THE LEGAL LINKAGES OF INTERNATIONAL TRADE AND
INVESTMENT AND THE BENEFITS AND DRAWBACKS OF
INTERNATIONAL TRADE AND INVESTMENT
1.0 Introduction
International trade is the activity of buying and selling or exchanging between
countries or national borders in the form of goods or services which is a crucial aspect in the
global economy. The concept of international trade provides an exchange of goods or
services of a country that is not owned by another country, and get goods or services that are
not owned by the giving country. By conducting international trade, each country has
economic benefits, as well as other aspects related to the country. International trade provides
an opportunity for a country to produce goods and services that they have and are needed by
other countries that do not have these resources. For example, countries in the Middle East
that have natural resources in the form of abundant crude oil, cooperate with countries that
need these resources for the benefit of these countries, therefore the majority of countries in
the Middle East are the largest exporters of oil in the world, they trade these resources of
course benefit their countries in the economy, as well as countries that receive these resources
can still carry out the interests of their countries that utilize these resources.
The WTO is an international organization in the field of free trade. Many countries
that are members of the WTO aim to advance their country's economy, but not all developing
countries that are members of the WTO have succeeded in advancing their country's
economy. The establishment of the WTO has provided trade freedom to the world, especially
to member countries, where the basic concept of trade liberalization is to remove barriers to
international trade, the application of rules against WTO member countries has no certainty
or definite punishment for rule breakers. (Huala Adolf, 2005) The General Agreement on
Tariffs and Trade (GATT) is a multilateral trade agreement with the aim of creating free, fair
trade, and helping to create economic growth and development in order to realize the welfare
of mankind. To date, the Agreement has been joined by more than 125 countries. (Law no.7
of 1994 "Ratification of the Agreement Establishing the World Trade Organization)
This International Trade activity is inseparable from exports and imports, Export is an
activity of selling goods abroad by Using a payment system, quality, and terms that have
been legally agreed upon by the exporter and importer, this export activity usually benefits all
parties in the country, both the government and the general public, exports will increase the
country's foreign exchange from the profits obtained from the sale of goods if the exporters
are state-owned companies or BUMNs, and benefit from taxes if the exporters are the public
or private parties. As for the community, exports are certainly profitable because export
demand is usually in large quantities, and on the basis of economic principles where a lot of
demand will increase the valuation or value of exported goods so that it benefits the exporter.
With this economic activity, the abundant resources in the country will stimulate the pace of
economic development because of course domestic producers who export will open up new
jobs, and create income for the country in the form of taxes. Import itself is a contradiction of
export activities, imports are an effort to enter goods into the country to fulfill domestic
needs, although it is known as a country that has diverse and abundant natural resources, of
course Indonesia is inevitable from imports, imports are considered a leak in domestic
income, as well as a threat to domestic producers in trade competition against foreign
products. (Primadhany, 2020)
From international trade which is inseparable from export and import activities, there
is one activity that is related and has a similar conception to international trade, namely
Investment, in international trade activities producers who carry out domestic production
must certainly have capital in setting up infrastructure in production efforts, as well as funds
to carry out operations or employee and labor wages. Usually in this case, both state and
private companies require large injections of funds from investors. Investors are people who
invest or provide the funds needed by the company to run its production business or develop
its production business and expand its business. Therefore, international trade is related to
investment, because without investment international trade activities will be difficult to carry
out or difficult to develop. Of course, investment is one of the crucial factors in international
trade and global economic development.
2.0 Methods
The research conducted uses a qualitative method that emphasizes the theory of theory
with a normative juridical approach and data collection with a library research method
sourced from laws, books, journals, and other research results related to the issues discussed
in this journal.
3.0 Results and Discussion
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
3.1 International Trade and Investment Linkages and Binding Laws.
International Trade and Investment is a milestone of today's world economy, where
the globalization of trade has resulted in countries establishing bilateral, multilateral and
convention-level relationships to enter into agreements on international trade, in terms of
international trade which is growing rapidly, of course investment in the form of FDI
(Foreign Direct Investment) is directly proportional to the pace of development of
international trade. These two economic activities are very important in the development of
the world economy, where these economic activities create new jobs, improve the country's
quality of life standards, and have an impact in other fields such as politics and others.
