Shall the Indonesia-OIC Countries' Free Trade Agreements on Modest Fashion be Implemented?

Articles in Press

Document Type : Research Paper

Authors

Department of State Financial Management, Polytechnic of State Finance STAN, South Tangerang, Indonesia

10.22059/ier.2024.373324.1007956

Abstract

A free trade agreement (FTA) could be a first step towards greater economic integration among OIC countries. This paper explores the impact of the proposed Indonesia-OIC Countries FTA in the modest fashion industry under a general equilibrium basis on some indicators such as welfare, GDP, trade balance, investment, and job opportunity. It utilizes computable general equilibrium (CGE) analysis on the Global Trade Analysis Project (GTAP) model. For analysis purposes, 65 GTAP sectors, representing the whole regional economy, have been aggregated into four sectors, and 141 GTAP regions, representing the whole world, have been aggregated into 13 regions. The scenario is Indonesia conducting an FTA with ten potential OIC export destination countries by reducing import tariffs for modest fashion products to 0%. It is predicted that Indonesia will receive the highest increase in welfare of USD 140.83 million, followed by Morocco. The highest impact on changes in real GDP will be received by Indonesia, with a positive change of 0.004%, followed by Morocco and Turkey. Egypt is projected to have the highest negative real GDP. Indonesia might experience the most significant trade balance deficit of USD 198.13 million. Almost all OIC countries will experience an increase in investment, especially Indonesia, which is predicted to increase by 0.069%. Skilled and unskilled workers will receive increased employment opportunities in all modest fashion industries. This paper contributes to the literature by focusing on critical aspects of the FTA's impact on modest fashion by optimizing the elimination of import tariffs of OIC countries.

Keywords

Main Subjects

Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 16 June 2024

Files

Share

How to cite

Statistics