ASEAN-Australia-New Zealand FTA: Indonesia entry-into-force: Impact for Victoria

18 November 2011

The Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) will enter into force for Indonesia on 10 January 2012. At that time, AANZFTA will be in force for all 12 signatories to the agreement.

Entry-into-force of AANZFTA for Indonesia will benefit both Australia and Indonesia. Tariffs on a wide range of Australian exports to Indonesia will reduce to zero, improving market access opportunities for Australian exporters (see section 1 below). Indonesia will also bind existing levels of market openness in various services sectors, providing greater certainty for Australian exporters and investors (see section 2 below). Many existing Indonesian exports to Australia are currently paying tariffs and for most of these products Indonesia will receive duty-free treatment from entry-into-force of AANZFTA between our two countries.

Australia and Indonesia are the two largest economies in AANZFTA. Total goods and services trade between Australia and Indonesia stood at $12.9 billion in 2010, making Indonesia our 12th largest trading partner globally and fourth largest trading partner in ASEAN. AANZFTA’s entry-into-force for Indonesia presents an opportunity to grow further our trade and investment relationship.

The Australian Prime Minister and Indonesian President launched the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) negotiations in November 2010. The IA-CEPA will build on AANZFTA and further strengthen the bilateral economic relationship. In taking the IA-CEPA negotiations forward, the Department of Foreign Affairs and Trade welcomes submissions on issues relating to Australia’s trade, investment and economic cooperation with Indonesia (email to ia-cepa@dfat.gov.au). IA-CEPA developments can be followed at http://www.dfat.gov.au/fta/iacepa/index.html.

1. Trade in Goods

Victorian merchandise exports to Indonesia (calendar year 2010) were $573 million. Export products included:

The following analysis summarises tariff outcomes for access to Indonesia under AANZFTA for some of the products of export interest to Victoria.

Dairy (HS Chapter 04)

Beef (HS Heading 0201-0202)

Wheat (HS Heading 1001)

Aluminium and articles thereof (HS Chapter 76)

Live animals – cattle (HS Heading 0102)

Machinery and mechanical appliances (HS Chapter 84)

Fruit and Nuts (HS Chapter 08)

Cotton (HS Chapter 52)

Iron and steel and articles thereof (HS Chapter 72-73)

Automotive Parts and Components (HS Chapter 87)

Passenger Motor Vehicles (HS Chapter 87)

Other Processed Goods

2. Trade in Services Opportunities for Victoria

CASE STUDY – GEKKO SYSTEMS

Gekko Systems is an innovative and highly regarded Ballarat-based manufacturer that provides environmentally improved and low-cost metallurgical solutions for the mining industry. The company’s area of expertise is the design, manufacture and application of equipment in the mineral processing field with a specialist focus on gold, diamonds, sulphide and silver. Gekko Systems employs around 100 people and has 450 installations across 40 countries. Export earnings represent, on average, approximately 85% of total business.

The company has recently established a South American office in Chile, a country with which Australia has implemented an FTA, and operations on the continent are growing rapidly.

Gekko Systems has a strong interest in taking advantage of any benefits provided by AANZFTA. Indonesia is a particularly important market and they have also exported to Laos, Vietnam, the Philippines and Thailand.

On entry-into-force of AANZFTA for Indonesia, tariffs on a range of products that Gekko Systems exports to Indonesia will be reduced from 5% to 0%. These include products such as sorting, screening, washing and separating machines.