Analysis of Trade in Goods between Indonesia and South Korea on Cooperation Forum IKCEPA

: Indonesia Korea Comprehensive Economic Cooperation Partnership (IKCEPA) arises from the desire of both countries to boost trade performance and make the free trade agreement more comprehensive. CEPA agreement with South Korea has targeted the reduction and elimination of tariffs that cover more products and services. This study analyzed the relationship between Indonesia merchandise trade cooperation with South Korea. Besides, look at the potential of the Korean market for goods exports from Indonesia featured. To deepen the study simple equilibrium analysis is used to analyze the potential of the South Korean market for goods exports Indonesia. The analysis showed that after the implementation of AKFTA in 2007, Indonesia merchandise trade performance by sector turned out to have an average growth of imports by 21.36 percent, higher than the average export growth of 8.19 percent. There are some items which have the potential to become a mainstay of exports to Korea that includes textiles, wood processing, manufacturing goods such as spare parts of household appliances, bicycles and others. Likewise, there are some agricultural products such as pineapple, guava, and animals such as freshwater fish, crabs, cuttlefish and others. However, the export of these items to South Korea is still hampered by their tariff barriers. Forum IKCEPA cooperation can be a bridge to fill the gap between the two countries for tariff reduction, market acces and an increase in exports of both countries.


Introduction
Open economy is an economy that involves international trade (exports and imports) in goods and services and capital with other countries. The era of free trade is currently growing with the number of bilateral agreements, regional and multilateral. Disclosure can not be separated from the high dependence on import tariffs as a source of government revenue that would impede the process of trade openness in the economy. But slowly began to diminish with the existence of free trade agreements among trading partner countries. Tariffs and other non-tariff barriers is the main policy instrument that was originally used to protect the industry which is the domestic import substitution. With the liberalization of trade, the economy is expected to further improve. Relations with the national economy through international trade is now unavoidable. It shows a strong relationship to economic conditions in trading partner countries. Their relevance between economic openness with domestic prices, which causes the price of domestic goods would be affected the structure of trading partner economies. Many things that drive a country to international trade adheres to an open economy, such as differences in available resources to expand the market share of national production with a relationship of international trade policy and many other things that affect (Boediono, 1981).
cooperation is expected to expand market access in South Korea. In addition, as an effort to increase the promotion of Indonesian products to Korea. While Korea advantage with this agreement is the fulfillment of a number of commodities that are needed in the country of Indonesia to support its economy.