International Trade as an activity related to the economic field and the region must
have a law like every other activity in the International Trade law is a set of rules governing
trade between countries, including legal frameworks such as international treaties, national
laws, and court decisions, international trade law certainly plays a crucial role in improving
the global image and regulating international trade which has a significant impact on the
world economy. The organization responsible for Trade is the World Trade Organization
(WTO) which provides a framework for negotiating and enforcing trade agreements between
member states. In addition to the WTO there are also organizations whose regional scope
regulates international trade such as the North America Free Trade Agreement (NAFTA), and
the European Union (EU) as well as other bilateral and multilateral agreements. (Suardi.
B.Dg)
International Trade became increasingly popular after World War II, where the
abundance of capital at that time encouraged the government of each country to establish
relationships with other countries to utilize the capital in circulation, as well as build
cooperation between countries after World War II, The correlation between international
trade and investment can be seen in the mutually beneficial relationship between the two.
International trade can provide opportunities for investors to make profits through investment
in foreign markets. Conversely, investment can provide support for international trade by
creating jobs, expanding production, and increasing competitiveness. In addition, the
relationship between international trade and investment is close because both influence each
other. Trade International trade creates opportunities for investment, and investment can
strengthen international trade.
In particular, foreign direct investment (FDI) is often linked to international trade as it
can facilitate access to foreign markets and expand the reach of production in global markets.
FDI can also help reduce trade barriers by strengthening the links between local and foreign
firms.through Foreign investment firms get the opportunity to make profits. When a country
expands its trade with other countries, it means there are more markets available for investors
to access. Investors can buy stocks, bonds, or other assets from companies in countries
involved in international trade. In addition, international trade can affect investment flows
through its impact on currency stability and interest rates. In addition, investment can also
strengthen international trade by helping to build infrastructure, improve technology and
production, and create new employment opportunities. Foreign direct investment can help
companies in other countries to expand their production capacity, improve product quality,
and create new jobs. This in turn can increase the availability of products produced in the
country and open up new trade opportunities with other countries. in terms of currency
stability, which is affected by foreign investment or FDI, If a country's currency exchange
rate strengthens, it can make investment in the country more expensive and less attractive to
foreign investors. Conversely, if the exchange rate weakens, then investment becomes
cheaper and more attractive to foreign investors. there can also be found a link between
international trade and investment in the context of trade and investment policy. (Mas., 2020)
Countries often determine their trade and investment policies as part of an effort to
promote economic growth. For example, an increase in international trade may motivate
countries to introduce more investment-friendly policies to attract foreign investors.
Governments from different countries at that time competed to make foreign investment
regulations fit their country's needs and attract foreign investors to invest in their country,
which led to chaos and legal uncertainty in the world of international trade and investment.
Because of this phenomenon, the international world must take steps to establish
policies based on international agreements governing international trade, one example of
policies related to international trade and investment is the Agreement on Trade-Related
Investment Measures (TRIMs) is an agreement negotiated during the Uruguay Round of
multilateral trade negotiations under the Organization of International Trade Organization
(OITO). World Trade Organization (WTO). (Huala Adolf, International Trade Law, 2005)
This agreement is intended to regulate and restrict certain investment measures that may
affect international trade, especially measures that are discriminatory or trade distorting.
TRIMs cover a wide range of investment measures, including local product requirements,
trade balancing requirements, and technology transfer requirements. The agreement aims to
eliminate or limit measures that countries may use to protect domestic industries or
discriminate against foreign investors.
