Indonesia and Canada on Monday signed a Comprehensive Economic Partnership Agreement (CEPA) that aims to strengthen economic ties between the two G20 members, three years after negotiations began. The agreement will take effect in 2026 and was signed in Jakarta by trade ministers of both countries.
Under CEPA, Indonesia will see liberalisation of 90.5% of the total tariffs for Indonesian goods entering Canada. The trade agreement aims to increase trade, investment, and economic collaboration between the two countries. It will establish a more transparent and predictable environment for trade and investment.
Canada and Indonesia enjoy strong commercial relations. Indonesia is Canada’s 22nd largest merchandise trading partner. Two-way trade between Indonesia and Canada was $3.4 billion last year, according to with Indonesia’s trade ministry. Canada has estimated bilateral trade at $5.1 billion in 2023.
Canada’s main exports to Indonesia were agriculture products fertilizers, while Indonesia mainly exported machinery and electrical machinery as well as garments and footwear.
Indonesia’s trade minister, Budi Santoso, said Indonesia appreciated Canada’s support for its plan to prioritise its critical minerals sector, which was vital for its sustainable growth.
Canada’s international trade minister, Mary Ng said the country’s cattle industry was also represented on the Jakarta visit and looking to play a part in President Prabowo Subianto’s signature programme to provide free school meals from next year.
The CEPA’s provisions on market access focus on reducing trade barriers. Key measures include:
- Tariff elimination: The agreement outlines a schedule for the phased elimination of tariffs on a broad range of goods. For Canadian exporters, this means reduced costs and improved competitiveness in the Indonesian market.
- Import and export licensing: Enhanced transparency and cooperation in licensing processes ensure smoother trade flows and minimize the risk of regulatory hurdles.
- enhancing access to Southeast Asian supply chains
- establishing a more transparent and predictable environment for trade and investment
These measures aim to increase trade volumes further, building on the robust performance of 2024, where Canada’s exports to Indonesia reached US$1.6 billion, including key products like potassic fertilizers, wheat, and wood pulp.
The Indonesia-Canada CEPA marks a new chapter in bilateral relations, laying the foundation for sustainable and inclusive economic growth. By addressing trade barriers, enhancing market access, and promoting investment, the agreement creates a robust framework for collaboration.
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