Literature Review
Indonesia as a country that adheres to an open economy, then to push the national economy but to rely on the domestic economy is also developing various forms of international cooperation multilateral, regional and bilateral. Indonesia Korea Comprehensive Economic Partnership Agreement (IKCEPA) is one of the bilateral economic agreements between Indonesia and South Korea. IKCEPA also a strategic step for both countries to improve economic relations, trade and investment. It is hoped that this cooperation can be achieved benefit for both parties in order to improve the welfare of the people of both countries through trade activities. Foreign trade allows a country to learn more efficient of production techniques and ways for more modern management including the transfer of technology, that is often referred to as the commercialization of the technology. It is intended as the process of transfer of skills, knowledge, technology, manufacturing method, a sample of the manufacturing and government facilities, universities and other institutions that guarantee the development of science and technology can be accessed by multiple users. It becomes important for the further development and use becomes a process, application, materials and products as well as products of other new services. Transfer of technology is divided into two, namely the transfer of both horizontally and vertically transfer. Horizontally is the transfer of technology from one field to another. While the vertical transfer is the transfer of technology from research to implementation (Grosse, 1996).
To realize this IKCEPA cooperation, a study group has been assessing the feasibility of CEPA that startedduring the visit of Coordinating Minister for Economic Affairs of the Republic of Indonesia to Seoul in February 2011. After some time the study group doing the assessment, then endorsed the final report on the first meeting of Working level Task Force Meeting (WLTFM) in Seoul in October 2011. Several seminars have also been implemented in each country to disseminate study results to the national stakeholders. The study of the Joint Study Group for a Comprehensive Economic Partnership Agreement Between Indonesia and Korea (JSC IKCEPA) concluded that further liberalization of the tariff on the product categories Sensitive Track (ST) are not ready for liberalization. This Sensitive Track consists of two products, namely the Sensitive List (SL) and Highly Sensitive List (HSL). This provision according to the agreement Asean Korea Free Trade Agreement (AKFTA) which will increase prosperity for both countries is estimated to be worth US $ 7.97 million or 0.03 percent increase in GDP for Indonesia and $ 1.5 billion, equivalent to an increase in GDP of Korea South by 0.13 percent. With the existence of this bilateral cooperation, Indonesia will gain enormous benefits through economic cooperation, which amounted to USD 10.6 billion, which is equivalent to a 4.37 percent increase in GDP of Indonesia. This benefit is an increase of ± 1:36 times of the benefits derived from trade in goods which only amounted to USD 7.79 million (De Silva, 2012).
However, the report did not report on the benefits South Korea through the economic cooperation. For the record, within the framework of AKFTA, about 90 percent of tariffs Indonesia and 92.1 percent of South Korea's tariffs included in the category of Normal Track (NT), which currently has import duty rates of 0 percent, and the rest is a product in a category Sensitive Track (ST), which consists of a Sensitive List (SL) and Highly Sensitive List (HSL). In March 2012, the two leaders held bilateral talks and agreed to start negotiations on IKCEPA. The talks first held on July 12, 2012 in Jakarta, discusses the Term of Reference (TOR) negotiations of IKCEPA also the scope IKCEPA, namely: Trade in Goods, Rules of Origin, Customs, Trade Facilitation, Investment, Intellectual Property Rights, Sustainable Development and Competition. (WTO, 2012). Currently IKCEPA is at the final stage of negotiations. Points to be a major obstacle in the negotiation of Indonesia-Korea CEPA are: (i) Indonesia wants investment commitments from Korea to be included in legal documents CEPA, while for Korea is very difficult to fulfill that; (Ii) Indonesia still could not accept the proposal of Korea related reduction in tariffs for sensitive products and compete directly with Korea, such as Iron and Steel; and (iii) Indonesia is still considering to liberalize the telecommunications sector according Korean proposal (PKRB, 2013).
In essence FTA is a commitment for members of treaty signatories to reduce or eliminate tariffs on imported goods originating FTA partner countries while maintaining import tariffs Most Favoured Nation (MFN) from countries outside the FTA partners. In fact, every member of FTA maintains its tariff regime. This will bring three things, namely (i) the FTA should be based on the rules of origin (ROO), the absence of ROO will lead to abuse facility for non member countriesof the FTA with the conduct transhipment in member states FTA with low rates and then goods horse re-exported to countries members of the FTA, (ii) expected to occur varying prices in the member states of the FTA because member states will choose varying rates, (iii) although they still maintain tariff regime of its (MFN) for countries not members of the FTA, but such autonomy can make any particular government more susceptible to a particular group at the national level. Basically a preferential trade agreement (preferential trade agreement) such as the Free Trade Agreement (FTA) has positive and negative sides. And to provide alternatives to policy in the field of trade, we can observe in the following Viner's model (TMUG, 2014).

Graph 1: Viner's Model
(Source) Methodology for Impact Assessment of Free Trade Agreement, OECD Viner (1950) concluded that to measure the impact of trade liberalization on a cooperation agreement between countries to compare the effects of positive and negative effects of liberalization: First, the positive effects: trade creation, where a shift of consumption of domestic products that are high-cost to imported products that are low-cost (produced by partner countries). Second, negative effects: trade diversion, ie intermediate consumption of imported products that are low-cost (which is produced by non-members) to the import of products that are highcost (generated by the cooperation partner countries in the FTA).

