Okta Nofri

• This case study is aimed at describing and explaining reciprocal trade relations between Indonesia representing the South and the EU representing the North. This study uses both descriptive and explanatory case studies. In the descriptive study, this study analyzes the trade volume and pattern of two political entities. In this part, this study also calculates and analyzes the RCA index and export performances. Results of the descriptive study have been used in selecting six cases. In the explanatory study, trade incentives and barriers that increase and restrict exports, respectively, in either direction are investigated. This involves the collection and analysis of firm level primary data and secondary data. In analyzing collected data, this study uses one primary data and four secondary data. In the case of Indonesia’s exports to the EU, the application of different methods of analysis has identified simple entry procedures, low technical barriers, good logistics, higher product quality, larger market size, endowment factors, GDP, and past colonial relations as trade incentives. Data analysis has also suggested that technical impediments, bad logistics, distance, high competition, production capacity, tariff barriers, and market entry procedures are barriers to export volume. In the case of the EU exports to Indonesia, data analysis has identified technology superiority, low tariffs, innovation, larger market size, distributor/local partner, patent ownership, GDP, and product quality as trade incentives of such exports. Data analysis has also revealed that higher tariffs, corruption, distance, absence of a unified patent system, increasing cost of production, and market entry procedures are barriers to the EU exports to Indonesia. Hence, Indonesia and the EU should better formulate their future bilateral trade policy. Bilateral trade partnership should contain promotion and elimination of regulatory trade incentives and barriers in order to create trade.