Effects of AFTA and APEC trade policy reforms on Indonesian agriculture

Abstract

Indonesia is facing commitments to international trade liberalisation through the Uruguay Round, its participation in Asia Pacific Economic Cooperation (APEC), and its collaborative effort with other ASEAN economies to form an ASEAN Free Trade Area (AFTA). As part of the Uruguay Round commitment, Indonesia has been reducing its border tariffs, opening its markets, as well as reducing other domestic distortions especially in the agricultural sector. As a member of APEC, Indonesia is determined to liberalise trade and investment in the Asia Pacific region. In the meeting in Bogor, Indonesia, in 1994, APEC economies set the long-term goal of free and open trade and investment in the Asia Pacific. The Bogor Declaration hopes to realize the goal in 2010 for developed economies and 2020 for developing economies. Furthermore, the Bogor meeting clarified the three pillars on which APEC would be based, namely, Trade and Investment Liberalisation and Facilitation (TILF); Economic and Technical Cooperation (ECOTECH); and Development Cooperation. Import tariffs have been cut unilaterally in APEC member economies, and further tariff cuts are expected so as to implement the Bogor goal. While considerable industrial tariff reduction has been implemented in APEC, there has not been much discussion of agricultural liberalisation. This is different from the Uruguay Round which explicitly specifies reductions of import tariffs, domestic subsidies, and export subsidies on agricultural commodities. In APEC, the tariff reduction measure is generally based on the average level of tariff.