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ndonesia has kicked off talks on a comprehensive economic partnership agreement (CEPA) with Chile designed to remove trade barriers and ease investment in the South American nation.

Currently Indonesian exports are subject to a 6 percent import tariff plus a 19 percent value-added tax upon entering Chile.

In addition to this, the country also protects its domestic markets strictly through various technical barriers to trade as well as sanitary and phyto-sanitary measures.

Director general for international trade cooperation at the Trade Ministry, Iman Pambagyo, said on Friday that the deal would be significant for Indonesia as Chile could serve as a trade hub for Latin America.

'€œApart from being a non-traditional export destination, Chile can be used as a trade hub in Central and South America through a free trade zone in Iqueque,'€ he said in a press statement.

During the first trade talks on May 26 and 27 in Santiago, Indonesian and Chilean trade officials agreed to adopt '€œan incremental approach'€ to finally reach an overall agreement, beginning with talks on trade in goods and then negotiations on trade in services, investment, dispute settlement and bilateral cooperation.

Both parties also affirmed that the substance of the agreement must be simple and refer to the rules of the World Trade Organization (WTO) and avoid any changes in laws in either nation.

Bilateral trade between the two countries amounted to US$412.02 million last year, with Indonesia booking a deficit of $70.48 million with exports of $170.77 million and imports standing at $241.25 million.

With the gross domestic product (GDP) of both countries totaling $1.6 trillion, the current level of bilateral trade is considered far below its potential of $1.6 billion.

Indonesia is the fourth-largest supplier to Chile in Southeast Asia after Thailand, Vietnam and Malaysia. In 2012 Indonesia exported 622 items to Chile out of a total of 4,084 items it ships across the world.

Indonesia, whose trade with Chile is complementary in nature, ships mainly sports shoes, rubber and rubber products, refrigerators, cars, electronics, seaweed, apparel and kitchen appliances.

For Chile, Indonesia has earned the status of most important nation in the region, with 40 percent of its exports into Southeast Asia being delivered here.

Chile exported 91 items to Indonesia out of its total of 3,279 goods and commodities exported in 2012.

Around 60 percent of Chilean exports to Indonesia comprise iron ore, copper, fertilizers, wood powder, grape, milk powder, salmon and wine.

Currently trade between the two economies is mostly carried out through third countries, such as Hong Kong, Shanghai and Peru, while a small portion of goods is delivered through New Zealand, Singapore, Panama and the
Netherlands.

Indonesia and Chile are slated to continue the second round of talks in the upcoming months to discuss the scope and draft text of the agreement before entering substantive negotiations under the newly-established Indonesian government following the upcoming election, according to Iman.