Canada and Indonesia ink deal to slash trade barriers

Canada and Indonesia signed a major trade agreement to reduce tariffs, ease investment rules, and increase economic cooperation.

The agreement, known as the Canada-Indonesia Comprehensive Economic Partnership Agreement (CEPA), was signed in Ottawa on Wednesday by Prime Minister Mark Carney and Indonesian President Prabowo Subianto. It is Canada’s first bilateral trade agreement with an ASEAN country, so it is a historic milestone for both countries.

The agreement comes as both countries try diversifying trade in light of global uncertainty. Skyrocketing US tariffs and friction with China have made new economic alliances more urgent than ever.

Under the agreement, more than 95% of Canada’s exports to Indonesia will be duty-free when the deal is fully implemented. It will provide Canadian businesses, from farmers to clean energy developers, with new access to one of the fastest-growing markets in Asia.

The agricultural sector will be the first beneficiary, according to Canada’s Trade Minister Maninder Sidhu. Canadian wheat, soybeans, and potash are already going to Indonesia, but the agreement will clear more room for processed foods, high-tech agri-products, and value-added goods.

Sidhu told reporters that the opportunities created by the deal cut across sectors, ranging from agriculture to energy. He explained that Indonesia’s population of 280 million makes it a massive market that Canadian companies are eager to serve.

And the deal opens the door to investment in nuclear power. Canada’s technology in small modular reactors could even be used to help Indonesia expand its power and, at the same time, keep a lid on emissions.

Indonesia secures access and investment growth

Beyond goods, the CEPA establishes rules for digital trade and intellectual property. Officials say it will provide an easier and more predictable environment for Canadian technology multinationals to do business in Southeast Asia.

Canada’s Global Affairs department reported last year that Indonesia was the country’s largest export market in Southeast Asia and its second-biggest destination for known direct investment in the region. Export Development Canada is now preparing to provide up to CAD 825 million in financing to the Indonesia Investment Authority.

This is expected to assist in financing large-scale projects in infrastructure, energy, and digital industries, EDC vice-president Franco Sciannamblo said. 

The business community is also pleased to note that a memorandum of understanding has been signed between the Business Council of Canada and the Indonesian Chamber of Commerce and Industry to help companies from both countries to benefit from trade initiatives. 

Canada pursues broader strategy in Asia

This CEPA agreement is part of a larger Canadian strategy for Asia. Ottawa, which takes three-quarters of Canada’s exports, has taken steps to conclude trade agreements with Asian countries outside of China to diminish US dependence. 

In addition to Indonesia, Canada is considering a partnership with ASEAN to launch a regional agreement over time. Canadian officials emphasized that ASEAN’s closer ties can help strengthen Canada’s position in one of the globe’s fastest-expanding areas.

Meanwhile, Indonesia is carving out its place in the world. Just this week, Jakarta announced that a nearly decade-long trade negotiation with the European Union had been completed. The EU and Canada deals represent a dramatic shift in Indonesia’s trade strategy as it seeks to assert itself as a linchpin of global supply chains.

The CEPA and similar ones will not become effective immediately. The deal requires domestic ratification in both countries for it to take effect. The official hopes to complete this process by 2026.

Once it does, trade between the two nations, valued at some $4 billion last year, is anticipated to increase sharply. Analysts said the deal could catalyze a new wave of Canadian businesses in Asia and increase market access for Indonesian goods in North America.

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