Beware of Trade Liberalization in Indonesia


Globalization in the trade sector has encouraged Indonesia to participate in implementing trade liberalization policies. There is an opinion that trade liberalization will actually reduce the economy. This is a matter of debate because the trade liberalization policy was made to increase economic efficiency. For Indonesia, trade liberalization is both a challenge and an opportunity to improve the economy. Therefore, it is important to analyze the impact of trade liberalization on the Indonesian economy. Based on previous empirical studies, an analysis was carried out using the Error Correction Model method, to determine the impact of trade liberalization on the economy in Indonesia. The variables used in this study are trade openness and economic growth. Meanwhile, the macroeconomic control variables used are investment and inflation. The data used is quarterly data sourced from BPS and the World Bank. The empirical test results show that trade liberalization has a significant positive impact on Indonesia’s economic growth. When viewed from the value, the impact is not too big. However, this is enough to prove that trade activities carried out by Indonesia have been able to boost the economy. To increase this positive impact, the government needs to reformulate trade liberalization policies that can continue to improve the Indonesian economy.
Indonesia is a country rich in natural resources. Whatever is planted must flourish. Whatever is in the bowels of the earth, if excavated, it will produce something economically. The state, which is a forum for the struggle for life together, has begun to recede its role in paying attention to economic justice for the Indonesian people, especially the little people.
In this globalization era, there was the euphoria of economic liberalization, such as macroeconomic stabilization that was pursued through fiscal balance, but it put more pressure on public interest budgets and cut subsidies than increased tax revenues. Besides integration into the world monetary and trade system; removing tariff and non-tariff barriers and opening wide doors for foreign investment; and privatization in terms of the withdrawal of the government from the production and service sectors which concern the livelihoods of the people, as well as the application of private law in capitalist countries.

Economic liberalization that comes from Western ideology is considered incompatible with the identity of the Indonesian nation and has undermined various aspects of national and state life in the country.
Trade that is more liberal is indeed the goal of most countries in the world, with the hope that liberalization can increase the volume and value of a trade which in turn can increase economic growth and social welfare. The government is currently carrying out a more comprehensive trade liberalization process, namely through the Comprehensive Economic Partnership Agreement (CEPA).

Of course, all of these agreements are related to the goal of making a profit, to increase economic growth through a trade balance surplus. So that it becomes a tempting offer for countries joined in trade liberalization to get market access. However, it must be remembered that the trade liberalization process itself is closely related to opening up market access for Indonesian export products to the world.

Likewise, the opening of world market access, in the sense that Indonesia’s domestic market will also be more open to products from other countries, aka flooded with imported products. For trade liberalization entrepreneurs that have been running through the China-ASEAN Free Trade Agreement (CAFTA) is a nightmare for the industry. This is because the national industrial production has decreased by 50% due to the lack of competition, especially in the products of small and medium enterprises in the domestic market.