Indonesia-Australia agreement offers glimmer of hope amid trade wars

Indonesia-Australia agreement offers glimmer of hope amid trade wars
While Australia continues to struggle with China trade tensions, a wide-ranging economic partnership agreement has been made with Indonesia, ratified by both governments before COVID-19 hit, and due to enter into force on 5 July.

The game-changing Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), drastically reduces many existing tariffs currently in place, to free up trade restrictions between the two countries.

Senior Analyst Kyle Springer joined Sky News host Chris Kenny and said this was good news at a time when “protectionism is rampant”.

Watch the interview in full below:

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The Agreement will see tariff reductions across meat and barley, two of the products China has recently set its sights on as a possible reaction to Australia’s decision to investigate the origins of COVID-19.

Kyle said the Agreement will make Australia the chief food security partner for Indonesia, which will be an essential component of post-COVID recovery.

“Indonesia will allow imports of up to 500kt of barley for a year after it goes into force, increasing in subsequent years. Australian live cattle and beef have greater access to the Indonesian market under the agreement as well. As Indonesia seeks to stabilise its food market in the wake of the pandemic, its partnership with Australia under IA-CEPA will be critical.”

“Indonesia can only absorb a small part of what was exported to China. But the current situation creates an opportunity for Australia and Indonesia to build a deeper economic relationship that did not previously exist,” Kyle said.

The agreement will also reduce tariffs on machinery and motor vehicle parts, and open the door to service markets across aged care facilities, tourism accommodation and railway operation.

“For two neighbouring G20 economies, their trade and investment ties are surprisingly weak. No two G20 pairings trade as little as they do absent a sanctions regime.”

“The fact that both countries, with such different trade policies, have finished the deal is no small achievement in our present climate of trade wars and protectionism,” Kyle said.
 
Australia is also a destination choice for Indonesian students, with more than 20,000 studying throughout the nation during 2019, with close to 7,000 Australian students studying in Indonesia under the New Columbo Plan over five years to 2019.
 
“There is no doubt, both Australia and Indonesia have a long journey back to economic recovery as COVID-19 subsides, and this Agreement represents a framework for an economic partnership long overdue,” Kyle said.

The IA-CEPA will come into force on Sunday 5 July.

Authors

Kyle Springer
Kyle Springer
Senior Analyst
Kyle Springer is the Senior Analyst at the Perth USAsia Centre. He provides high-level program assistance and develops the think tank and external outreach programs of the Centre. Kyle also directs the Centre's Indonesia programs and convenes policy workshops focussed on Australia-Indonesia relations.
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Tammy Wayne-Elliot
Tammy Wayne-Elliot
Senior Media and PR Advisor
Tammy Wayne-Elliot is the Senior PR and Media Advisor for the Perth USAsia Centre. She is responsible for public relations, media liaison and marketing and oversees the Centre's external profile.
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