Canada-Indonesia CEPA: Summary of negotiated outcomes

November 2024

On June 20, 2021, Canada and Indonesia launched negotiations toward a Comprehensive Economic Partnership Agreement (CEPA). The tenth round of negotiations were held in Bandung, Indonesia from November 4-8, 2024.

On November 15, 2024, Canada's Prime Minister Justin Trudeau and Indonesia’s President Prabowo Subianto announced the substantive conclusion of the negotiations.

The negotiations have resulted in a comprehensive trade agreement that addresses market access for goods, services, and investment, and includes provisions on small and medium sized enterprises, labour, environment, and women’s economic empowerment.

A detailed summary of key negotiated outcomes can be found below.

Institutional

The institutional chapters include comprehensive provisions that establish the framework by which the Agreement will be interpreted, managed and implemented. This includes the Exceptions and General Provisions Chapter, which includes provisions to ensure the Parties retain their ability to protect national security interests and the cultural industries sector. The Agreement established a Joint Committee to oversee the implementation and operation of the Agreement with a view to updating and enhancing it to ensure it continues to address trade and investment issues and challenges.

National treatment and market access

The National Treatment and Market Access chapter provides the framework for tariff elimination and reductions of non-tariff barriers. It includes substantive obligations consistent with Canada's existing trade agreements such as provisions disciplining import and export restrictions, increasing transparency in import and export licencing; and on innovative agricultural products to help facilitate trade and increase transparency, predictability, and cooperation. New provisions on import licensing have also been established in the chapter to ensure that import licenses do not undermine market access under the CEPA.

Trade remedies

The Trade Remedies provisions reaffirm WTO rights and obligations in respect of anti-dumping, countervailing and global safeguard measures, and recognize certain best practices such as promoting the goals of transparency and due process in trade remedy proceedings.

Rules of origin and origin procedures

Rules of origin: The CEPA includes rules of origin that allow for accumulation of materials and a review clause on accumulation of production. It establishes criteria for determining the origin of goods that are clear, as simple as possible, leave little room for administrative discretion, and take into account existing production patterns and regional integration.

Origin procedures: The origin procedures text administers the rules of origin of goods to enable the trading community to take advantage of the preferential tariff treatment afforded under the Canada-Indonesia CEPA. The CEPA’s origin procedures contain obligations in areas such as certification of origin, record keeping, origin verifications, advance rulings, penalties and cooperation. The text prescribes the processes necessary for traders to take full advantage of the CEPA, while at the same time providing customs administrations with an efficient and effective method, performed on a risk-managed basis after the good is imported, to ensure that only qualifying goods receive the benefits of the Agreement.

Customs and trade and facilitation

With the WTO Agreement on Trade Facilitation as the baseline, the CEPA Customs Procedures and Trade Facilitation chapter establishes obligations that modernize, simplify and standardize trade-related customs procedures, while safeguarding and providing certainty around the Parties’ ability to administer or introduce new measures that ensure or enhance trader compliance with their trade-related laws, regulations or procedural requirements. Such measures include those that seek to ensure the safety and security of the Parties and their citizens through the proper declaration of goods and the payment of applicable duties, taxes, fees and charges by traders.

Sanitary and phytosanitary measures

The Sanitary and Phytosanitary Measures (SPS) chapter includes robust obligations on science and risk analysis, incorporates the substantial obligations of the WTO Agreement on the Application of Sanitary and Phytosanitary Measures, and establishes cooperative mechanisms to resolve trade issues and enhance regulatory cooperation. The entire SPS Chapter is subject to CEPA dispute settlement mechanisms. The rights of the Parties to take measures necessary for the protection of human, animal or plant life or health are preserved.

Technical barriers to trade

The Canada-Indonesia CEPA Technical Barriers to Trade chapter compliments and builds upon the WTO Agreement on Technical Barriers to Trade, specifically for standards, technical regulations, conformity assessment and transparency. The Chapter highlights the importance of transparency when standards, technical regulations and conformity assessment procedures are developed. It also ensures that - in line with each country’s laws and regulations - regulations are applied equally to products and goods originating in either country, while protecting each country’s right to regulate in its own best interests.

Good regulatory practices

Good governmental regulatory practices foster openness, transparency, and evidence-based decision-making. Countries that adhere to good regulatory practices can have confidence in one another's regulatory systems. In turn, this can facilitate trade. The Canada-Indonesia CEPA includes a chapter on good regulatory practices designed to further the goal of working together to ensure transparent and predictable regulatory systems that foster stronger trade relations and protect citizens. At the same time, the chapter maintains the ability of each partner to adopt and apply their own laws and regulations to regulate economic activity in the public interest.

