Exports push: Budi (left) and Ng shake hands after signing the agreement in Jakarta. The trade pact, which will come into effect in 2026, gives Indonesian exporters greater access to the Canadian market, with 90.5% of tariff lines eliminated. — Reuters
JAKARTA: Indonesia has finalised a Comprehensive Economic Partnership Agreement with Canada (I-CA CEPA), marking Jakarta’s first free trade deal with a North American country.
South-East Asia’s biggest economy expects the agreement to pave the way for greater access to the region, including to the United States.
The deal is set to come into force in 2026, pending legislative approval in both countries, while legal scrubbing is anticipated to be concluded by the middle of 2025.
Trade Minister Budi Santoso and Canadian Minister for Export Promotion, International Trade and Economic Development Mary Ng officially concluded the negotiations in Jakarta on Monday, three years after talks began.
The deal gives Indonesian exporters greater access to the Canadian market, with 90.5% of tariff lines eliminated.
The agreement is poised to increase trade between the two Group of 20 nations by US$1.4bil and provide a boost for Indonesian exports in sectors like textiles, processed foods, paper products, timber and birds’ nests, as well as palm oil.
“This opens major opportunities for Indonesia’s key commodities to enter the Canadian market,” Budi said during a press conference.
The minister added that the trade pact would make palm oil exports to Canada “larger and easier” than to markets with “stricter” regulations.
Indonesia is the world’s largest palm oil producer and exporter, but it has faced declining crude palm oil exports for the past year amid weaking global demand, fierce competition from other vegetable oils and trade barriers in some markets.
Trade between Indonesia and Canada was valued at US$5.1bil in 2023, with Indonesia serving as Canada’s largest export market in Asean.
Beyond trade, the I-CA CEPA will improve Indonesian providers’ access to the Canadian market in sectors such as business services, telecommunications, construction, tourism and transportation.
For investors, the agreement will ease entry into manufacturing, agriculture, fisheries, forestry, mining and energy infrastructure.
The deal also embraces commitments on intellectual property rights, regulatory practices, eCommerce, small and medium enterprises, women’s economic empowerment, the environment and labour.
Prospective Canadian investments worth US$25mil over the next five years are to accompany the agreement, according to Ng.
The agreement follows discussions between Canadian Prime Minister Justin Trudeau and President Prabowo Subianto at last month’s Asia-Pacific Economic Cooperation summit in Lima, where Prabowo expressed interest in expanding cooperation in fisheries, manufacturing and renewable energy.
Budi expressed hope that the agreement would provide a foothold for accessing the US market via Canada, but analysts have warned that protectionist policies under US President-elect Donald Trump could complicate such ambitions.
Trump has threatened to impose a 25% tariff on Canadian exports unless Ottawa cracks down on drugs and migrants crossing the border.
Such a move could limit Indonesia’s ability to use Canada as a bridge for its goods into the US market, said Muhammad Habib Abiyan Dzakwan, a researcher at the Centre for Strategic and International Studies Indonesia.
“I-CA CEPA opens significant access to the Canadian domestic market, which offers potential as a G7 country,” Habib told The Jakarta Post on Monday.
“However, Indonesia’s hopes of exporting to the United States via Canada would face diminishing chances under Trump’s tariff plans.” — The Jakarta Post/ANN
