Amid Covid-19, breakthrough for Aussie-Indon trade deal

THIS year is going to be a tough one for trade. The Covid-19 pandemic has prompted an unprecedented cessation of economic activity. The shock is two-pronged, hitting both supply and demand. Travel restrictions and social-distancing measures have disrupted the fundamental tools of international business: travel, face-to-face meetings, and large events. Supply chains are collapsing.

But amid the chaos, an unlikely agreement has broken through. The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), which has been over a decade in the making, will enter into force in July 2020.

The state of their bilateral economic ties is what makes the agreement a breakthrough. For two neighbouring G-20 economies, their trade and investment ties are surprisingly weak. No two G-20 pairings trade as little as these two do, absent a sanctions regime. Indonesia's share of Australia's total trade has stagnated at around 2 per cent over the past two decades while Australia's overall trade with Asia has increased.