Under the TRIMs agreement, WTO members are required to notify the organization
of any investment measures they have in place, and to phase out or modify measures found to
be inconsistent and contrary to WTO rules. The agreement also provides for possible
exemptions or a transition period for developing countries that may need time to adjust to the
new rules. The TRIMs Agreement is part of a broader framework of WTO agreements
designed to promote and regulate international trade. By limiting discriminatory investment
measures, the agreement aims to create broader and more equal investment opportunities for
investors and to promote economic growth and development. (Sidabalok, 2020). Some
examples of cases concerning International Trade and Investment: 1) Australia-Canada
salmon trade dispute. In 1995, Canada and Australia established trade relations, where
Canada exported salmon to Australia, Canada filed a lawsuit at the WTO against Australia
for limiting the import of fresh salmon on health grounds where Australia limited the amount
of incoming fresh salmon to maintain the consistency of inspection and quarantine at
Australian customs. Australia at that time was a salmon processing country with a market
capital of 75 million dollars that exported their salmon to most countries in Asia such as
Japan. Australia's salmon import restrictions were based on health reasons, where they have
regulations to prevent infectious diseases from entering through imported fish, but Australia
accepts salmon that has been processed through heating and canning. Canada's challenge was
met by Australia on the basis of health objectives and their country's regulations; 2)
Indonesia's National Car Dispute with Imported Car Manufacturers. In 1996, Indonesia
inaugurated the Timor national car, which was a car produced in collaboration with Korean
car maker KIA Motors, through Presidential Decree No.2 of 1996, regarding the inauguration
of the national car which appointed PT Timor Putra Nusantra as the production company, but
because it was not able to produce domestically, Presidential Decree No.42 of 1996 was
made which allowed PT Timor to import national cars from South Korea. Japan and the
European Union countries that exported cars to Indonesia at that time filed a lawsuit to the
WTO, the lawsuit of Japan and the European Union was based on the fact that the
government's decision at that time was discriminatory against imported cars from their
countries, where the Indonesian national car had a price that was much cheaper than imported
cars made in other countries because it received the elimination of import duties and other
administrative costs because it was a national car. Japan and the European Union were
furious because Indonesia seemed to only benefit one country and did not compete fairly.
After filing a lawsuit at the WTO panel, Indonesia was finally proven guilty and violated
WTO principles, and the Indonesian government was ordered to revoke the Presidential
Instruction or regulation regarding the elimination of import duties, taxes, and administration
on PT Timor, and finally the Indonesian national car was declared a failure due to the high
price of the national car because it was a CBU car from South Korea and did not get
marketshare from cars from Japan and the European Union.
As a member country of the World Trade Organization (WTO), Indonesia certainly
has access to cooperate and establish relationships with countries that are members of
organizations that regulate international trade and investment, the majority of countries on
this earth are members of the World Trade Organization, countries that ratify the WTO
certainly benefit in the form of international access in the economic sphere, but of course the
WTO has an important role as an organization that regulates and provides policies on
international trade.
Laws in International Trade are regulated and also supervised by the World Trade
Organization (WTO), substantively the regulations contained in the WTO consist of 4 basic
principles, namely (Kartadjoemena, 1996): 1) Non-Discrimination. The agreement of the
WTO member countries, considers that discrimination in international trade must be
eliminated, this agreement stipulates that the state is not allowed to make national regulations
that are detrimental to foreign parties that are bound by cooperation with the country of
origin, such as international products that are discriminated against local products in getting
tax write-offs so that the price of local products is much cheaper than international products
that must increase the price of their products because of taxes. As well as from the treatment
of WTO members, in order to get the same rights as members, for example if a country gives
privileges to one WTO member country then other WTO members get the privileges given;
2) Free Market Access Rules. This rule provides freedom for members to trade freely, not
limited by the number or quantity of goods, in addition to freedom from trade barriers such as
tariffs and duties. The WTO itself does not prohibit countries from collecting duties, but the
collection of duties is regulated by the WTO not to exceed a predetermined maximum limit;
3) Tariff Binding. This principle is stipulated in Article II of GATT 1994, which reads that
each GATT/WTO member country must have a list of products on which the level of import
duties or tariffs is regulated, this tariff binding is intended to create openness and ease in
international trade activities, and prevent member countries from unilaterally and arbitrarily
increasing import duty tariffs and harming the parties to trade with the country; and 4)
Special treatment for developing countries. In an effort to increase the participation of
developing countries GATT / WTO puts forward the principle of special and differential
treatment for developing countries, which makes it easy for countries that have status as
developing countries to comply with WTO agreements in order to develop and develop their
country's economy with access and ease of international trade.
Indonesia itself became a member of the WTO since its inception, marked by the
formation of Law no.7 of 1994, which discusses the ratification of the agreement establishing
the world trade organization (WTO), where article 1 reads "Ratifying the Agreement
Establishing the World Trade Organization (Agreement Establishing the World Trade
Organization) along with Appendices 1, 2 and 3 of the Agreement, a copy of the original text
in English and its translation in Indonesian are attached, as an integral part of this Law.
