Re:Response to the letter concerning AFTA forwarded by Mr.Gde Wisnaya
Dear LP3B,
Welcome to the AFTA, ASEAN Free Trade Area. The AFTA Members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
I want to inform and discuss about the impacts of AFTA for us in Indonesia. The "Free Trade Area" is the least restrictive and loosest form of economic integration among countries. There are other forms of economic integration which are Customs Union, Common Market, Economic Union, and Cartels and Commodity Price Agreements.
The barriers to trade among member countries which are removed in a Free Trade Area are only for goods and services. Usually, factors of production and harmonized currency are not included in the Free Trade Area agreements. Therefore, I think the factors of production like employees and investments are outside of the AFTA agreement. We need to check the agreement up so that there will be no confusion for us. If someone has this information, it is highly appreciated when you could forward it to us on this media, LP3B.
On the other hand, Economic Union like the one which has been applied for European Countries requires the integration of economic policies in addition to the free movements of goods, services, and factors of production. In the European Union, member countries have harmonized monetary policies, government spending and taxation. The single currency, Euro Money, has been used by all member countries since a year ago. Now the value of euro money is stronger than that of US dollar. One Euro is equal to 1.056 of US dollar yesterday. Furthermore, last month there were other 10 countries in Europe such as Croatia, Lituania, Zhech Republic, Latvia, et cetera, joining the European Union.
There is a number of arguments concerning the advantages and disadvantages of economic integration like the "Free Trade Area" for member countries. They usually generate the following issues :
1. Trade Creation and Diversion for member countries. 2. The economic integration effects on import prices, economies of scale, competition, and factor of productivity. 3. The benefits of regionalism vs. nationalism. As a conclusion, there are still a lot of rooms for us in Indonesia to reap the benefits of AFTA compared to those of Myanmar, Combodia, Vietnam, and Laos. Also, this AFTA agreement can be used as a mode of entry to reach GMS ( Greater Mekong Subregion) Area.
Sincerely Yours,
Sudarma
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