INTERNATIONAL TRADE POLICY IN INCREASING ECONOMIC GROWTH

INTERNATIONAL TRADE POLICY IN INCREASING ECONOMIC

GROWTH

Introduction

International trade is an exchange activity that is carried out by one country with

another country on the legality of mutual agreement. In addition, international trade also

promotes more advanced industrialization, transportation development, globalization and the

presence of multinational corporations. So it cannot be denied that International Trade is an

aspect that has a huge impact on the economic growth of a country. According to Mikhral

Rinaldi (2017), by prioritizing economic growth, the government must implement various

economic policies to achieve economic growth economic growth stage and exemplify the

stage of prosperity and welfare of society, such as through international trade (Suhardi & et

al, 2023).

Czinkota argues that international trade is the exchange of goods, services and

capital across national borders, as cited by Asdi Aulia (Asdi Aulia, 2008). Export means

selling or sending goods or services abroad and import means buying and receiving goods

and services from abroad. According to Ibrahim (2017), currently every country involved in

international trade relations is dependent on each other. Even Ibrahim said that in the current

era of globalization, countries must work together to meet their own needs (Firdaus, 2022).

David Ricardo proposed a theory about international trade called the Theory of

Comparative Advantage. According to David Ricardo, a comparative advantage is if a

country can produce goods or services efficiently and at price that more cheaper than

countries other countries. For example, countries computer producing countries, South Korea

and United States can produce computers at a price of that are more cheaper than United

States, so United States will be more profitable if it imports computers from South Korea

(Amanda & Aslami, 2022). Restrictions on exports may help increase prices producer rents at

home and abroad. In particular, changes in substitution that caused by an increase in exports

can make constraints that were initially unforeseen voluntary, based on the relationship that

linking the structure of domestic and foreign markets as well as the substitutability of foreign

and domestic goods consumed in the domestic market.

country (Hillman & Ursprung, 1988).

Sedyaningrum (2016) argues that increasing imports can lead to a decrease in

domestic production, which in turn will lead to increased unemployment, decreased income,

and decreased purchasing power. As a result, an increase in the amount of exports will lead to

an increase in demand for domestic currency, which in turn will increase the exchange rate,

which in turn will increase employment. In addition to capital imports and investment, a

decrease in domestic production, an increase in unemployment, and a decline in income all

can affect people's purchasing power (Ilkaningtyas & et al, 2024).

According to Sukirno (2004), all countries in the world conduct international trade

for several reasons. The most important of these factors are as follows: (1) obtaining products

that cannot be produced at home (2) importing more advanced technology from other

countries; (3) expanding the domestic product market; and (4) gaining benefits from

specialization (Ibrahim & Halkam, 2021).

One indicator that can be used by a country to assess and evaluate the condition of its

economic development is economic growth; this is the process of gradual change in a

country's economic condition towards a better state over a period of time. Economic

improvement can increase the prosperity of society. One component that affects a country's

economic growth is international trade activity (Yuni & Hutabarat, 2021).

Trade between countries occurs when each country produces different products,

creating demand and supply for those products. Product differences (Comparative

Advantage) and differences in product efficiency in the production and distribution process

are the only reasons trade between countries occurs (Suhartono, 2011). According to Dabic

(2020), due to more open trade, advances in manufacturing, transportation, and

communication, micro, small, and medium enterprises (MSMEs) can now participate in

international markets, while large-scale companies can only participate in international

markets (Ariyani, 2022).

In his book entitled Principal of Political Economy and Taxation (1817), David

Ricardo expressed his opinion on international trade through one of his theories that has

influenced the world of economics to date, namely, the theory of comparative advantage.

Ricardo created the difference between domestic trade prices and domestic trade prices

international trade prices. One of the assumptions underlying Ricardo's thinking is as follows:

(1) two countries and two commodities; (2) free trade; (3) free labor that can move freely

within a country but not internationally; (4) fixed production costs; (5) zero transportation

cost; (6) no technological development; (7) labor theory of value; and (8) perfect competitive

market (Jamli & Rizaldy, 1998).

One of the things that can be used as a driving force for growth is international trade.

According to Salvatore (2004) in Trade as Engine of Growth, international trade, which

consists of exports and imports, has the ability to drive economic growth. Tambunan (2005)

stated that United States made a policy to encourage exports in the early 1980s. Therefore,

the policy utilized exports to boost growth (Yolanda, 2016).

