Australia like many countries has established a number of free trade agreements and closer economic policies with key partner countries over the years. These have set the guidelines and framework to allow trade to flow quickly and easily. The fundamental agreements are put in place and then legislation and regulation are added to each country in accordance with the agreements. The barriers and obstacles are removed and trade starts to flow. Australia has ten Free Trade Agreements (FTA’s) in force and more to join shortly. If you want to know more about these DFAT has a web site summarising the agreements and their content here.
These trade agreements bring about trade and investment bilateral, regional and multilateral, they deliver increased prosperity to both parties and result in higher economic growth and more jobs than without these FTA’s being in place. Research has suggested 1 in 5 jobs in Australia depends on trade and 1 in 7 jobs depends upon exports, so it seems to be a fundamental need of the economy. Barriers like tariffs are planned to be reduced and the transition for each country is carefully managed.
Very quickly after becoming Prime Minister of Australia, Scott Morrison flew to Jakarta to meet with met President Joko Widodo at the Bogor palace south of Jakarta on his first overseas trip since taking office last week after winning an internal party leadership challenge.
“Indonesia has the honor of being the first country visited by the new prime minister. This can be interpreted as a strong commitment by the Australian prime minister to build strong relations,” Widodo told a joint news conference.
Morrison said the neighbors were already close partners in the security field, “but it is the economic relationship where we have committed today to take another big step”. He said negotiations on the Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA) had been successfully concluded and the accord should be signed by the end of the year.
These discussions have taken a long time to come about, and we do not have the agreement signed yet! Its been almost a decade of talks! Trade between the 2 nations is very limited despite them being next door neighbours and Indonesia being the biggest Southeast Asian Economy and Australia the 13th in the World, however this was without much trade with each other. Australia putting the trade at AUD$16 billion in 2016 – 17.
The Agreement called IA-CEPA, has been documented and there is a public information page available on the DFAT web site at https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/Pages/indonesia-australia-comprehensive-economic-partnership-agreement.aspx
So what is on offer and what is known of the contents so far. Only some detail on the accord were released but some 90 percent of Australian goods exported to Indonesia, by value, would enter duty free or “under significantly improved arrangements” under the deal, Australian Trade Minister Simon Birmingham said earlier on Friday, adding that was up from 85 percent under previous deals.
Birmingham listed frozen meats, live cattle, feed grains, dairy, citrus and rolled steel as examples of Australian products destined for favorable treatment under the deal.
Indonesia’s Maritime Affairs Minister Luhut Pandjaitan also told reporters the agreement covered Australian agricultural imports including cattle but “both parties must feel the benefits”.
On Thursday, an Indonesian Foreign Ministry official said the agreement would free up Indonesia’s university sector for Australian investors, allowing up to 67 percent foreign ownership. Foreign investors are currently barred from majority ownership in an Indonesian university.
There seems to be quite some protectionist strategies in play from both sides, Australia wants more access to VET and University education, Indonesia wants to send their people out to work, and so is looking for access to the Australian work place for some of their skilled people, such as nurses. The differences in the education systems and social structures is being fundamentally challenged, with this agreement, so no wonder it takes a little while to finalise.
A new chapter of economic partnership with Indonesia
- The Hon Scott Morrison MP, Prime Minister
- Senator the Hon Simon Birmingham, Minister for Trade, Tourism and Investment
31 August 2018
“Australia and Indonesia have successfully concluded negotiations on the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), deepening our economic and security cooperation with one of our major trading partners.
A passionate commitment to ensuring open trade with the world, through such free trade deals, is one of the key elements in the Morrison Government’s plan to keep our economy strong. A stronger economy means we can guarantee the essential services that all Australians rely on.
The partnership between Australia and Indonesia is one of our nation’s most significant. Indonesia is playing, and will continue to play, a much greater role on the global stage, particularly in the areas of economy and security.
Indonesia is one of the largest economies in the world, and bolstering the economic ties between our nations will lead to even greater opportunities for Australian businesses.
This stronger relationship will ensure increased prosperity for both Australians and Indonesians. It will further reinforce Australia’s strengths to build opportunities in Indonesia, as well as enable Indonesia to tap into economic prospects here in Australia.
A renewed economic partnership with Indonesia is particularly a major boost for Australian farmers with the grains, live cattle, dairy and horticulture sectors to benefit from greater certainty of access and lower tariffs.
As a result, Australian farmers will be able to export 500,000 tonnes of feed grains such as wheat into Indonesia tariff free. This is a significant boost for the Australian wheat industry, building on our substantial milling wheat exports.
IA-CEPA will support Australian industrial producers in areas such as steel, copper and plastics. Australian service industries including health, mining, telecommunications, tourism and education will also have greater access to Indonesia’s growing economy.
Vocational training providers that are Australian-owned will now be able to partner with Indonesian business to provide quality skills training to upskill Indonesia’s workforce.
The Agreement will also expand the two-way investment relationship between our two countries. Australian investors will now have greater certainty under Indonesia’s foreign investment regime, which will help to drive more Australian investment in Indonesia.
IA-CEPA has attracted strong support from the Australian business community, including the Indonesia-Australia Business Partnership Group.
Malcolm Turnbull, Steven Ciobo and Australia’s trade negotiators have delivered a landmark advance in our economic partnership with Indonesia, which the Morrison Government will proudly build on.”