Methodology
This study aimed to analyze the relationship of cooperation trade in goods and the market potential of South Korea for the main export goods from Indonesia. To deepen the study, simple equilibrium analysis is used to analyze the potential of the South Korean market for goods exports Indonesia. Indicative Potential Trade is also used as an approach. Indicative Potential Trade is a methodology introduced by Christian Helmers and Jean Michel Pasteels (ITC Working Paper, 2006), which can make an assessment of the export potential based on the level of its products. This methodology uses an approach that combines macro and micro indicators. The initial step of this methodology is to establish a certain level of disaggregation trade.
This methodology is illustrated using examples of real world trade, which was originally used in a study conducted by the German Development Cooperation CTZ investigating the potential of bilateral trade in some commodities between Mongolia with partner countries. Simply put products imported into a country or destination is an indication of the existing demand (existing demand), and products dieksor by a country to the world is an indication of the existing offer (existing supply). Indicative Trade Potential (ITP) can be calculated by, first, forming wedges of performance Demand, supply, and existing trade transactions. Second, calculate ITP is based on the equation below: is Indonesia's exports to the world (supply) is Indonesia's exports to Korea (existing) is Korean imports to the world (demand) Generally to analyze IPT results can be explained as follows: -See the difference (gap) between the proportion of Indicative Potential Trade (IPT) with Ratio (Existing / Demand), so that this difference can be seen from the performance of Indonesia's trade with South Korea and viewable potential export goods go to South Korea. For example, for the goods "Cedar" HS 440710100 numbers obtained ratio of 0 per cent and 0.14 per cent of the value of IPT, the next should be seen Indonesia's export performance. -When looking Indonesia in the world trade performance. For goods "Cedar" Indonesia has been supplying to the world amounted to USD 701 000 excluding South Korea country. -World trade performance for the goods to South Korea "Cedar" amounted to USD 513.574 million, meaning that demand for goods Cedar in South Korea is quite large. -Meanwhile, Indonesia's trade performance of South Korea showed that the value of the goods "Cedar" turned out to 0. This means that there is potential for these goods can be negotiated to the South Korean government. Furthermore, to be seen how tariffs applied in AKFTA forum and how rates MFNnya Korea. -AKFTA rates (rates Asean agreement South Korea), it turns out fare "Cedar" is still 5 per cent, in other words, there are still tariff barriers in order to go to South Korea to ASEAN countries, including Indonesia. -South Korea MFN rates, it turns out one obstacle is fare "Cedar" to South Korea. These countries still impose tariffs of 5 percent. This is what must be explored and as a reference to be negotiated with the South Korean government.

Data:
The data used is secondary data import export South Korea and Indonesia as well as the world, while the source data comes from Statistics Indonesia, UN Comtrade, the Organisation for Economic Cooperation and Development (OECD) as well as data from the International Trade Centre (ITC).

Results and Discussion
Indonesia Import Export Performance: For more than a decade from 2004 through 2014, the performance of export-import of Indonesia has been ups and downs. Indonesian imports increased and peaked in 2012, and after that it fell back. Indonesia's main import partner countries has been changing time to time. In 2004, Indonesia main import partners are Singapore, Japan, China, the United States (US), Australia and South Korea. However, the data in 2014, Indonesia's main import partners are China, Singapore, Japan, South Korea, Malaysia and the United States. Imports from Indonesia, has tripled portion of the middle class population, boosting from the demand for fuel oil and consumer goods that becomes higher. Indonesia's major imports are oil and gas (about 24 percent of total imports), machinery (19 per cent), electrical appliances (13 percent), iron and steel (7 percent), vehicles (6 percent) and plastics (5.5 percent). Over the last ten years the development of Indonesian imports, as shown by the graph below.

Graph 2: Import Indonesia of the World Year Period 2004-2014
(Source) ITC, 2014 One mainstay of Indonesia's economic growth is the contribution of the growth of exports from Indonesia to the world. Export is heavily influenced by internal factors such as increasing competitiveness and external factors such as global economic conditions. Some of the main Indonesian export products include oil and gas (18 percent of total exports), mineral fuels and oils (14 percent), animal and vegetable fats and oils (11 percent), electrical equipment and machinery (6 percent). Other exports include: rubber and rubber processing, ores, slag and ash, nuclear reactors and boilers and vehicles (Juan, 2014). During the 10 years of Indonesian exports can be seen in Figure 3 as follows:

Graph 3: Export Indonesia to the World Year 2004-2014
(Source) ITC, 2014 Indonesia's export to main destination countries in 2014 amounted to $ 23,127,089, namely Japan, followed by China amounted to $ 17,605,944, Singapore amounted to $ 16,752,340, and South Korea amounted to $ 10,606,000. Although the general trend of the ten-year average Indonesian exports have increased, but in fact there has been a trend in the last five years of stagnation and even a declining trend in the past year, as pictured on the graph 3 above.

