FORMOSA NEWS
Surabaya-Indonesia's participation in the Regional Comprehensive Economic Partnership (RCEP) has strengthened the country's export performance while maintaining trade with markets outside the regional bloc, according to a new study published in 2026. The research was conducted by Michael Jeremi Zebua and Dr. Sishadiyati from the Department of Development Economics, Faculty of Economics and Business, Universitas Pembangunan Nasional "Veteran" East Java (UPN Veteran Jawa Timur). Their findings suggest that RCEP has generated new export opportunities for Indonesia rather than diverting trade away from existing international partners.
The study arrives at a critical time as governments across Asia continue to evaluate the long-term economic impact of the world's largest free trade agreement. Covering 15 economies—including ASEAN member states, China, Japan, South Korea, Australia, and New Zealand—RCEP represents approximately one-third of global GDP and population. Since the agreement entered into force in 2022, economists have debated whether it would genuinely create additional trade or simply redirect commerce from non-member countries.
The evidence presented by Zebua and Sishadiyati indicates that Indonesia has largely benefited from trade creation, meaning that lower trade barriers have generated additional export activity rather than replacing existing trade relationships. The results suggest that RCEP is helping Indonesia expand its presence in regional markets without sacrificing exports to countries outside the agreement.
Why This Research Matters
Regional trade agreements have become increasingly important as countries seek more resilient supply chains and broader market access. Indonesia, one of Southeast Asia's largest economies, depends heavily on international trade to support industrial growth, employment, and foreign exchange earnings.
While free trade agreements typically reduce tariffs and simplify customs procedures, they may also produce unintended consequences. Economists distinguish between two possible outcomes:
- Trade creation, where lower trade barriers encourage new and more efficient international trade.
- Trade diversion, where imports or exports shift toward member countries simply because of preferential tariffs, even when non-member countries remain more efficient trading partners.
Understanding which outcome dominates is essential for policymakers designing trade strategies and businesses seeking new export markets.
How the Researchers Conducted the Study
The researchers analyzed Indonesia's export performance between 2005 and 2024, covering both the years before and after RCEP implementation. They compiled international trade and macroeconomic data from UN Comtrade, the World Bank, and CEPII, three widely recognized global data sources.
Rather than relying on simple comparisons, the authors applied a gravity model of international trade, an established economic approach that estimates trade flows based on factors such as economic size, distance between countries, exchange rates, and membership in trade agreements. The model examined Indonesia's exports to major trading partners both inside and outside the RCEP framework.
This approach allowed the researchers to determine whether export growth reflected genuine market expansion or merely a redistribution of existing trade.
Key Findings
The study reports several important findings about Indonesia's export performance during the RCEP period.
- RCEP significantly increased Indonesia's exports to fellow member countries.
- Indonesia's exports to non-RCEP countries also continued to grow after the agreement entered into force.
- The evidence strongly supports trade creation rather than trade diversion.
- Indonesia's own economic growth plays a major role in expanding exports.
- Economic distance, including logistics and transportation costs, remains one of the strongest barriers to export growth.
- Exchange rate fluctuations showed no statistically significant impact on Indonesia's export performance during the study period.
The statistical model explained approximately 62.5 percent of the variation in Indonesia's export performance, indicating that the selected economic variables captured much of the country's changing trade dynamics.
One notable finding concerns Indonesia's economic growth. The researchers estimate that a 1 percent increase in Indonesia's Gross Domestic Product (GDP) is associated with approximately a 1.04 percent increase in exports, highlighting the close relationship between domestic production capacity and international competitiveness.
Conversely, stronger economic growth in trading partner countries was associated with lower Indonesian exports. According to the authors, rapidly growing economies may become more capable of producing goods domestically or sourcing imports from increasingly competitive suppliers, reducing demand for Indonesian products.
What the Findings Mean
The results indicate that RCEP has strengthened Indonesia's position within the Asia-Pacific trading system without weakening relationships with countries outside the agreement.
According to Michael Jeremi Zebua and Sishadiyati of Universitas Pembangunan Nasional "Veteran" East Java, the positive coefficients for both RCEP and non-RCEP trading partners demonstrate that the agreement has generated additional trade instead of diverting existing export flows. In practical terms, Indonesia has expanded its overall export opportunities rather than merely shifting sales from one market to another.
The researchers also emphasize that domestic economic strength remains a more influential driver of exports than exchange rate movements. Investments that improve industrial productivity, manufacturing capacity, and export competitiveness are therefore likely to generate greater long-term benefits than relying solely on currency depreciation.
Another major implication concerns logistics. The study found that greater economic distance—including transportation costs, shipping efficiency, and market accessibility—significantly reduces export performance. This finding reinforces the importance of improving ports, supply chains, and trade infrastructure if Indonesia hopes to maximize the benefits of regional economic integration.
Policy and Business Implications
The findings provide encouraging evidence for policymakers seeking to maximize Indonesia's participation in RCEP. Continued efforts to simplify trade procedures, strengthen industrial competitiveness, and improve logistics infrastructure could further increase Indonesia's export capacity across Asia-Pacific markets.
For exporters and manufacturers, the study suggests that RCEP offers genuine opportunities to reach new customers while maintaining existing international markets. Companies that invest in higher productivity, product quality, and regional supply chains may be well positioned to benefit from continued economic integration.
The authors also recommend that future studies include additional variables such as foreign direct investment, institutional quality, logistics performance, and trade facilitation indicators to provide a more comprehensive understanding of RCEP's long-term economic effects.
Author Profile
Michael Jeremi Zebua, is a researcher in the Department of Development Economics, Faculty of Economics and Business, Universitas Pembangunan Nasional "Veteran" East Java. His research focuses on international trade, regional economic integration, export performance, and development economics.
Sishadiyati is a lecturer in the Department of Development Economics, Faculty of Economics and Business, Universitas Pembangunan Nasional "Veteran" East Java. Her academic expertise includes international economics, regional development, public policy, and economic integration.
Source
Article Title: Indonesian Export Dynamics in the RCEP Era: Trade Creation or Trade Diversion?
Authors: Michael Jeremi Zebua & Sishadiyati
Journal: International Journal of Economic, Finance and Business Statistics (IJEFBS)
Publication Year: 2026
Volume: 4, Issue 3, Pages 215–228
DOI: https://doi.org/10.59890/ijefbs.v4i3.5
Official Journal: http://journalijefbs.my.id/index.php/ijefbs
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