Impact of Free Trade Agreement (FTA) on Indonesian Agricultural Exports

The study of impact of Free Trade Agreement (FTA) on Indonesian agricultural exports study was aimed to examine whether Indonesian participation on free trade agreement increased exports of agriculture commodity. Annual data from 140 partner countries along 2004-2013 had been used. The augmented gravity model was chosen to analyze factors affecting Indonesian agricultural exports. This study also examined the impact of FTA on five major agriculture exports commodities including cocoa, coconut, coffee, palm oil and rubber. The result showed that Indonesian agricultural exports were positively correlated with the population growth and free trade agreement enrollment but negatively correlated with the Indonesian currency exchange rate appreciation. It also found that Indonesian membership on ASEAN Free Trade Area (AFTA) has a significant positive impact on agricultural exports. The impact on commodities is as follows, Indonesian membership on ASEAN-India FTA and ASEAN-Korea FTA has promoted export on rubber and cocoa respectively. However, the ASEAN FTA has significantly negative impact on coconut and palm oil export. The result was similar to the ASEAN-Australia and New Zealand FTA which negatively impacted for rubber exports.