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

Trade in Goods

South Australian merchandise exports to Indonesia (calendar year 2010) were $288 million. Export products included:

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

Wheat (HS Heading 1001)

Copper and articles thereof (HS Chapter 74)

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

Machinery and mechanical appliances (HS Chapter 84)

Zinc and articles thereof (HS Chapter 79)

Lead and articles thereof (HS Chapter 78)

Products of the milling industry (HS Chapter 11)

Beef (HS Heading 0201-0202)

Automotive Parts and Components (HS Chapter 87)

Passenger Motor Vehicles (HS Chapter 87)

Trade in Services Opportunities for South Australia

CASE STUDY – REFINED COPPER

At $52 million, refined copper was one of South Australia’s biggest export commodities to Indonesia in 2010. Almost 75% of Economic Demonstrated Resources (EDR) of copper in Australia is in South Australia, mostly contained in the Olympic Dam deposit. More than 3,800 people are employed by the copper mining industry in South Australia.

Australia is estimated to have about 13% of the world’s economic resources of copper, the second largest after Chile and ahead of Peru, Mexico, the USA, Indonesia and China. Refined copper is one of Australia’s top 10 commodity exports, worth about $2.6 billion a year.

The entry into force of AANZFTA for Indonesia will see the reduction and elimination of tariffs on refined copper. Tariffs on copper cathodes will be reduced from 5% to 3% in 2025 and all other tariffs of 5% and 10% will be eliminated from entry-into-force. Tariffs of 15% will be reduced on entry-into-force and then eliminated by 2013, and tariffs of 20% will be reduced on entry-into-force and eliminated in 2014.