Accounting for Regulatory Distance and Looking the Most Potential Indonesias FTA/CEPA Partners
Ernawati Munadi, Ayu Sinta Saputri
University of Wijaya Kusuma Surabaya, Ministry of Trade
Abstract
As tariff has been declined, Non-Tariff Measures (NTMs) become significantly important to supercede tariff role on protecting domestic industry. In APEC countries, between 2000-2015, the use of NTMs has increased by 413% from only 3,165 NTMs to 16,238 NTMs with average growth at 10.8% per year. The most prominant NTMs is technical measures mostly on SPS and TBT accounted for 80% in 2015 compared to other measures. The ability to comply SPS and TBT determines their ability to penetrade market access. To overcome the negative impact of NTMs, some countries are establishing an economic cooperation with other countries so for Indonesia. This study seeks to identify the most potential Indonesias FTA/CEPA partners from regulatory distance perspective. The study utilizes Regulatory Distance analysis in 10 Indonesian CEPA/FTA partners. Analysis shows that the most potential Indonesias FTA/CEPA partners are Singapore, Vietnam, and Thailand. This is indicated by the low value of Regulatory Distance approximately at 0.33 (lower is better) implies that about 33% of total NTMs measures implemented on Singapore, Vietnam, and Thailand are different with Indonesia NTMs. In contrast, the least potential FTA/CEPA partners for Indonesia are Philippines, Australia, and US market as indicated by high value of Regulatory distance at 0.70 implies that 70% of NTMs imposed by Indonesia is different with those countries. Therefore it is important for Indonesia to address NTMs issues when negoatiates its economy cooperation, particularly with Australia, and US.
Keywords: Non-Tariff Measures; Regulatory Distance Analysis; Free Trade Agreement
Topic: Trade policies strategic Responses