Investment

The Investment chapter incorporates a comprehensive framework of obligations. It establishes a suite of investment protections, including: non-discrimination at the pre- and post-establishment phases; protections against expropriation without fair compensation; provisions on minimum standards of treatment; and disciplines against performance requirements. The chapter also ensures policy flexibility in critical areas, such as public health, safety, the environment, and the rights of Indigenous Peoples. It also includes modern, transparent, and predictable rules governing investor-state dispute settlement (ISDS). Consistent with Canada’s practice, the ISDS mechanism also applies to investments in services sectors.

Trade in services

The Trade in Services chapter includes substantive obligations consistent with Canada's existing trade agreements. The chapter provides market access, non-discriminatory treatment, transparency, and predictability for both Canadian and Indonesian service suppliers. It also includes annexes on development and administration of measures as well as professional services.

Services and investment non-conforming measures

The CEPA includes a negative list of reservations for non-conforming Measures (NCMs) on services and investment, with a 3-year transition period for Indonesia to improve transparency. For the first time, existing measures are listed in two separate annexes depending on whether they are subject to ratchet. This list of NCMs reflects both Parties' regimes and provides transparency and predictability. Parties also committed to a review process set to begin 3 years after entry into force, in which Parties will aim to improve current offers.

Financial services

The CEPA includes a comprehensive stand-alone Financial Services Chapter. The chapter will provide a level-playing field between Canada and Indonesia through a framework of general rules tailored to the unique nature of the financial sector. This includes core obligations such as market access, national treatment and most-favoured nation treatment, and modern commitments on regulatory transparency and processing of applications. The chapter also includes a robust prudential exception, ensuring the ability of financial sector regulators to take measures to preserve the integrity, security, and stability of the financial system.

Temporary movement of natural persons

The Temporary Movement of Natural Persons chapter expands economic opportunities for Canadians and Indonesians through a combination of facilitative measures and transparency commitments aimed at easing cross-border movement for a range of business persons, as well as for their corresponding spouses. These provisions align with Canada’s established approach across its free trade agreements, facilitating short-term access for business purposes while clearly distinguishing these pathways from permanent employment, residency, and citizenship. This approach preserves Canada’s flexibility to implement measures that protect health, safety, and national security, supported by eligibility criteria that uphold the integrity of the domestic labour market. Together, these commitments create a balanced, reciprocal framework for labour mobility, fostering economic collaboration and mutual benefit between Canada and Indonesia.

Telecommunications

The Telecommunications chapter includes commitments that will provide enhanced regulatory certainty for telecommunications service suppliers when operating or investing. This Chapter consists of obligations regarding the access to and use of telecommunications services, and ensures that service suppliers will be treated in a fair and objective manner when providing telecommunications services into Canadian and Indonesian telecommunications markets.

Electronic commerce

The Electronic Commerce chapter supports digital trade by including commitments relating to cross-border data flows, data localization, source code disclosure, open government data, and personal data protection. Overall, the Chapter aims to improve regulatory certainty for businesses and consumers seeking to engage in the digital economy in both markets, as well as those specifically looking to engage in cross-border digital trade between Canada and Indonesia.

Intellectual property

The Intellectual Property chapter contains commitments that increase the predictability and transparency of the Intellectual Property system. The Chapter contains cooperation and consultations commitments that will allow the Parties to work together towards achieving modern Intellectual Property standards in the region.

Government procurement

The Government Procurement chapter includes procedural rules related to transparency, cooperation, and ensuring integrity in procurement practices. It also recognizes the use of environmental and socio-economic considerations in procurement processes and encourages the participation of Canadian and Indonesian small and medium sized enterprises (SMEs) in government procurement. The Chapter includes an article on further negotiations, allowing Parties to enter into negotiations to increase the ambition of the Government Procurement Chapter in the future, including on market access.

Competition policy

The Competition Policy chapter aims to advance the shared goals of both Parties for transparent, predictable, and competitive business environment and establishes strong requirements for procedural fairness. This ensures that Canada’s and Indonesia’s competition authorities uphold transparency in their investigative and enforcement processes, and safeguards the rights of those under investigation. It also encourages cooperation and sets out measures for competition authorities to identify and protect confidential information.

State-owned enterprises

Canada and Indonesia agreed on disciplines for state-owned enterprises (SOEs). This marks the first commitment of this kind for Indonesia and introduces provisions for SOEs on non-discriminatory treatment, commercial considerations, regulatory impartiality, transparency, and technical cooperation. This text ensures that large, commercial SOEs generally operate in accordance with market principles, while recognising the role of SOEs in the public domain.

