10 May 2022 (closed)
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Neighbors Indonesia and Australia will resume talks about the Indonesia-Australia Economic Partnership Agreement (IA-CEPA), a bilateral free trade agreement. The decision to resume negotiations in May 2016 was taken after Indonesian Trade Minister Thomas Lembong met Australian Trade and Investment Minister Steven Ciobo in Canberra on Wednesday (16/03). Previously, talks about the IA-CEPA were put on hold amid a period of severe diplomatic tensions between both nations involving the "2013 spy-scandal", the execution of two Australian citizens in, cattle trade, and the tough asylum-seeker policies of Australia.
Indonesian Trade Minister Lembong said talks about the Indonesia-Australia Economic Partnership Agreement (IA-CEPA) are to be resumed. "Indonesia and Australia will ensure that the IA-CEPA is to be implemented comprehensively, mutually beneficial, and will provide optimum results in terms of the trading of goods and services, investment and economic cooperation between both nations", Lembong said on Thursday (17/03).
Despite being neighbors, separated by the Indian Ocean and Timor Sea, trade activities between Indonesia and Australia are relatively small. Two-way trade between both nations was worth nearly USD $8.5 billion in 2015, down 19.8 percent (y/y) from USD $10.6 billion in the preceding year. Australia has the upper hand in this trade relationship with a trade surplus of USD $1.1 billion.
For comparison, two-way trade between Indonesia and the United States was worth USD $23.8 billion in 2015, two-way trade between Indonesia and Singapore was worth USD $30.6 billion in 2015, and two-way trade between Indonesia and China was worth USD $44.5 billion in 2015. This should suggest that there is ample room for growth in terms of trade activity between Australia and Indonesia.
In a joint statement Lembong and Ciobo announced the reactivation of the Indonesia-Australia Business Partnership Group (IA-BPG). This group will renew reports and recommendations regarding the bilateral free trade agreement. Results are to be presented at the next round of negotiations in May 2016 (in Indonesia).
Diplomatic Tensions Australia-Indonesia
Australian live cattle exporters objected strongly when Indonesia implemented barriers to cattle imports from Australia in mid-2015, slashing total cattle imports by 80 percent. The Indonesian government decided to make this move in a bid to enhance self-sufficiency in beef. However, it led to soaring local beef prices and good gains for the so-called "beef mafia", referring to certain groups that deliberately hold on to the beef supply in order to raise prices. Although the Indonesian government has allowed more live cattle imports, it remains an issue between both nations. Lembong suggested that this issue should be put aside in order to reach a more broader agreement.
The "2013 spying scandal" occurred in 2013 when allegations were made that the Australian Signals Directorate attempted to monitor activity on the mobile phones of then-President Susilo Bambang Yudhoyono, his wife and several senior government officials. Another major diplomatic fallout occurred when - despite Australia requesting for clemency - Indonesia executed two Australian citizens (members of the so-called "Bali Nine" drug trafficking ring) in May 2015.