Investment itself, according to Sornarajah quoted by Ida Bagus Rahmadi Supancana,
formulates investment as, "involvesthe transfer of tangible or intangible assets from one
country into another for the purpose of their use in that country to guarantee wealth under
the total or partial control of the owner of the asset." Seen from an economic point of view
that views investment as one of the factors of production in addition to other factors of
production, Investment can be defined as: 1) an action to buy stocks, bonds or other
investments; 2) an action to buy capital goods; 3) utilization of funds available for production
with future income.
In economic theory, the investment factor has a very important role to increase
economic growth, Paul M Jhonson states, "investment is all income spent by companies or
government agencies on capital goods that will be used in productive activities. Aggregate
investment in a country's economy is the total amount of spending to maintain or increase
reserves of certain goods that are not consumed immediately. These goods are used to
produce different goods or services and will be distributed to other parties." Therefore, it can
be said that investment or capital investment is the expenditure or spending of companies to
buy capital goods and production equipment to increase the ability to produce goods and
services available in the economy (Dhaniswara)..
3.2 Benefits and Drawbacks of International Trade and Investment.
Broadly speaking, the regulation of International Trade Law certainly has the aim of
providing legal certainty regarding international trade, where the laws regulated and
determined by the GATT / WTO are based on the principles previously stated, and the
formation of international policies has the aim of obtaining benefits from international trade
activities without harming one of the parties involved, the benefits of this policy consist of: 1)
Protection, the benefits of this international law or policy have the aim of protecting domestic
production such as import bans, import tariffs, quotas, subsidies, and premiums; 2) Free
trade, this free trade policy removes barriers to international trade, and also the determination
and determination of prices are submitted freely only for member countries that are members
of the free trade group; and 3) Political dumping, a policy where the sale of products is
cheaper abroad than within the country with the aim of increasing competitiveness to expand
the market.
Trade policies can be divided into two types, namely policies that increase trade, as
well as policies that limit trade such as goods subsidy policies in economic motives, the state
provides trade policies to protect newly established industries in order to compete, while
cultural motives can influence the application of trade policies because the state seeks to
protect its culture and national identity so as not to be eroded by foreign cultural culture and
popular culture contained in imported foreign products. So it can be concluded that the
benefits of regulating international trade law, provide freedom for countries that want to
engage in international trade to provide policies for their countries, ratify favorable WTO
policies and have the freedom to make national policies that benefit their countries and
protect their countries from negative impacts.
As for investment, according to John W.Head there are 7 benefits of investment for
the country, namely: (Hartini): 1) Creating job vacancies for the host country population so as
to improve their quality of life standards; 2) Creating investment opportunities for residents
of the host country so that they can share in the income of new companies; 3) Increasing
exports from the host country, bringing in additional income from outside which can be used
for various purposes for the benefit of its population; 4) Generating transfers, transfers,
technical training, and knowledge used by residents to develop other companies and
industries; 5) Expanding the potential of the host country's independence by producing local
goods to replace imports; 6) Generating additional tax revenues that can be used for various
purposes, for the benefit of the host country's population of the host country; and 7) Make the
host country's resources, both natural and human, more efficiently utilized.
In addition to the benefits caused by international trade, there are certainly negative
impacts of international trade and the openness of international markets on countries that
carry out international trade activities both exports and imports: 1) Weakening sales of
domestic products, with the entry of foreign products, of course, competition in the domestic
market increases, therefore domestic products must share consumers which causes a decrease
in sales of domestic products, especially if the price quality of foreign products is superior
and prices are more competitive than domestic products because they have more advanced
and large-scale production technology than domestic products; 2) The emergence of
dependence on imported products, imported products originating from countries that are more
advanced than the country of origin are of course produced from infrastructure and
technology that is far more advanced than the country of origin, this affects especially in
developing countries, as a result the country of origin that has not been able to produce goods
of this quality depends on imported products and tends not to want to innovate because it
already has a fairly sophisticated product that comes from abroad, with this habit will slow
down the pace of development of innovation, technology, and the creation of market
capitalization of imported goods; 3) Pioneering industries will not survive, capital is the most
crucial instrument in building a business, limited capital is the thing that most inhibits small-
scale industry, especially if there are foreign imported goods that can replace and take part of
the industry's market share, of course the small industry is difficult to survive; 4) The
emergence of unfair practices, the government as a regulator creates policies that are often
detrimental and create unfair competition, such as dumping policies, import tariffs that are
prone to corruption such as illegal levies; 5) Exploitation of Natural Resources and Human
Resources, in international trade activities, of course, to increase the competitiveness of
products, companies try to make products at the lowest possible price, with the highest
possible quality, to create products at low prices, of course, producers will try to outsmart
them by paying low wages for labor in order to cut production costs, and over-exploiting
natural resources to become raw materials for production which results in damage to natural
resources and exploiting human resources; and 6) Local industries experience a raw material
crisis, this is caused by raw materials that are sold abroad or exported because they are valued
or overvalued by foreign companies, so that local producers do not get raw materials, this
causes domestic producers to lose money if even if raw materials are available, they have to
pay more or equal to foreign producers, and raw materials exported abroad will be processed
abroad into processed products. The value is much higher and will be imported back to the
country of origin. (Primadhany, 2020)
Investment or investment is an investment given by individuals or companies or
organizations both domestically and abroad. However, investment has obstacles to be carried
out in Indonesia, both internal and external issues such as the difficulty of companies
obtaining suitable land or project locations, difficulty obtaining raw materials, difficulty in
terms of financing, difficulty marketing products, disputes between shareholders in the
company. As well as external factors such as business environment factors, legal
arrangements, security, inconsistent regulations and others (Andani, 2020).
