Trade and Environment in Indonesia: Case Study of EU-Indonesia Free Trade Agreement
Trade and Environment in Indonesia: Case Study of EU-Indonesia Free Trade Agreement_Conference Proceeding 9th NEU-KKU Full Version (14.34Mb)
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This paper attempts to investigate whether environmental impacts, would increase or decrease with trade liberalization. Trade expansion, that is, Comprehensive Economic Partnership Agreement (CEPA) between Indonesia and EU (European Union) causes environmental damage in Indonesia. Trading activities between Indonesia and EU makes some negative externalities even though the vision of CEPA included the concrete measures to promote the sustainability of environment of EU-Indonesia. Using Estimated Pollution Intensity (EPI) which is developed by the World Bank in 1995, it has been found that the estimated amounts of pollution have been increasing in Indonesia after three years of Indonesian-EU CEPA FTA implementation from 2014 to 2016. Even though the share of export of most polluting sectors has been decreasing, its contribution on the pollution intensity remains the largest. Since chemicals become the most polluting sector with its rapid growing in export to EU countries, this sector needs to be considered in trade negotiations in order to lessen negative impacts of trade to the environment.