Trade and sustainable development

The Trade and Sustainable Development chapter promotes trade and economic flows that contribute to enhancing decent work, high levels of environmental protection and inclusive economic growth, through three distinct sections:

Trade and environment: Comprehensive environment provisions aim to level the playing field by ensuring Parties do not lower their levels of environmental protection to attract trade or investment. The Environment Section includes provisions recognizing the importance of mutually supportive trade and climate change policies, and articles to address global environmental challenges, including on plastic pollution and the protection of biological diversity, as well as commitments on fisheries and aquaculture, forest management and agriculture and the promotion of responsible businesses conduct. The Parties’ commitment to enforce domestic environmental laws and not derogate from those laws to encourage trade or investment is subject to the CEPA’s dispute settlement mechanism. The Environment Section also provides for enhanced consultations and cooperation to resolve any other matter that may arise.

Trade and labour: Comprehensive labour provisions are enforceable through the CEPA Dispute Settlement chapter. The labour provisions commit each Party to provide protection for International Labour Organization (ILO) fundamental principles and rights at work, and acceptable conditions of work, in their respective laws and regulations, and to effectively implement the fundamental ILO Conventions that it has ratified. In addition to including a non-derogation article, the labour provisions further require that a Party not fail to effectively enforce its labour laws through a sustained or recurring course of action or inaction in a manner affecting trade or investment. Dedicated provisions recognize the importance of addressing forced or compulsory labour as well as violence against workers, and the possibility of undertaking cooperative activities in these areas. Institutional mechanisms such as public awareness and procedural guarantees and a cooperation article are included to facilitate implementation of the labour provisions.

Trade and women’s economic empowerment: The trade and women’s economic Empowerment provisions recognize the importance of incorporating a women’s economic empowerment perspective into the development of each Party’s trade policies and practices. It includes a framework for the Parties to participate in cooperation activities and a commitment to domestically promote existing laws, regulations, and policies that protect the rights of women and promote equality between men and women. 

Trade and small and medium-sized enterprises

The Small and Medium Sized Enterprises (SMEs) chapter highlights the crucial role SMEs play in both economies and commits the Parties to work together to remove barriers so that SMEs may be better placed to leverage the opportunities created by the Agreement. The chapter also includes commitments on information sharing, on undertaking cooperation activities, and on establishing a committee to oversee the chapter's implementation.

Economic and technical cooperation

The Economic and Technical Cooperation chapter enables Canada and Indonesia to undertake technical assistance and capacity building activities. These activities will strengthen the capacity of the Parties to implement the Agreement and maximize the opportunities and benefits of the CEPA while promoting inclusive and sustainable economic growth.

Transparency, anticorruption and responsible business conduct

The Transparency, Anti-Corruption and Responsible Business Conduct chapter includes comprehensive provisions to facilitate a transparent and predictable environment for trade and investment. This will be Indonesia’s most comprehensive chapter on transparency, anti-corruption and responsible business conduct included in a trade agreement.

Bilateral dialogues on priority matters

The chapter on Bilateral Dialogues on Priority Matters establishes dialogues on cooperation on critical minerals and matters related to sanitary and phytosanitary measures which are operationalized through Memoranda of Understanding.

Critical minerals: The establishment of a Bilateral Dialogue on Critical Minerals Cooperation aims to strengthen the partnership between Canada and Indonesia in our shared ambitions to develop secure and resilient global critical mineral supply and value chains with high environmental, social, and governance (ESG) standards. This Dialogue will facilitate information exchanges including the sharing of knowledge regarding best practices related to legislative and policy frameworks for supporting high ESG standards in the mining and refining sectors, environmental impact assessments, mine closure protocols, the reduction of greenhouse gas emissions in the mining and refining sectors through the application of clean technology solutions, and other mutually agreed upon areas of cooperation. The Dialogue will also support bilateral mining and service sector trade and investment with a focus on “green” solutions for the mining and refining sectors.

Matters related to sanitary and phytosanitary measures (SPS): Canada and Indonesia negotiated a memorandum of understanding (MOU) that creates a bilateral dialogue on SPS issues, effective upon signature. Canada and Indonesia will use the dialogue to facilitate market access for the trade in Canadian beef and Indonesian bird’s nests as well as to enhance collaboration on food safety. The CEPA Chapter on Bilateral Dialogues on Priority Matters references the SPS MOU and allows a Party to bring any matter from the SPS Dialogue to the CEPA Joint Committee.

Dispute settlement

The Agreement provides for a fair, transparent, efficient, and effective means of resolving differences relating to the Agreement that may arise between the Parties. The dispute settlement mechanism applies across the Agreement, with few specific exceptions. The public in each Party will be able to follow the proceedings, as the Parties’ submissions, hearings and final reporting presented by panels will be made available to the public. The mechanism provides robust rules that allow the Parties every opportunity to resolve disputes through cooperation and consultation, and which encourages the use of alternative dispute resolution mechanisms when appropriate.