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RI-Chile CEPA to open gateway to Latin America
The country is seeking wider access to the Latin American market as it is set to ratify the Indonesia-Chile Comprehensive Economic Partnership Agreement (IC-CEPA), which will be the first trade agreement Indonesia has ever signed with a Latin American country
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span>The country is seeking wider access to the Latin American market as it is set to ratify the Indonesia-Chile Comprehensive Economic Partnership Agreement (IC-CEPA), which will be the first trade agreement Indonesia has ever signed with a Latin American country.
Trade Minister Enggartiasto Lukita exchanged on Tuesday an instrument of ratification (IoR) of the agreement with vice minister for trade at the Foreign Ministry, Rodrigo Yáñez Benítez. The exchange kickstarts with a 60-day period until Aug. 10, when the IC-CEPA will come into force in both countries.
Latin America has become of strong interest amid Indonesia’s efforts to increase trade with nontraditional partners, as the latter seeks to diversify exports with its two main export destinations — China and the United States, which are waging a trade war against each other.
“Both of us have agreed that with the IC-CEPA, Chile will become our trade hub in Latin America and Indonesia will become Chile’s hub for ASEAN countries,” Enggartiasto said Tuesday shortly before the exchange at the Trade Ministry building in Jakarta.
Likewise, vice minister Benítez lauded the agreement as having paved the way for Chilean products to enter the Indonesian market, which he said was “the largest and most diverse market” in the ASEAN region, and eventually into the whole region itself.
“In addition, Indonesian exporters can certainly benefit from our extensive network of trade agreements, which is the strongest in the world according to the Organization for Economic Cooperation and Development (OECD). That provides not only preferential access to 64 markets but also a window of opportunity to use Chile as a gateway to Latin America,” Benítez said on the same occasion.
Nevertheless, Chile had positioned itself earlier in the region when it signed a free trade agreement with Vietnam in 2011. “We have over $1 billion in [bilateral] trade with Vietnam and its possible to do the same thing with Indonesia. There is no reason for our trade with Indonesia not to reach that or even beyond [as] we are convinced there is potential we both have not been using,” Benítez said.
The IC-CEPA, he said, was expected to benefit Chile’s private sector, particularly firms that exported dairy, fresh fruit, dried fruit, olive oil, wood, cellulose and copper.
On the other hand, Enggartiasto said the agreement would benefit Indonesian businesses, especially those that exported automotive products, textiles, palm oil and its derivatives.
He also expressed optimism that Indonesia’s trade with Chile would double in the next three years on the back of the IC-CEPA ratification, though he refrained from expressing the precise target.
“Our bilateral trade totaled US$274.1 million [last year] but the number has not reflected the potential of both countries yet,” said Enggartiasto. “This IC-CEPA is a very comprehensive agreement that will cover bilateral trade in goods, trade in services and investment.”
The ratification of the IC-CEPA took 18 months to complete following its signing by the two governments in Chile’s capital of Santiago in December 2017. The signing had taken place after more than three years and six rounds of negotiations, which started in 2014.
For the initial phase of the ratification, the IC-CEPA will focus on the trade of goods, with Indonesia to eliminate 9,308 tariff lines for Chilean products and Chile to eliminate 7,669 tariff lines for Indonesian products, including automotive, textile and palm oil products.
Chile ranks 55th among Indonesia’s export destinations, with total exports of US$158.9 million in 2018. The bilateral trade transaction of $274.1 million saw Indonesia booking a surplus of $43.9 million. However, total trade had actually decreased 9.5 percent from 2014, when bilateral trade reached $419.4 million.
As of the first quarter of 2019, bilateral trade between the two countries reached $56.1 million.
The Trade Ministry’s international trade negotiations director general, Iman Pambagyo, said negotiations on trade in services and investment would follow immediately after the IC-CEPA was in place.
“We do not have a set timeline for these negotiations but we will report the ratification progress to the President [...] and then equip ourselves with more comprehensive studies so that we can better map out partnerships for trade in services and investment,” Iman said following the exchange.
