Wednesday, April 20, 2011

ACFTA again

Ten, fifteen days in a row - maybe more - the media is filled with heavy mercantilism again. It's about ACFTA. They say, Indonesian market is being flooded with Chinese cheap products: from textile to fruit to toys. All these destroy Indonesian producers. Not good.

Interestingly, no one mentions about the benefits to consumers: cheap prices are good. One article in Kompas (17/4) rightly quotes a small orange trader saying that Chinese oranges are good, the supply is reliable, and the quality is better - all with cheaper price than local oranges. So yes, some local businesses are benefited, too.

But they are rotten, say the complainers. Really? According to a news (also Kompas 17/4, same page), the Chinese exporters have started to adopt Indonesian National Standard. So?

A few note that the increase in Indonesia's trade deficit against China has a lot to do with yuan's and rupiah's appreciation against dollar. And because rupiah appreciation is relatively stronger than yuan appreciation, Chinese products become relatively cheaper to Indonesian importers than the other way around. So, this is not just between Indonesia and China. It also involves US. And all other countries, for that matter. You want to block China? Block everyone else too. Good luck with that.

Of course I'm not saying everything China is good. But when you find smuggle or illegal products, impose the correct punishment, not to burn the whole ship. Otherwise, you'll just be used by them inefficient, rent-seeking, protection-loving domestic producers. At the cost of consumers. And all the rest.

1 comment:

  1. I've only started following this debate quite recently, but I've been dismayed to see Indonesians who think they are getting a bad deal out of ACFTA calling to renegotiate parts.

    It seems to be that rather than pushing to renegotiate (ie, change the rules of the game) Indonesin businesses are better off putting their energies into developing better export products (ie, playing the game better).