"The Analysis of Intra-Industry Trade Between Indonesia and Japan: A Case Study in Manufactured and Agricultural Products"

Mr. Zamroni Salim
Research Centre for Economics
Indonesian Institute of Sciences
15:30-17:00, March 26 (Fri), 2004
E207, East Building of CSEAS

Indonesia and Japan have had a long relationship either in trade or other historical memories. As one of the Association of Southeast Asian Nations (ASEAN) member countries, Indonesia has a tight related trade connection with Japan especially after the agreement between Japan and ASEAN countries in 2000. Indonesian and Japan trade covered not only in agriculture and manufactured products but also in services. The present study uses intra-industry trade analysis to investigate manufactured and agricultural trade between Indonesia and Japan.

Intra-industry trade (IIT) analysis has become the emerging tools to analyse the extent of international trade in the presence of differentiated products under the role of economies of scale. Some studies had been devoted to investigate the IIT patterns encompassing countries with the different level of development. Mostly, studies on IIT were directed to trade among developed countries, even few of them were conducted between developed and developing countries.

The study analyses the IIT patterns of Indonesian trade with Japan and explore its determinants. As one of the biggest importers of Indonesian products, it is expected that Japan consequently has a big influence on the emerging IIT. The Asian financial crisis, as one of determinants, came to halt the extent of intra-industry between Indonesia and Japan. As a kind of setting up reduction in trade barriers, agreements such as under Asia Pacific Economic Cooperation presented a positive effect on bilateral intra-industry trade between two countries. Regarding the trade policies imposed in the bilateral and multilateral relations gave significant benefits to encourage the intra-industry trade. At the end of study, it is expected to explain the position of issued bilateral trade policies between Indonesia and Japan in encouraging bilateral intra-industry trade.

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