Developments Trade Relations Indonesia South Korea:
In particular, when viewed from the flow of trade between Indonesia and South Korea,the trend for has been turning up and down for both exports and imports between the two countries. However, in 2014 Indonesia experienced a trade deficit.

Graph 4: Trend Trading Indonesia-Korea 2000-2014
(Source) UN Comtrade, processed In almost all the period, Indonesian exports dominate the trade balance with South Korea, but the last two years the value of imports from South Korea continue to increase and become involved in the trade balance deficit. The proportion of export products from Indonesia to South Korea market is not yet significant, which is ranked at 12th position in 2014, which amounted to USD 12,271,095,000. During this time the main partner for South Korea is China with imports amounted to USD 90,072,159,000, and then Japan amounted to USD 53,775,979,000, United States amounting to USD 45,532,370,000, and Saudi Arabia amounted to USD 36,724,136,000. Indonesia is ASEAN countries which have the highest proportion in South Korean imports, followed by Singapore and Malaysia, which amounted to USD 11,306,787,000 and $ 11,100,597,000. As seen in Figure 5. South Korea's main import products in 2014 are products that are used to support the industry, such as petroleum oil (18.07 percent), liquefied natural gas (5.84 percent), light petroleum oil (4.17 percent), processors (3.12 percent), bituminous coal (2.04 percent), iron ores (1.51 percent), electronic integrated circuit (1.42 percent), as well as parts of telephone (1.12 percent). As Table 1 below.  In 2004-2008, there was no major change in trade policy formulation in South Korea. Regulatory reform continue to be made in South Korea with an emphasis on reducing the number of quantitative regulatory policies in order to improve the quality of regulation. After that, South Korea trade policy has also not changed much. Things that encourage trade and investment policies of South Korea is in order to achieve greater liberalization. This is done by increasing productivity and deployment of resource allocation more efficiently. However some protectionist measures to protect domestic producers continue in South Korea, especially farmers, from foreign competition is maintained (TPR, 2004) Discussion: To see a potential indicator of trade especially export potential of Indonesia to South Korea based on the level of product in IKACEPA forum, can be described in Matrix Calculation Indicative Potential Trade between Indonesia and South Korea. From the analysis of the market potential of Indonesia's exports to South Korea can be used as a basis for policy making the Government of Indonesia to negotiate rates trade in goods with South Korean government. Here are the results of analysis using approach of Indicative Potential Trade. The data used is data of 2014 as many as 12 232 items of goods HS Indonesia's main export.
Of these, taken 30 HS items that potentially could be negotiated with the South Korean government that can be summarized as follows (Appendix 1):  6-digit HS 040221, in the form of milk powder Whole milk powder HS 0402211000. This has the proportion of IPT 100 percent. Export or supply of merchandise from Indonesia to the world is very big which is USD 36.681 million while the South Korean demand for USD 10.145 million and Indonesia's exports to South Korea amounted to zero. When looking at constraints which include tariffs remain high at 17 percent good or MFN tariff rates AKFTA South Korea.  6-digit HS 252310, goods Cement Clinkers 2523100000. Merchandise HS also has the potential can go to South Korea. IPT its proportion of 100 percent. Cement exports from Indonesia to the world worth USD 12.597 million while South Korea demand of the world worth USD 1.449 million while the supply from Indonesia yet so these items can be negotiated with South Korea. Tariff barriers to AKFTA by 5 percent and tariffs on entry to South Korea or South Korea MFN also by 5 percent.  6-digit HS 010620, in the form of goods Fresh Water Tortoises HS 010620200. This item is in the form of a turtle or turtle lives in freshwater. South Korea is quite highly demand, and supply Indonesia to the world is also quite high. However, supply to Korea from Indonesia only 10 percent of South Korea's needs. Barriers to entry to South Korea turned out to be the rate charged 8 percent.
