Tavi Supriana
Departemen Sosial Ekonomi Pertanian, Fakultas Pertanian, Universitas Sumatera Utara, Medan 20155, Indonesia

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Journal : Economic Journal of Emerging Markets

INDONESIAN TRADE UNDER CHINA FREE TRADE AREA Tavi Supriana
Economic Journal of Emerging Markets Volume 3 Issue 2, 2011
Publisher : Universitas Islam Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20885/ejem.v3i2.2326

Abstract

This paper investigates the implementation of CAFTA (China-Asean Free Trade Area) on the international trade flows across Indonesia, China and the rest of ASEAN using a gravitation model. It finds the evidence that the influence of diversion and creation effects on China are significant, while the influence of both effects on Indonesia are not significant. It also finds that the diversion effect, which leads to a decrease in society’s wealth, is greater than that of the creation effect. As a consequence, the gap across countries involved in the trade agreement is wider. Keywords: CAFTA, gravitation model, diversion effect, creation effectJEL classification numbers: F13, F14, F15