imports. 

Reference:

http://www.hukumonline.com/klinik/detail/lt4b04bef2aa8ee/dasar-hukum-pemberlakuan-acfta

http://en.wikipedia.org/wiki/ASEAN%E2%80%93China_Free_Trade_Area#Tariffs
http://www.thejakartapost.com/news/2011/04/25/the-pain-gain-acfta.html

Taiwan's Economy

            Taiwan, officially the Republic of China, is a dynamic multi-party democracy, and its economy is one of the richest in Asia. In1949, the communist party under Mao Zedong was defeated the Nationalist party ynder Chiang Kai Shek after that the government moved to the island and established dominance there. However, China still consider Taiwan as their province. Since then, Taiwan and China had tensions that can’t be avoided. Taiwan’s government was totally controlled by the Nationalist. In 1990s, when Asian economy was weaker, mostly all countries was caught under economic crisis. Japan, South Korea, Indonesia, Thailand and Malaysia, all of then got economy crisis and then their GDP growth decline. On the other hand, Taiwan, had a steady growth GDP in the range of 6 percent throughout this period. This fact proved that the country economy has been manage carefully. We do the combination of tight exchange controls, low foreign debt, conservative fiscal policies and relatively austere and transparent banking. 

            With only 13,900 square miles and with a population of approximately 23 million, Taiwan can grow rapidly. Taiwan has  approximately $680,5 billion of growth domestic product and per capita GDP is around $29,500. Today, Taiwan is the 28th wealthiest country globally, and 6th richest country in Asia. And along the way Taiwan has transformed itself from a dictatorship into a vibrant democracy. Taiwan especially focused in the Information and Communication Technology sector. 94 percent of the world’s motherboard and notebook PCs was produced by Taiwan. Some major high-tech firms have set up operation on the island, including Microsoft, Sun Microsystems and Intel. All of them realized that Taiwan has a lower cost than in another places and also the quality of the workplace allow them to produce state of the art products. Taiwan has an importance part in this sector.

        The success of the IT companies in Taiwan was reflecting of personal cultural values, such as high motivation, hard work and patience. Taiwan imports mostly mineral products and basic metals, electronic products, chemicals, machinery. Taiwan exports electronics (28% of total), basic metals (9%), plastic & rubber (8%), optical and photographic instruments (8%) and chemicals (7%). Taiwan main exports are electronics, computers, telecommunications equipment, Industrian design service and creative industries/cultures. Taiwan's economy , one of the "Four Asian Tigers", is export-oriented and specialized in production of electronics and machinery. In fact, Taiwan is one of the world's largest suppliers of computer chips, LCD panels, DRAM computer memory, networking equipment, and consumer electronics. Textile production, although already in decline, is another major industrial export sector.

Reference:http://www.tradingeconomics.com/taiwan/gdp-growth

http://en.wikipedia.org/wiki/Taiwan

New Trade Theory

New trade theory became popular in the 1960s and 1970s, when it replaced traditional international trade theories that focused on unlimited free trade and comparative advantage a way of explaining international patterns of trade. The new suggests that a critical factor in determining international patterns of trade are the very substantial economies of scale and network effects that can occur in key industries. If one countries specialists in a particular industry then it may gain economies of scale and other network benefits from its specialization. New trade theory also offers interesting insight on the subject of government regulation. At the time when the theory emerged, it countered traditional wisdom that supported unlimited free trade.

Domestic subsidization or tariff production would allow developing industries in developing countries to eventually exploit economies of scale and be competitive within the global market. But poorer countries with developing economies may struggle to ever develop certain industries because they lag too far behind the economies of scale enjoyed in the developed world. This is not due to any intrinsic comparative advantage, but more the economies of scale the developed firms already have.

Regards,

Keiko Kezia

Reference

http://www.economicshelp.org/blog/6957/trade/new-trade-theory/

http://internationalrelationsonline.com/new-trade-theory/

Indonesia and Australia relation heated up

           Indonesia concerns about drugs problem. Indonesia are considered drugs as a worst crimes against humanity. Many Indonesians were believed that drugs make the most people lose their lives or being murdered. Because of that, Indonesia made a policy for people who are the drug dealers will be executed to death. 