Likewise AKFTA forum also still apply the rate of 8 percent.  Barriers to entry to South Korea in the form of tariffs by 8 percent and AKFTA also still apply the rate of 8 percent.  6-digit HS 030749, in the form of Cuttle Fish HS 0307491010. This item is in the form of cuttlefish or squid either dried or salted. IPTnya fairly large proportion of 83 percent. Exports of goods to the world from Indonesia is very big which is USD 93 510 and South Korea demand is also very large, while the supply of Indonesia to Korea is still relatively small. Cuttlefish tariff barriers to entry into South Korea by 10 percent while tariffs are applied AKFTA very high at 27 percent.  6-digit HS 390410, in the form of Poly vinyl chloride (PVC) not mixed with any other substances 3904300000. HS has a PVC Goods IPT proportion of 77.83 percent. These goods are exported to the world worth USD 96.61 million and South Korea imported from the world worth USD 124.125 million while Indonesia supplies to the country of South Korea 0, which means there are still opportunities to enter into South Korea. Tariff barriers for MFN AKFTA 7 percent and Korea also 7 percent.  6-digit HS 030624, in the form of goods Blue Crab HS 0306241010. This item is the crab and the like.
The proportion of potential indicators tradenya quite large at 65 percent. Export crab Indonesia to the world today is very large, while imports to South Korea in addition to Indonesia (the world) is also quite large, while South Korean imports from Indonesia are very small. It is this which is the potential of this crab stuff can get into South Korea. When viewed from the non-tariff barriers on the forum AKFTA and South Korea MFN tariff is still high at 20 percent.  6-digit HS 382311, in the form of acid oil from refining HS 3823192000. This item has IPT proportion of 78 percent. Indonesia to supply goods to the world is very large USD 1.431011 billion. Likewise, South Korea needs for goods is also quite large but the supply Indonesia to South Korea are still relatively few. AKFTA tariff barriers for MFN subject to 8 per cent and South Korea are also 8 percent.  6-digit HS 170290, in the form of HS 1702901000. IPT Artificial Honey Honey Artificial proportion is large enough that 54.09 percent of the potential acquisition is also very large which is USD 83.813 million. When viewed Artificial Honey exports to the world amounted to USD 34.743 million, while demand for South Korea and Indonesia worth USD 63.765 million Artificial Honey supplies to South Korea is still relatively small in the amount of USD 252,000. When viewed AKFTA tariff barriers turns exports still amounted to 24 percent, as well as South Korea MFN rate is still high at 24 percent.  6-digit HS 291612, in the form of Ethyl Acrylate Chemical Goods HS 2916121000. IPT has a proportion of 50.13 percent. Exports of goods to the world this chemical is relatively large in value and South Korea imports of the world is also very large, 2-fold Indonesia's exports to the world. But South Korean imports from Indonesia is still very little. The problem is that barriers to AKFTA rates of 7 percent and South Korea MFN rates by 7 percent as well.  6-digit HS 220290, goods Based on Ginseng Beverage HS 220290100. Goods processed products has the potential to be able to enter more into South Korea. IPTnya proportion of 50.37 percent and South Korea demand is higher than supply Indonesia to the world. Barriers to AKFTA rate was 8 percent while tariff barriers to entry to South Korea is 8 percent as well.  6-digit HS 200820, in

Conclusion and Recommendation
The results of the IPT analysis showed that some items may be proposed in cooperation IKCEPA forum are prime export goods Indonesia HS 6 digit that have the potential as export goods to South Korea one of which has a high proportion of IPT and South Korea demand is very large. In addition, it can also be established in IKCEPA forum about both tariff barriers and MFN tariff rates AKFTA South Korea. This is one factor that dominates the difficulty of potential Indonesian export goods enter the South Korean market.To increase the value of Indonesia's exports to South Korea, dialogue and bilateral cooperation should be supported especially that benefits both parties related tariffs on South Korean government. Besides, it needs to be discussed and negotiated as well as for the South Korean government to provide access to the market leading products in Indonesia. As seen from the structure of the tariffs applied South Korea, South Korean government has tended to protect the products of the farm. This is a concern also for the Indonesian government to be able to apply the same policy to protect agricultural products.
As the material IKCEPA discussion forum of cooperation, there are several items featured Indonesian exports of HS 6 digit that has the potential to enter the market of South Korea.