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

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

Western Australian merchandise exports to Indonesia (calendar year 2010) were $1.1 billion. Export products included:

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

Wheat (HS Heading 1001)

Live animals – cattle (HS Heading 0102)

Petroleum oils and crude (HS Chapter 27)

Machinery and mechanical appliances (HS Chapter 84)

Beef (HS Heading 0201-0202)

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

Fertilisers (HS Chapter 31)

Tariffs of 5% eliminated from entry-into-force.

2. Trade in Services Opportunities for Western Australia

Services exports from Western Australia to the world were worth $5.4 billion in 2010, accounting for 5.0% of the State’s total exports.

Travel and education were Western Australia’s top services exports in 2010, comprising $3.4 billion or 62% of the State’s services exports.

Western Australia’s services exporters are in a strong position to access the growing services markets in Indonesia.

A built-in review provision provides for further improvements to be negotiated over time, as the ASEAN countries progressively liberalise their services sectors.

CASE STUDY – MIDLAND BRICK

Middle Swan-based Midland Brick is Western Australia's largest brick maker and employs around 550 people. Since the early 1980s, the company has established successful export markets in countries including Brunei, China, Indonesia, Japan, Republic of Korea, New Zealand, United Arab Emirates, the UK and US.

More recently, the company’s products were used in the construction of the Australian pavilion at the Shanghai World Expo 2010 and the new Resorts World Sentosa hotel and casino complex in Singapore.

On entry-into-force of AANZFTA for Indonesia, 5% and 10% tariffs will be eliminated on articles of stone, plaster, cement, mica or similar materials that are exported from Australia to Indonesia. Tariffs of 10% will be reduced to 3% on entry-into-force, and eliminated in 2012. Tariffs of 15% will be reduced to 3% from entry-into-force and eliminated in 2013.