How to Measure Bilateral Economic Relations? Case of Indonesia – Australia


Indonesia and Australia had agreed to seal the deal for a bilateral economic agreement entitled Indonesia-Australia Comprehensive Economic Partnership Agreement (IA CEPA). After about ten years since both countries committed to having a bilateral agreement, IA CEPA had entered into force on July 5th, 2020. This paper has two aims. Firstly, assessing potential trade and long-run investment relations with the combination of RCA (Revealed Comparative Advantage) and CMSA (Constant Market Share Analysis) with ToT (Terms of Trade) and Net Export (NX) as the filter. Secondly, measuring the potential impacts from tariff rate elimination utilizing the GTAP (Global Trade Analysis Project) model. This paper finds that both countries have complementarity relations that Indonesia can gain to improve manufacturing productivity, and Australia can benefit from sunrise to sunset relations. This paper proves that CEPA matches their need to increase their economic benefits, revealed that they could share mutual benefits and sustainable economic relations.

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