Determinants of ASEAN-China Free Trade Agreement (ACFTA) Utilization for Indonesia’s Imports

Indonesia has implemented ASEAN-China Free Trade Agreement (ACFTA) since 2004. Even though ACFTA has a tariff elimination of more than 90%, its utilization in Indonesia remains low. Therefore, this study examined the determinants for low utilization of ACFTA, using monthly firm-level import data from Indonesia Customs and Excise at eight-digit trade classification level from 2017 to 2022. This study used mixed-method, combining quantita-tive methods - regression analysis with fractional logit model – and qualitative methods - key informant interviews (KII). I found that tariff margin and import value had significant and positive contribution to ACFTA utilization. I also found inconsistent result for the rules of origin (ROO), which might indicated that the ACFTA ROO is determined in a product-specific manner. In addi-tion, the study revealed that the firm size mattered in determining utilization. Furthermore, as expected, this study found that the ACFTA Upgrading Protocol had a significant impact on ACFTA utilization. Among all the identified independent variables, I found that the im-port value (scale effect) had the greatest impact on utilization. My results suggested some policy recommendations for the import side that aim to reduce the cost of compliance for FTA utilization; thus, in the future, it is expected that FTA utilization in Indonesia can be optimized.