             Australian as one of the country that contributed in Bali nine drug dealers was preventing to avoid the execution. There is 2 australians, Andrew Chan and Myuran Sukumaran,  that was going to be executed soon on Nusakambangan island prison off the main island of Java with another 7th foreign drugs provicts. Australian foreign minister, Julie Bishop, was on going to convict Indonesian to hand out their citizens. They offered to pay for the prisoners in order to get them back to Australia. However Indonesia decision was not  goin to be swayed by others. Indonesia still stays  firm with their decisions in order to prevent narcotics sellers Indonesia. They will consistent about the  death penalty for the drugs smugglers. It was being confimed by vice President of Indonesia, Jusuf Kalla. It was a concrete options that Indonesian government ever had. To avoid or minimize drugs sellers in Indonesia that policy was the best options. Because of Australian intervention this policy have been delayed for sometimes. Indonesia should confirm their strict decision.  
              Australia even threatened Indonesia that they will not allow their citizens to come to Indonesia. As we know that many Australian like to come to Indonesia especially to Bali. Australian tourist is one of the most contributing in foreign exchange for Indonesia. It can be a big problem for Indonesia if Australia realize their desire. However, Indonesia should not stop the death penalty policy for the prisoners. It can be an example for foreign drug dealers that they should not do the transactions in Indonesia because Indonesia have a strict policy for drugs. Even, their own country cannot help them back to their origin. It

Jokowi Restricts Imports, The US and New Zealand Protests to WTO

by : Delinda Listawaty Bethriani (1801453700)

   The US and New Zealand protested to WTO about the import restriction made by Indonesian government towards food and farming products. Both countries claimed the import restriction broke the international trade obligations.

   Tim Groser, New Zealand trade minister, stated that access to agricultural market is highly important to New Zealand. The agricultural commodities export from The Kiwi country reaches US$ 23,84 billion in total. This is equivalent to 15% The US' agricultural commodities export value, even though New Zealand is only 1% of The US economy value.

   The export restriction implemented by Indonesia : apple, grape, potato, onion, flower, juice, dried fruit, chicken, and beef.

   As Reuter's report, The US' export to Indonesia decreased since the import restriction in 2011. In 2014, the application of import license such as the limitation when the product can be imported, price, and the quantity affected the US' export to Indonesia US$200  millions, including US$ 122 millions fruit and vegetables, and horticultural  products. Such export product is equivalent to US$ 6 millions higher to Malaysia.

Reference : S, Deddy, " Rezim Jokowi Batasi Impor, AS dan Selandia Baru Protes ke WTO ", 2015 : CNNindonesia.com 

the Oil Price Dropped to the Lowest Level since 2009

by : Delinda Listawaty Bethriani (1801453700))

   The oil price fell again in the trade of international commodity markets, on Thursday (19/3). In New York Mercantile Exchange for April delivery, the price of West Texas Intermediate (WTI) crude oil dropped to US$ 42,38 per barrel or touched the lowest level since 2009. While in the market of Nymex, the price of black gold dropped to US$ 44,35, lower US$ 84 cents than the previous position, U$ 44.52 per barrel.

   Based on the weekly report by the US Energy Information Institution, the US's reserved crude oil last weekend (13/3) rose up to 9,6 million barrels, or increased 161 percent from the previous expectation around 3,8 million barrels. This report also shows that the stored oil decreased 4,5 million barrels, higher than the slope expectation at number 0,9 million barrels.
  " Many analysts commented that the oil price would remain low at level US$ 40 per barrel, while i predicted that the price could reach US$ 30 if there is any significant policies. " said The head of Price Information Service analysis, Tom Kloza as quoted from CNN Money..

The Reasons of the Oil Price Dropped

   The falling of oil price is not separated from the abundance of oil supply in the international market and The United States.The abundance of supply is also because the plan to give a sanction to Iran due to the use of nuclear. With that prohibition, president Hassan Rouhani would make the crude oil as one of Iran's biggest incomes.


References : Duta, Diemas Kresna, Harga Minyak Kembali Anjlok ke Level Terendah Sejak 2009, 2015  ; CNN Indonesia.com

The reasons behind Rupiah's value keep weakening

The rise and fall of the Dollar against the Rupiah caused by several factors

1. The value of domestic exports fell

One of the causes of weakening currency in the states is the value of the domestic exports are very weak so that the state spends a lot of money to importing goods from another country. Deficit economies are usually the value of its currency is weak against the foreign currencies. As Indonesia ever experienced the monetary crisis in the 1998.

2. The political instability

The condition of the political dynamics of a country can affect the exchange rate. For example when Indonesia in the election situation, by that time there was happen uncertainty in the political situation so the investors or the manufacturers will be doubtful to importing goods to Indonesia.

Regards
Rama Hilmy