International trade is currently one of the ways for countries to grow their

economies. The cooperation carried out is governed by established policies. This can be done

through the export and import of goods or services in any field. International trade can not

only be carried out between countries, but can also be carried out by people from different

countries. Interaction between MSMEs and other countries or foreign companies is one

example of cooperation that is not carried out directly by the state.

In the current era of globalization, it is possible for people from different countries to

interact more easy to transact. So it is possible that a lot of state income comes from MSMEs

that carry out international trade outside of market activities carried out by the state.

Therefore, the economic growth of a country is greatly influenced by international trade. The

more transactions that occur, the faster the country's economic growth will increase.

Research Methods

Discussion The research uses a literature study method which aims to provide an

overview of the literature About international trade policies carried out by countries with

other countries. The groups in this study are the government, MSMEs, and others who are

included in the elements of the United States state. The type of research used is a literature

study. According to Zed (2008:3), the literature study method is a collection of actions that

include reading, recording, and processing materials material research materials.

(Kartiningrum, 2015).

According to Evenett (2019), the government protects the domestic industry by

setting international trade policies. Forms of international trade policy protection can be in

the form of tariff policies, quotas, import bans, subsidies and dumping (Suryanto & Kurniati,

2022). The form of protection starts from (1) Tariff policy, setting fees for goods or services

that cross national borders in order to improve the economy, (2) Quotas, limiting the quota of

incoming foreign products so that domestic products are still sold and people avoid the

consumptive attitude of foreign products. (3) Import bans, useful for preventing imported

goods from entering the country entry that can disrupt domestic industries. (4) Subsidies,

assistance from the government, especially for MSMEs in developing their production and

markets. (5) Dumping, selling products abroad at a lower price so that the market reached is

wider and can compete with foreign products where the goods have been exported.

Results and Discussion

Policy International trade policy affects the economic growth of the country, so the

determination of the right policy from the government is needed. Good economic growth will

improve welfare and reduce the risk of domestic conflict. Many aspects can carry out

international trade, from the state as the main actor to the community which can take the form

of individuals or groups. It has been widely seen starting from large private companies to

MSMEs also participate in international trade. This is one of the causes of the increase in the

economy of a country if it is well run.

Opinion according to Evenett in Suryanto and Kurniati (2022: 108), indicators of

international trade policy on the form of protection of domestic industries, namely: Tariff

policy. setting fees for goods or services that cross national borders in order to improve the

economy. International trade is one of the important factors in improving the economy

through exports and imports. Utilizing this, the state can get income from taxes on goods or

services entering the country.

Policy tariff policy imposed by the state can be one of the solutions in economic

growth. Goods entering from outside Foreign goods are subject to higher taxes in order to

discourage consumers due to the increased price of these goods. This method can reduce

people's consumptive nature towards foreign goods. The high price of goods makes people

think again to buy and prioritize domestic goods.

This reduces the demand for imported goods for domestic buyers as the price rises.

The competitiveness of the exporter's products in the destination market is reduced by tariffs.

Tariffs can also cause fraud due to unfair practices of foreign producers dumping and

protecting domestic producers, including industries that raise market prices higher than

selling prices. Tariffs can also help the government generate more taxes (Priyatno & et al.,

2022).

The reduction in the purchase of foreign goods makes people prefer domestic goods,

so that the circulation of money returns to the country. This can increase income for domestic

industries in both large private companies and MSMEs. Taxes that go to the government

from export and import tariffs are also very helpful for economic growth. Therefore, the tariff

policy imposed by the government has a major impact in improving the economy.

Chang (2005) argues that since advanced industrialized countries control the

advancement of production technology, better imported products at lower prices will

dominate the domestic market if the government does not implement a measured trade

protection policy. As a result, the Infant Industry, which is one of the developing domestic

industries, will be in danger if the survival of the industry is not guaranteed (Anam & Solikin,

2020).

The second indicator according to Evenett in Suryanto and Kurniati (2022: 108),

namely quotas that limit the quota of incoming foreign products so that domestic products are

still sold and people avoid the consumptive attitude of foreign products. The large number of

incoming foreign goods is a threat to domestic products. This will result in the uncontrolled

circulation of foreign goods in United States. In the end, it will displace domestic goods that

are less competitive with imported products, especially in price.

