PERKIRAAN DAMPAK ASEAN DAN HONG KONG FREE TRADE AREA (AHKFTA) TERHADAP KINERJA PERDAGANGAN INDONESIA

ASEAN and Hong Kong have agreed to establish bilateral cooperation in the form of the ASEAN-Hong Kong FTA (AHKFTA). The negotiation process is planned to be completed by the end of 2016. Indonesia as one of ASEAN countries will surely participate in AHKFTA. This study aims to investigate the impact of the bilateral trade agreement of the ASEAN-Hong Kong FTA on the Indonesian trade performance. The analytical method applied in this study is Computable General Equilibrium (CGE) using modeling approach of Global Trade Analysis Project (GTAP) version 8. This cooperation is expected to reduce the trade barriers in all sectors, such as reducing tariff in order to decrease the trade barriers between Indonesia and Hong Kong. This study conducted two simulations of tariff cuts 50% and full liberalization. The results indicate that Indonesia gained some benefits from full liberalization of ASEAN-Hong Kong FTA in terms of its welfare and the increase of GDP. The increase of output only occurs in few sectors which are categorized as a primary commodity such as vegetable oil, oil seeds, wearing apparel, textile and electronic equipment. In short, reducing tariff gradually and reinforcing protection and improvement to a sector having low competitiveness are vital to support Indonesia's trade performance.