Despite Economic Turmoil, Indonesia-Australia Trade Agreement Pushes Ahead

In the midst of COVID-19, an unlikely trade agreement breaks through.

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 , which has been over a decade in the making, will enter into force in July 2020.
Australia is an open economy heavily dependent on trade. It has eschewed protectionism for decades. It is already a member of multilateral trade agreements like the ASEAN-focused AANZFTA and the 11-member CPTPP. Australia now has almost 80 percent of its exports covered by trade agreements.
Indonesia is early in its foray into the regional trade architecture. Most of its existing agreements are through the ASEAN «plus» framework. A post-COVID détente for the sake of the global economy looks unlikely.
Australia is beginning to experience China’s economic bellicosity. A Chinese anti-dumping case against Australian barley, which began in 2019, has turned ugly. China followed through on its threats and placed a total of 80 percent of tariffs on Australian barley on May 17. China followed up with a ban on Australian beef from abattoirs in Queensland under the pretext of food safety. Now around $2 billion in exports are in jeopardy.

This article was written by Kyle Springer

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