Indonesia’s Trade Minister, Muhammad Lutfi, and Canada’s Minister of Small Business, Export Promotion and International Trade, Mary Ng, officially launched the negotiations during a virtual ceremony on Monday.

“This is an extension of President Joko Widodo’s instruction to have Indonesia actively negotiate international trade deals to open new markets, especially new export markets, amid the pandemic,” said Lutfi.

The ICA-CEPA marks Indonesia’s second comprehensive trade agreement with a country from the Americas after Indonesia ratified a CEPA with Chile in 2019.

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Canada’s and Indonesia’s bilateral trade value is quite small, amounting to just over US$2 billion in 2020, compared with the neighboring United States, the figure for which amounted to over $27 billion in the same year, according to Statistics Indonesia (BPS) data.

Canada was Indonesia’s 15th biggest foreign investor last year, with investments standing at $175.3 million, according to Investment Coordinating Board (BKPM) data. In comparison, the US invested $749.7 million, making it the eight biggest investor.

“Once it is concluded, an Indonesia-Canada CEPA will level the playing field and allow Indonesian businesses to compete with exporters from Canada’s other free trade partners,” said Canadian Ambassador Cameron MacKay in a statement issued by the Canadian Embassy in Jakarta.

Read also: Trade Ministry, TFO Canada team up to promote food, IT exports

Indonesia lags behind Southeast Asian peers Malaysia, Singapore, Vietnam and Brunei, which signed free trade agreements with Canada in 2018 through membership of the Comprehensive Progressive Agreement for the Tran-Pacific Partnership (CPTPP).

The embassy’s statement said that, in 2020, Canada’s top exports to Indonesia were cereals, fertilizers, wood pulp, oilseeds and machinery while its top imports were rubber, electrical and electronic equipment and textiles.

“A comprehensive agreement can provide Canadians with enhanced access to Southeast Asian supply chains, unlock opportunities for world-class Canadian goods and services in this rapidly growing market, and drive long-term job creation and sustainable, inclusive growth for generations to come,” said Minister Ng, also in the embassy’s statement.

University of Indonesia (UI) economist Fithra Faisal, a specialist in international trade, said the ICA-CEPA would help Indonesian businesses access more non-traditional markets and therefore boost exports, especially from the agricultural and small and medium enterprises (SMEs) sectors.

Fithra added that the ICA-CEPA would give Indonesian businesses more options to source suppliers of raw materials and high-tech goods and to source investors.

The Canadian embassy’s statement noted that Canada was the only G7 country with free trade access to every other G7 country. Canada also has free trade agreements with over 50 countries around the world, including Japan, Vietnam and Singapore.

“This can bring us closer to participating in the global value chain, especially in North America,” Fithra told The Jakarta Post on Monday.

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