Indonesia-Australia Comprehensive Economic Partnership Agreement: Building the Powerhouse

Abstract

In January 2020 the Indonesian parliament ratified the Indonesia-Australia Comprehensive Partnership Agreement (IA-CEPA), which came into force in July 2020. The seed for this agreement was planted in 2005 when former Indonesian President Susilo Bambang Yudhoyono and former Australian Prime Minister John Howard agreed to improve trade relations between the two countries. Negotiations began in 2010, and after almost a decade, the two governments signed the agreement in March 2019. IA-CEPA came at an opportune time. As most countries recovered from the 2007–08 Global Financial Crisis, the United States and China engaged in a trade war. Tariff escalations and other trade restrictions by the two economic superpowers forced other countries to adjust their trade practices as well. Then came the COVID-19 pandemic, disrupting global trade as countries undertook restrictive measures to contain the spread of infection. Estimates suggest that international trade might have dropped by around 30% and Foreign Direct Investment (FDI) contracted by as much as 40% in 2020. Show more