Providing quotas for the entry of foreign goods is one solution to overcome this. One

way is to limit the quota of imported goods entering United States within a certain time. This

also has the aim that the domestic industry is not disturbed by the circulation of imported

goods. According to Pindyck (2013), a quota policy that aims to protect local producers from

imported products is a trade barrier (Lesmana, 2022).

One of the requirements for an import surge is that it must be immediate, sudden, or

short-lived, significant, and sharp, and the surge must be unpredictable. If the import surge

lasts for a long time or only occurs for a short period of time after an event that could have

been predicted at a previous time occurs, then the event cannot be declared. In this case, the

emergency is in accordance with the requirements set out in Article XIX of the GATT 1994

(Raytiaputri, 2016).

An emergency surge in imports can threaten the domestic industry, especially if it

occurs over a long period of time. If this happens, it will cause state revenue through private

companies and MSMEs will decline. Therefore, the government provides quota restrictions

for foreign goods entering United States so that this does not happen. The existence of this

quota restriction is expected to overcome the surge in imports and can provide opportunities

for domestic industries to compete and develop, so that economic growth continues and

continues to increase.

The third indicator according to Evenett in Suryanto and Kurniati (2022: 108) is the

import ban, useful for preventing imported goods from entering which can disrupt the

domestic industry. Some imported goods can affect the domestic industry. This is due to the

unsuitability of the market for these goods in United States and can threaten domestic

products which can have an effect on product inactivity, losing competitiveness in quality and

price. Therefore, the threat posed is increased imports of these products and decreased

demand for domestic products, thereby disrupting the country's economic development.

Import bans can be an important measure to protect domestic industries from the

threat of imported products that can destabilize the domestic market. By preventing the entry

of imported goods that are not suitable for the United States market, domestic products have a

better chance to develop and compete, which can encourage the growth of domestic

industries that improve the quality of local products and keep prices competitive.

However, it is important to remember that import bans should be done with caution

and in moderation. A policy that is too strict may causing market distortions, reduced product

quality due to lack of competition, and increased prices for end customers. One effective way

to safeguard the domestic industry is to ban imports, however, this should be implemented

carefully and within a comprehensive policy framework to achieve optimal results for the

country's economic growth.

One of them is the recent ban on the import of used clothing in United States. The

issue of second-hand clothing trade has spread in various countries around the world, both in

developed and developing countries. The growing issue has a negative impact on developing

countries, which seem to be collectors of used clothing from developed countries. One of the

developing countries in the world that exports used clothing is United States (Aditya, 2017).

Used clothing imported into the country from other countries is called imported used

clothing. These used clothes are much cheaper than new items. Moreover, there is currently a

thrift trend and the branded second-hand clothing business continues to grow year after year.

Since imported goods are banned, their income has decreased and illegal distributors are

more cautious in marketing their goods. As a result, traders in some local markets suffered a

huge impact (Fatah & et al., 2023). Therefore, the import ban was enacted by the United

States government so that the local market would not be dominated by imported goods which

resulted in traders not earning income. As a result, there is a decrease in revenue that will

result in state losses and economic growth will be hampered.

The fourth indicator according to Evenett in Suryanto and Kurniati (2022: 108) is

subsidies, assistance from the government, especially for MSMEs. in developing their

production and markets. Assistance in the form of money or commodities to economic actors

such as foundations, local traders, or MSMEs carried out by the government has the aim of

increasing spending or lowering prices for production goods. The role of the government is

very helpful in supporting the economy by keeping domestic goods circulating in the market.

According to Milton H. Spencer and Orley M. Amos, Jr. in their book entitled

Contemporary Economics, a subsidy is a payment made by the government to a company or

individual in any form to achieve a specific goal that benefits the recipient. Subsidy in short

means financial enhancement or assistance. Subsidies can be in the form of money, materials,

products, or fee waivers. Most recipients of subsidies are from the lower middle class (Soen

& et al., 2022).

According to Triest (2009), a subsidy is a form of encouragement provided by the

government to a portion of the population that allows the government to lower the price of

goods purchased because the government helps lower the cost of production. The purpose of

subsidies is to improve market mechanisms by providing services to the poor and

underprivileged and by correcting market failure mechanisms by producing a more efficient

allocation of goods and services. (Carolina, 2022). Therefore, traders or MSMEs can still

produce their goods at low prices so that the domestic industry continues to run.

