Armin Hohenadler

The official website of the Ministry of Commerce of the Republic of Indonesia (FTA) is an agreement between two or more countries for the creation of a free trade area. In the meantime, trade diversion is the passage of imports from one country to another. Trade diversions usually occur because, from an economic point of view, the transition is seen as more efficient or cost-effective. Among the advantages of the free trade agreement are the emergence of trade creations and trade diversions. The creation of commercial transactions between FTA members, which have never taken place before, due to incentives arising from the creation of a free trade agreement. What exactly is meant by a free trade agreement? The decree was issued following the ratification of the ASEAN-Hong Kong Free Trade Agreement, in accordance with Presidential Regulation No. 34/2020. This agreement also completes the list of free trade agreements held by the Indonesian government. The objective of free trade agreements is to reduce barriers to trade so that trade can progress through specialization, division of labor and comparative advantage. According to the theory of comparative advantage, each source of production will focus on activities that have a comparative (not absolute) advantage if the market is not limited. The result is an increase in income and wealth for all in the free trade area. But this theory is only about wealth as a whole and does not deal with the sharing of wealth; Indeed, many will also be affected by this agreement, especially industries previously protected by the government do not have a comparative advantage. Another example is that of farmers who may not be able to compete with farmers in other countries, with more advanced farming systems and lower prices.

The benefits of free trade can be used as compensation for those who have been harmed by this agreement. This is the adage of a wise family teacher, never try to do it at home and what it will cost more than buying a family. If a foreign country can provide us with cheaper goods than we can make them ourselves, it is better to buy them with part of our own industrial product, so we have some advantages. The free trade area is the first of economic integration before embarking on the customs union, towards the common market towards the economic union. A free trade area is a region composed of Member States that have signed free trade agreements and thus form a trading bloc. It is an agreement signed by two or more countries to remove barriers to trade (import quotas and tariffs) and promote trade in goods and services. [1] If this agreement also allows citizens to move freely, we are talking about an open border. . . .