Indonesia-Australia FTA comes into effect

Legislation | | MIC Customs Solutions |

The IA-CEPA is now officially in operation and both sides hope it will boost exports.

The new free trade agreement between Indonesia and Australia came into effect as planned on Sunday (July 5th 2020).

Officially referred to as the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), the deal was ratified by the Indonesian government in May this year and aims to provide an export boost to the agricultural and textile industries in particular.

Australia's trade minister Simon Birmingham said the FTA will mark the beginning of a "new economic chapter" between the two nations and should help those businesses that have been hit hard by the coronavirus pandemic.

"This is the most comprehensive bilateral trade agreement Indonesia has ever signed, and will give our exporters a competitive edge in what is one of the fastest growing economies in the world," he commented.

As a result of IA-CEPA, 99 per cent of Australian goods will be able to enter Indonesia duty-free or as part of improved preferential arrangements.

There will also be reduced tariffs and better access for grain, cattle and meat, dairy products and horticultural goods, with grain producers permitted to export 500,000 tonnes of feed without incurring tariffs.

This comes on top of the Australian government's support package for international exporters that was announced during the pandemic, which aimed to keep international freight routes and flights going.

Meanwhile, the Indonesian trade ministry said it expects a significant boost in exporting to Australia, with affected products including textiles, car parts, electronics and fish products.

Secretary-general Rizal Tanzil Rakhman told the Jakarta Post: "We welcome the IA-CEPA and hope it can grow our exports to Australia."

In May, Mr Birmingham told the world's press that the economic stress being caused by COVID-19 made an FTA between Australia and neighboring Indonesia even more important than before.

Australia is also keen to negotiate a new FTA with the UK post-Brexit, having announced last month that discussions to this end have now begun.

Mr Birmingham said a deal would support economic recovery after coronavirus and take the two nations' bilateral trade and investment relationship to the next level.