The Pattern of Intra Industry Trade and Competitiveness of Agricultural Product Trade Between Indonesia and Türkiye

Abstract

International trade cooperation is one of the main issues faced by several countries in response to the global economic uncertainty. Indonesia is one of the countries that is active in trade cooperation both on a bilateral and regional. One of Indonesia’s bilateral collaborations was the trade agreement with Türkiye in the Indonesia-Türkiye Comprehensive Economic Partnership Agreement (IT CEPA). The IT CEPA aims to improve economic relations between Indonesia and Türkiye by increasing trade. This research aims to analyze the pattern of intra-industry trade between Indonesia and Turkiye and the competitiveness of agricultural product trade. The agricultural sector has a high proportion of international trade between Türkiye and Indonesia; therefore, this study focuses on agricultural products. The method utilized is Intra-industry trade (IIT) analysis and Constant Market Share (CMS) analysis. Data on the export and import trade flows of Indonesian and Turkish commodities were obtained from the International Trade Center (ITC) database. The results showed that after the signing of the IT CEPA (2018-2022 period), exports of agricultural products increased by 45.6 percent. Indonesia has the opportunity to increase its exports to Türkiye for commodities that are declining in competitiveness. The intra-industry trade analysis showed that out of 20 two-digit HS code, only one two-digit code has strong intra-industry trade, which is HS 03 fish and crustaceans. This implied that in this HS code, both countries trade relatively in similar value. Meanwhile in other two-digit HS code, is mostly a one-way trade. The Constant Market Share (CMS) analysis revealed that the competitivenes of Indonesia’s agricultural product export to Türkiye increase after the implementation of IT CEPA showing that Indonesia benefits with the implementation of this trade agreement. In the future, both countries must optimalize the IT CEPA in increasing trade between two countries especially products in HS code currently only exist oneway trade.