ASEAN-China Free Trade Area (ACFTA) had been inked since 2002 and the agreement would come into effect in 2010. Certainly, it’s not difficult to expect what would happen. Chinese products would overwhelm Indonesia’s market and out-compete locally made products. After a year of implementation, some industries affected by this agreement cry for government’s help. So, what should we do to deal with free trade wisely and effectively?
First off, does free trade really exist? According to former Malaysian Premier, Mahathir Mohammad it never does. All global economic ideas coming from developed nation are usually self-serving despite they call it win-win situation.
To exemplify, America, oft-described as staunch free market supporter, always hamper foreign products sales in domestic market by hook or by crook. Once, America banned palm oil due to its higher cholesterol content. It’s a black campaign from rival American soya bean producers. The research shows that it is true that palm oil’s cholesterol is higher than soya bean’s before cooking, but after cooking the palm oil’s cholesterol will be lower than soya bean. The threatened American catfish producer smashes unfairly Vietnamese producers by uttering that Vietnamese catfish is not a catfish. Moreover, America banned Malaysian gloves because one out of millions gloves had caused allergic reaction. And later they do the same to Japan’s Toyota who beats America’s General Motors as the world’s no.1 car producers.
All these are called non-tariff barrier. So Uncle Sam implies there is no free market for real anyway. He preaches free trade, when it comes to export his products worldwide. And in the same time he protects his domestic industries from foreign rivals by any means.
Second, free trade agreement gives great impact for a country with a lot of competitive products. Although investment is often touted, free trade is mainly about scrapping tariff. If our products are not good enough to sell in ASEAN and China, then no tariff barrier will be redundant.
As matter of fact, Indonesia has 8 years before the free trade implementation. However, the government never committed to industrial development. Post-Pak Harto era, this sector sees decreasing share in GDP. Indonesian producers cannot outperform foreign ones in Indonesian market itself, let alone in overseas market. Indonesian products can compete neither in price nor in quality. As a result, made in China, made in Japan, made in Taiwan, made Germany from low end to high end products are wall-to-wall presence here.
Domestic industries are stuttering. Unfortunately only Indonesia out of ASEAN countries complains about the adverse impact of free trade. So it will be shameful for Indonesia to renegotiate ACTFTA. The free trade agreement is water under the bridge. The show must go on, notwithstanding the crippling industries and threatening mass layoffs.
Third, the good news is that Indonesia’s consumers are blessed with cheaper products, we can buy more items. Free trade can also absorb domestic workforce of marketing and distribution as well as of manufacturing if followed by direct investment. Free trade is not so bad as the critics say. Based on 2010 statistics, SBY claimed the unemployment has declined on grounds of industrial, agricultural and service sectors development.
Finally, free trade is double-edged sword which can serve a country well by creating more jobs or kill the domestic industries. However, in the future free trade seems inevitable due to larger market attraction. The government must address this economic trend. Today’s era, government’s officers should have business acumen and technological prowess of industries should be encouraged. Indonesia must strengthen the chosen few industries with specific niche and pour the full attention, energy, and funding so as the products to expand to lucrative overseas markets.
References:
1. http://www.thejakartapost.com/news/2010/04/05/attempts-postpone-some-parts-aseanchina-fta-fail.html
2. http://chedet.co.cc/chedetblog/2010/07/the-free-market.html
3. http://www.thejakartapost.com/news/2011/04/13/no-talks-with-ri-asean-free-trade-pact-china.html
4. http://m.bisnis.com/articles/7334
5. http://www.thejakartapost.com/news/2011/04/13/unemployment-indonesia-has-declined-president-claims.html
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