A new platform for deepening economic ties: the Indonesia-Australia Comprehensive Economic Partnership Agreement

International trade Free trade Strategic interests Australia Indonesia

Key points:

  • The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) is a major strategic effort to build a bilateral economic partnership. Australia and Indonesia signed the free trade agreement in March 2019 after eleven years of consultation and negotiation
  • IA-CEPA is more than a trade agreement, as it includes both economic and strategic instruments. It combines conventional economic liberalisation provisions (in the trade and investment domains) and institutional mechanisms to enhance the broader strategic partnership between Australia and Indonesia
  • IA-CEPA aims to establish the foundation for a new bilateral partnership. It is designed to bind Australia and Indonesia as an “economic powerhouse” in the Indo-Pacific region, leveraging their proximity and economic complementarity, competitiveness, and productivity to supply other countries in the region with high-quality agricultural products and manufactures
  • For Indonesia, one of the most significant outcomes is reduction of all Australian tariffs to zero percent. This will support the development of Indonesian processing sectors through deeper value-chain integration with a developed-country market
  • For Australia, it secures the country as Indonesia’s preferred agricultural export partner, contributing to Indonesia’s food security and lowering food prices through reliable supply. For the first time, Australian exporters have a known quantity Indonesia will allow to be imported for specific agricultural commodities
  • Chapter 14 on Investment and the Investor State Dispute Settlement (ISDS) mechanism will give investors more confidence to move capital between both countries
  • IA-CEPA also serves as a platform to improve economic relations through the establishment of a wide range of consultation mechanisms. These make IA-CEPA a “living agreement”. Both countries should make active use of these mechanisms to advance discussions on further regulatory matters needed to promote further economic integration.
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