"Indonesia still recorded a trade deficit of US$3.2 billion in 2019 with Australia. This is quite a big deficit, hence the IA-CEPA is expected to curb the deficit," the minister said at a virtual press conference here on Friday.
While Suparmanto did not elaborate the target for the reduced deficit, he said there would be a significant decline in the trade gap in 2021.
In keeping with the IA-CEPA, Australia has eliminated 6,474 tariffs on imports from Indonesia since the agreement took effect on July 5 this year.
Meanwhile, Indonesia will slash 94.6 percent of the trade tariff on Australian exports to Indonesia.
The minister said the government has ensured protection for some products that are considered sensitive for the country.
"There may be some questions on how the Indonesian government would protect some products considered as sensitive for Indonesia. This agreement has the mechanism of TRQ, or Tariff Rate Quota, where preferential tariff will be imposed for a certain volume of exports," Suparmanto said.
However, he continued, non-preferential tariff will be imposed if the export volume exceeds the quota.
"The agreement has excluded sensitive products, such as rice and alcoholic beverages," he added.
According to the minister, Australia's exports to Indonesia are primarily raw materials, such as wheat, coal, iron ore, aluminum, raw sugar, milk, and cream.
Despite a lower population of 25 million compared to Indonesia's 270 million, Australia's demand for Indonesian products is relatively high.
Australia's Gross Domestic Product (GDP) has been recorded at US$57 thousand per capita, which is 15 times higher than Indonesia's GDP, which is pegged at US$3,800 per capita. Australia also has a wide trade and economic cooperation network, Suparmanto said.
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