The positive impacts of investment for the home country are: 1) Job creation for the
home country, this arises because if a foreign investor invests directly, he will open his
company in the home country in order to reduce production costs, and get raw materials for
production in the area. Of course, foreign companies also establish infrastructure for
production such as factories whose production is intended for the country and also regionally
from the territory of the country of origin, the openness of this production factory certainly
requires workers or laborers who will create jobs for local residents; 2) Increased revenue
from taxes, of course for PMA that carry out export and import activities, or production in the
country of origin are charged taxes that will increase state revenue from taxes; 3) The
abundance of products in the country of origin, with foreign investment creating production
in the country of origin, of course, the products needed by the country of origin will be easy
to obtain and have low prices because they come from domestic production; 4) Motivating
domestic producers, with the presence of foreign producers from FDI, domestic producers
must produce goods that are far more competitive by improving the quality of goods; 5)
Technology transfer, FDIs that open their industries in their home countries will certainly
bring the technology they have in their countries to the destination country of investment,
which will certainly affect domestic production by receiving new technology from more
advanced foreign industries.
For the negative impact of Investment for according to William A. Fannel and
Josephy W. Tyler are: 1) Incoming multinational companies have a negative impact on the
economy of the recipient country; 2) Foreign companies create disputes with the recipient
country or with local poor natives; 3) Incoming foreign companies have power or dominance
over local companies, so that they have a share in the economic and political policies of the
receiving country; 4) Companies resulting from foreign investment are often accused of
environmental damage around their business locations, especially in developing countries.
For example: multinational corporations use substances that harmful to the environment and
the application of technology that does not pay attention to environmental sustainability; 5)
The profits of multinational companies are not utilized in the recipient country but are
returned to the company's induction country; and 6) Multinational companies are considered
to damage the positive aspects of investment in developing countries (Kambono, 2020).
4.0 Conclusion
The relationship between International Trade and Investment is based on the interests
of both of them on the economy on a global scale, without international trade and investment
the wheels of the world economy will not move and it is difficult to develop, because these
two things are the milestones of the global economy, where each country certainly has its
own shortcomings and advantages in various fields ranging from its natural resources, human
resources, technological developments in production, and other factors, with the existence of
international trade and investment the ability of the country to develop its economic pace is
unlimited, focused on the ability of the domestic government to make policies that benefit
both parties. In addition to the relationship with the global economy, international trade and
investment are related in parallel, where international trade, which of course has certain
policies and regulations, provides investment opportunities for capital owners, with the
investment made, international trade efforts are growing because of course in trade begins
with production, to carry out production activities, adequate infrastructure and labor are
needed, without capital there will be no infrastructure and labor so that investment and
international trade have a reciprocal relationship, investors who invest benefit in the form of
returns and profit sharing from producers who benefit from their production which is traded
internationally.
Like activities and activities that involve international interests, of course,
International Trade and Investment have their own benefits and disadvantages, these benefits
and disadvantages are certainly influenced by the parties involved in international trade and
investment relations ranging from producers, investors, and policy makers, namely the
government. In order to minimize the negative impacts that can harm the country and
maximize the benefits of international trade and investment.
