The Australian Minister for trade wants to make Indonesia one of Australia's top ten trading partners; how realistic is this?
In: http://hdl.handle.net/1885/95481
In June 2014 the Australian Trade Minister, Andrew Robb, stated that he wants to make Indonesia one of Australia's top ten trading partners. Given that Indonesia is currently Australia's 11th trading partner for both Imports and Exports, Andrew Robb's goal is to increase trade between Australia and Indonesia. This is despite the fact that over the last ten years Indonesia's share of trade with Australia has decreased. Therefore, the purpose of this research is to provide an understanding as to what influences an increase in trade between two countries and analyse the practicality of the Trade Minister's goal. Increasing trade means that Australia's exports and imports with Indonesia will need to grow more quickly than their exports and imports with other countries. Growth in exports and imports is dependent on two factors; economic growth and barriers to trade in both Australia and Indonesia. This report has specifically focused on the Indonesian side, primarily barriers to trade. Analysis of publicly available data showed that the election of new President Joko Widodo is promising and there has been an increase in Foreign Direct Investment interest in Indonesia. These are positive indicators that Indonesia will undergo economic growth and consequently trade between Australia and Indonesia could increase. However factors such as poor infrastructure and economic nationalism have the ability to hinder Indonesia's growth and consequently growth of Australia and Indonesia's trade. Importantly, the influence that the Australian Trade Minister has over factors of economic growth in Indonesia is minimal. Indonesia's barriers to trade are both indirect and direct. Indirect barriers include poor trade facilitation and business administration. Direct barriers include tariff measures which incur costs for traders and non-tariff measures such as complex licensing requirements. Since 2007, as the number of tariff measures has decreased, the number of non-tariff measures has increased. This is problematic given the greater level of ambiguity associated with non-tariff measures. More importantly, Indonesia does not coordinate the use of non-tariff measures amongst government ministries or conduct regulatory impact assessments on economic policies. This reduces the gains that can be made from economic policies and consequently limits Indonesia's growth and increases barriers to trade. Again, the influence that the Australian Trade Minister has over reducing these barriers is minimal. The results show that what Indonesia needs is economic reform and while the Trade Minister has minimal control over making Indonesia a top ten trading partner, he can attempt to help Indonesia with reform. However it should be achieved by; approaching the Australia Indonesia relationship from a unilateral basis rather than a bilateral basis, illustrating the effectiveness of the Australian Productivity Commission, and targeting the elimination of barriers to sectors like education in order to influence Indonesian policy-making by educating the next generation of leaders. These are practical goals which target the long term, root causes of barriers to trade, namely the need for economic reform. An increase in trade between Australia and Indonesia will be an outcome of these practical goals, rather than a goal in itself.