ONE of the major tasks for governments around the world are to adopt measures which may assist business to recover and thrive as they plan to move out of COVID – 19 restrictions. As much as national governments have committed to generally keep borders open, there remains the need to actively take action to ensure that commitments are met and that new initiatives are adopted to support further enhancements to the trade environment. In Australia, the recent focus has been on the COVID – 19 restrictions and the interruptions to the normal trade patterns including the loss in export markets, the reduction in available imports and the creation of programs to assist exporters through the International Freight Assistance Mechanism, the increase in funding to the Export Market Development Grant program and the introduction of the Export Capital Facility. However, these measures are only likely to be temporary and a fundamental issue will be to maintain existing opportunities and provide new opportunities.
As a result, there was some celebration when our Trade Minister and Assistant Trade Minister issued a joint media release on 7 May 2020 confirming the Indonesia – Australia Closer Economic Partnership Agreement (IA – CEPA) would come into effect on 5 July 2020. That joint media release can be found at https://www.trademinister.gov.au/minister/simon-birmingham/media-release/free-trade-deal-indonesia-set-kick-5-july. The IA – CEPA is not our first trade deal with Indonesia as both countries were also parties to the ASEAN – Australia – New Zealand Free Trade Agreement (ANZFTA) which came into effect for Australia in January 2010. Further, both countries are also parties to the Regional Comprehensive Economic Partnership Agreement being finalised and scheduled to be signed in November 2020 to come into effect at some time in 2021. However, even with those two multilateral agreements, the conclusion and start of the bilateral IA – CEPA brings the direct trading relationship into more direct focus.
Steps to ratification
While Indonesia and Australia agreed on the terms of the IA – CEPA some time ago and it was signed in March 2019, the necessary steps to secure ratification have taken time in each country. In our context, this included review by the Joint Standing Committee on Treaties, which recommended implementation of the IA – CEPA, followed by the passage of enabling legislation in December 2019. The Indonesian ratification process has taken longer but with that process having been completed the counties have exchanged Diplomatic Notes confirming domestic ratification enabling commencement on 5 July 2020. As with most free trade agreements, much is in the detail of the agreements and the way in which it is being implemented. The DFAT website on the IA – CEPA at https://www.dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/Pages/indonesia-australia-comprehensive-economic-partnership-agreement includes some general commentary on the deal.
IA-CEPA creates a framework for Australia and Indonesia to unlock the vast potential of the bilateral economic partnership, fostering economic cooperation between businesses, communities and individuals. Indonesia is a growing market for Australian goods and services exporters. In 2018-19, total two-way trade in goods and services with Indonesia was worth A$17.8bn, making Indonesia our 13th largest trading partner. IA-CEPA will provide Australian and Indonesian businesses an opportunity to expand and diversify this economic partnership. As one of the fastest growing economies in the Indo-Pacific, Indonesia presents a significant opportunity for Australian businesses. By some estimates, Indonesia will be the world’s fifth-largest economy by 2030, and IA-CEPA ensures Australia is well-placed to deepen economic cooperation and share in Indonesia’s growth. As strategic partners and the two largest economies in Southeast Asia, the agreement also complements and supports our shared interest in fostering a secure and prosperous region.
The Trade Minister’s comments in the media release dated 7 July 2020 also included the following general comments:
“The economic stresses being caused by COVID-19 in both Australia and Indonesia make this agreement even more important, as it will provide an opportunity to better stimulate growth and investment across both nations during the recovery phase.
“With a population of over 260 million and one of the fastest growing economies in the world, Indonesia presents significant trade and investment opportunities for Australian farmers and businesses.
“For example, under the deal, producers of grains, live cattle and meat, dairy and horticulture, and many other products will benefit from lower tariffs and improved access to Indonesian markets.
“It will also provide a major boost across a range of services sectors including education and training, tourism, financial, mining and energy, as well as providing new mechanisms to address non-tariff barriers.
“With one in five jobs trade related, enhancing export opportunities for our farmers and businesses will be crucial to reducing job losses arising from the COVID-19 crisis and a critical part of our ultimate economic recovery.”
The next important part of the process will be the preparation of the customs and trade industry in both Australia and Indonesia including importers and their service providers such as licensed customs brokers and freight forwarders and providers of air and sea cargo. The DFAT website includes valuable information on the text of the agreement and both that website and the relevant Austrade website will provide details on the commercial opportunities and benefits arising to both countries.
Beyond the information on the DFAT and Austrade websites, there will be real and immediate interest on the detailed information regarding Rules of Origin, Certificates of Origin, permitted movement of goods and border clearance procedures to secure the preferential benefits of IA – CEPA. That information is found in the IA – CEPA itself and Guides and other documentation issued by DFAT and the Australian Border Force. The process will now commence in earnest and a number of us in industry have already been working on the proposed form of the Certificate of Origin to be used in an “FTA Rule of Origin Working Group” with DFAT. We also look forward to receipt of drafts of the Guides so we can work to finalise them with government and otherwise educate industry and their customers on the use of the agreement. I have already delivered CPD sessions for the Customs Brokers and Forwarders Council of Australia (CBFCA) on the terms of the IA – CEPA and I look forward to delivering more detailed sessions with the CBFCA in the near future.
The IA – CEPA is a significant deal with significant benefits and it is a real achievement that implementation has been confirmed even in these difficult times for trade.