Australia and Indonesia Free Trade Agreement By End 2017

The governments of Indonesia and Australia are expected to sign a Free Trade Agreement (FTA) by end of this year in 2017. The Prime Minister of Australia, Mr Malcolm Turnbull met up with Indonesian President Joko ‘Jokowi’ Widodo during a side meeting at the G 20 submit held in Hamburg, Germany. The meeting was to reaffirm the commitment between the 2 nations on the Indonesian Australian Comprehensive Economic Partnership Agreement.

This agreement would allow both countries to have increased economic cooperation. The negotiations for the Agreement have long been stalled and resumed last year , with both sides expecting the agreement to take effect at the end of this year.  The signing of the Indonesian Australian Comprehensive Economic Partnership Agreement would be an ‘improved’ version of a trade agreement from the current ASEAN-Australia-New Zealand free trade agreement, where Indonesia signed as a member of the Association of Southeast Asian Nations (ASEAN).

Jakarta History Museum, Located in Jakarta Old Town

What is a Free Trade Agreement?

We have analysed Free Trade Agreements (FTA) in our previous articles, which you could read here. Essentially, they are a form of  trade agreement that reduce or eliminate existing trade barriers or tariffs that exist between two or more countries. The reduction or elimination would as such, increase the ease of goods that leave and enter the countries which have signed the FTA.

What is Trade like between Indonesia and Australia Currently?

So far, there are agreements on sugar as well as beef.Indonesia has lowered tariffs for Australian sugar imports from 8 percent to as low as 5 percent . As for beef, the restriction on maximum weight that could be imported from Australia has also been increased. This means that Australian beef exporters can export more beef to Indonesia.

Furthermore, Mr Jokowi also indicated plans that he might remove tariffs on palm oil and paper products that are imported from Australia. By agreeing on the FTA before the end of this year, these plans may indeed come into affect, which would Australian goods such as palm oil and paper to enter Indonesia with less restrictions. As such, strengthening economic ties between the two countries. Australia’s primary focus is to get lower rates for tariffs on its products when they are being exported.

All About Indonesian Australian Comprehensive Economic Partnership Agreement

The CEPA trade agreement is set to build on existing multilateral and regional trade agreements that exist between Indonesia and Australia. Trade between the two countries reached 9.8 billion Australian dollars in 2015 and there are still opportunities to grow the numbers. As such, the CEPA aims to increase the economic cooperation between Indonesia and Australia so as to increase bilateral trade.

Prime Minister of Australia, Malcolm Turnbull with President of Indonesia Joko Widodo

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