Difference Between CEPA and FTA

THROUGH Law Number 1 of 2020, the government ratified the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).

The IA-CEPA has been initiated since April 2005. Although it had been stalled for 3 years, on 31 August 2018, the two countries managed to complete the negotiations substantially after going through 12 rounds of negotiations and 5 meetings at the level of the Chief Negotiator.

Further, on 4 March 2019,t the IA-CEPA was signed by the Minister of Trade of the Republic of Indonesia and the Minister for Trade, Tourism and Investment of Australia. The IA-CEPA officially took effect on 5 July 2020 after going through a 10-month ratification process.

The enactment of IA-CEPA allows Indonesian products entering Australia to enjoy an import duty rate of 0%. The rate incentive is only part of the benefits of the IA-CEPA. As such, what exactly are CEPA and IA-CEPA?

Definition

Quoting from the publication of the Directorate of Bilateral Negotiation of the Directorate General of International Trade Negotiation of the Ministry of Trade, CEPA is a broader scheme of economic cooperation than mere trade issues.

CEPA generally has interconnected designs of market access, capacity building and trade and investment facilitation.   Cooperation in CEPA may be carried out bilaterally or within the scope of economic cooperation blocks.

Referring to Article 2 paragraph (2) of MoF Reg. 109/2019, Indonesia has established CEPA with Asean and Japan in the Asean-Japan Comprehensive Economic Partnership (AJCEP). Indonesia has also established CEPA with Chile in the Indonesia-Chile Comprehensive Economic Partnership Agreement (IC-CEPA).

The ratification of Law No. 1/2020 adds to the list of Indonesia’s CEPA with the establishment of IA-CEPA. In definitive terms, the IA-CEPA refers to a comprehensive partnership in the field of trade in goods, services, investment and economic cooperation.

More broadly, IA-CEPA is defined as the agreement of a comprehensive economic partnership between Indonesia and Australia. The partnership is established on the principle of reciprocity and is expected to strengthen the economic relations between the two countries.

Indonesia and Australia formerly entered into a free trade agreement (FTA) in the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). The AANZFTA involves 12 countries and has been in effect since 2012.

However, as it involves many countries, AANZFTA has not fully accommodated Indonesia’s special interests. Such interests include trade in automotive products, textiles and furniture that Australia has not yet committed to in the AANZFTA.

In addition, the AANZFTA has also not accommodated cooperation in the field of human resources (HR) and regulations in support of economic transformation. Therefore, Indonesia has established the CEPA with Australia.

The CEPA is expected to assist Indonesia in carrying out the economic transformation, improving the export performance of goods and services, attracting investments and developing human resources.

Difference between CEPA and FTA

ALTHOUGH CEPA and FTA are terms used to describe economic pacts between countries, there are differences between the two. Simply put, it can be said that the CEPA has a wider scope than the FTA. (Also, check out the dictionary ‘What Is an FTA’)

This is because the CEPA not only aims to reduce barriers to trade in goods, services and investment. More broadly, the CEPA also covers a much broader area of cooperation, such as economic assistance, technology cooperation, renewable energy and other specific matters. (Bsi)