Subsidies are instruments used by the government to help companies or individuals,

especially MSMEs, increase production and expand markets. Subsidies can be provided in

various forms, such as financial assistance, material assistance, or fee waivers, and aim to

help recipients achieve specific goals that support economic growth. Subsidies are also

considered a form of encouragement provided by the government to lower the price of

purchased goods, allowing traders or MSMEs to compete at lower prices. With subsidies,

production costs can be reduced, allowing local products to remain competitive in the

domestic market. Subsidies can also improve the effectiveness of the distribution of goods

and services and correct market failure mechanisms.

The fifth indicator according to Evenett in Suryanto and Kurniati (2022: 108) is

dumping, selling products abroad at a lower price so that the market reached is wider and can

compete with foreign products where the goods have been exported. Goods that are sold

cheaply aim to dominate the market where the goods are exported. This competition is

carried out to increase the income from goods exported abroad with local goods in other

countries. Dumping is also defined as a policy of price discrimination that can shut down

foreign markets.

According to Hendra Halwani in his book entitled International Economics and

Economic Globalization, according to the rules of The General Aggrement on Tariff and

Trade (GATT), dumping is when a product is introduced into another country's market at a

price lower than the normal price. This can be either a price lower than the selling price in the

exporting country (if there are no sellers in that country) or a price lower than the selling

price in the importing country (after deducting transportation costs) and other costs common

in trade) (Anggraeni, 2015).

Based on the perspective of economists, Paul Krugman and Maurice Obstfeld state

that price discrimination can be a legitimate business tactic. In addition, the legal sense of

dumping is different from the economic sense. Since it is difficult to prove that foreign

companies charge domestic customers higher prices than export customers, countries often

try to calculate the supposedly fair price based on estimates of foreign production costs

(Nugroho, 2023).

Dumping indeed many unfavorable assumptions will but This this is allowed.

Considered not good because may cause damage to the domestic industry in the destination

country. This is because goods that are dumping has a lower price than the local goods

themselves. This method This is which become one of one of the supports economy

according to the government, which can improve the economy through exported goods with

price cheap.

Dumping is often considered unethical and can lead to unfavorable assumptions, but

in some situations the practice is still permitted. Dumping can have a negative impact

especially on domestic industries in dumped countries as selling goods at low prices can

threaten local businesses. However, governments see dumping as a way to boost the economy

by exporting goods at competitive prices. Therefore, to protect the interests of domestic

industries without violating international trade rules, the handling of dumping cases must be

done careful and based on careful analysis. Collaborative efforts between countries to address

dumping can also be an effective measure to create a healthy and fair trading environment for

all parties involved.

Conclusion

Policy International trade policy is a rule carried out by a country to regulate the

flow of goods and services between countries which aims to increase economic growth.

International trade is a trade activity carried out by a country with other countries through the

export and import market. The government has an important role in regulating this trade flow

so that the domestic industry continues to run and local goods are not less competitive with

imported goods. Through local traders such as private companies and MSMEs can support

the country's economy. Therefore, domestic products must be the main products in circulation

and can reduce people's consumptive behavior towards imported goods domestic industry and

can cause losses to the state. In terms of subsidies, the government provides assistance in the

form of money or commodities to private companies or MSMEs in order to minimize

production costs so that more goods can be produced and can support economic growth. In

terms of dumping, it is a policy that provides low prices for exported goods with the aim of

controlling the market where the country of the goods is.

It is expected to provide input government about the importance of international

trade policy in increasing economic growth. International trade has a great influence on the

country's income. Therefore, policies are needed that can support international trade itself. In

increasing current economic growth, it is suggested that government subsidies to MSMEs can

be increased again and facilitated in developing their industry to expand the market.

Based on this research using Trade Policy Theory according to Evenett (2019), the

form of international trade policy protection can be in the form of tariff policies that provide

tax rates to incoming goods so that the price of imported goods becomes more expensive. In

terms of quotas that limit goods entering United States in order to reduce the consumptive

nature of society towards imported goods and continue to use domestic goods so that the

country's economic growth can continue to increase. In terms of import bans in improving the

economy, it is useful to protect domestic goods from the onslaught of imported goods that

can harm the economy.