The Economic Impact of Indonesia-Bangladesh Preferential Trade Agreement (IB PTA)
Devina Cieny Juventia (*), Eka Choirulina, Yucky Anggun Anggrainy
Trade Analysis and Development Agency, Ministry Of Trade
*devinacieny[at]gmail.com
Abstract
Indonesia-Bangladesh agreed to make a Preferential Trade Agreement (PTA) at the 2017 IORA Summit. Both countries need to see the possibility of this PTA. This study aims to review the economic impact of PTA and arrange indications of requests/offers to be negotiated. The methods used are trade indicators including the trade balance, the main export-import products, Revealed Comparative Advantage, Trade Complementary Index, and Partial Equilibrium to determine the cost and benefits of the agreement. The results of the analysis based on the Partial Equilibrium simulations show that the reciprocal decline in import tariffs between the two countries will increase Indonesias export by USD 286,3 million, meanwhile Indonesias import will increase by USD 79,1 million. Both countries will obtain welfare in the form of consumer surpluses, for Indonesia amounting to USD 5.2 million and Bangladesh USD 12.0 million. Potential loss of Indonesias revenue was due to a reduction in tariffs of USD 6.9 million and potential loss of Bangladeshs revenue of USD 159.2 million. We suggest for the initial stages of trade cooperation between Indonesia and Bangladesh it is suggested in the form of PTA with an indication of Indonesias requests of 145 post tariffs and offers of 180 post tariffs.
Keywords: Partial Equilibrium, PTA, Request/Offer
Topic: Trade policies strategic Responses