WT/REG446/2  
 
20 October  2021 
(21-7918) Page: 1/6 
Committee on Regional Trade Agreements  Original: English  
 
COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT BETWEEN  
INDONESIA AND AUSTRALIA (GOODS AND SERVICES)  
QUESTIONS AND REPLIES  
 The following communication, dated 15 October 2021, is being circulated at the request of the 
delegations of  Indonesia and Australia.  
 
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Question s from the delegation of Canada  
 
Technical barriers to trade  
 
1.1.  Section 3.4.1.2 of the factual presentation describes the Technical Barriers to Trade 
obligations in the RTA.  
 Why did Indonesia and Australia choose not to include the following obligations in 
the Technical Barriers to Trade Chapter:  
 
• incorporation of certain WTO TBT commitments by reference;  
 
 The TBT Chapter includes an affirmation of the TBT Agreement article (Art 8.4) and both 
Parties agreed to base the IA –CEPA TBT Chapter on the WTO TBT Agreement. The Parties wanted 
the TBT Chapter to build on the WTO TBT Agreement rather than incorporate it. This is in line with 
both Parties ' FTA precedent.  
 
• application of FTA dispute settlement;  
 
 Given the cooperative nature of the WTO plus elements of the TBT Chapter, the Parties decided 
that dispute settlement would not apply to the chapter. The Parties consider the WTO as the 
appropriate body to resolve T BT disputes on WTO obligations. This is in line with both Parties ' FTA 
precedent.  
 
• National Treatment regarding the acceptance of the results of another Party 's 
conformity assessment;  
 
 Regarding acceptance, both parties will give positive consideration of  the other party 's results 
and even if those procedures differ from its own, the party may accept such results provided it is 
satisfied that those procedures offer an assurance of conformity with applicable technical regulations 
or standards equivalent to its own procedures.  
 
• transparency obligations covering:  
o publication of technical regulations ' and conformity assessment 
requirements ' objectives;  
o explanation of reasons for non -acceptance of the other Party 's conformity 
assessments and accreditations of c onformity assessment bodies;  
 
 
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   The Parties included transparency provisions in line with the TBT Agreement (Art 8.11)  which 
clearly outlines  the publication of such information . The Parties chose not to include a provision 
requiring publication of technical regulations ' and conformity assessment requirements ' objectives.   
 
 The conformity assessment provision requires a Party (on request of the other Party) to 
explain its reasons for not accepting the results of any conformity assessment procedures performed 
in the territory of that other Party (Art 8.7.4). The provision also requires the parties to exchange 
information, with a view to facilitating the acceptance of conform ity assessment procedures 
(Art 8.7.3). The Cooperation provision also provides that the Parties may consider cooperation 
between conformity assessment bodies, including on the use of accreditation to qualify conformity 
assessment bodies (Art 8.8.2.1) . 
 
• a requirement to meet WTO obligations encouraging the use of international 
standards as the basis for technical regulations, without access to the WTO 
exemption for developing countries;  
 
 As previously indicated, Article 8.4 of the IA -CEPA stated that both p arties affirm their rights 
and obligations with respect to the WTO TBT Agreement . 
 
• adherence to WTO TBT Committee decisions and recommendations on determining 
when international standards exist; or  
 
 As previously indicated, Article 8.4 of the IA -CEPA sta ted that both parties affirm their rights 
and obligations with respect to the WTO TBT Agreement.  
 
• requirement to enter into consultations within 30 days of a request?  
 
 The Parties chose not to include a time period  of 30 days for consultations. The Parties note, 
however, that the consultation article obliges each Party to give prompt and positive consideration 
to any request for consultations on issues relating to the implementation of the TBT Chapter 
(Art. 8.9.1).  
 
1.2.  The RTA does not include text on good regulatory practices.  
 Why did the Parties choose not to include text on Good Regulatory Practices?  
 
 Australia and Indonesia chose not to include text on good regulatory practices in IA -CEPA. 
This reflects difference s in FTA practice among the Parties. The Parties have agreed strong 
transparency (Chapter 19) and services domestic regulation disciplines that support good regulatory 
practices.  The elements of good regulatory practices are also covered in the SPS and TBT  Chapter 
in IA-CEPA.  
 
Provisions on trade in services and investment  
 
Scope and definitions  
 
1.3.  Paragraph 4.4 of the factual presentation states: "Sectoral coverage under the Trade 
in Services Chapter mirrors that of the GATS, except for air transport service s which has 
a wider scope. Additional sectors are specialty air services, airport operation services and 
ground handling services."  
 Can Australia and Indonesia confirm whether they permit the cross -border supply 
of specialty air services, as defined under this Agreement, by entities of the other Party, 
and if so, under what conditions?  
 
 The Scope of the IA -CEPA Cross Border Trade in Services Chapter confirms that speciality air 
services, airport operation services and ground handling services  are included in the agreement, 
unless they are carved out or conditions are listed in Australia or Indonesia 's Schedules of 
commitments.  
 
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   Australia 's Schedule of services and investment market access commitments confirms, at the 
state and territory level, that Australia does not place any restrictions on market access for 
Indonesian airport operation service suppliers and ground handling service suppl iers under Modes 2 
and 3. Mode 1 is unbound due to lack of technical feasibility. Otherwise, Australia permits the cross -
border supply of specialty air services, airport operation services and ground handling services.  
Further detail can be found here:  
 
Annex II: Schedule of Australia | Australian Government Department of Foreign Affairs and Trade 
(dfat.gov.au)  
 
 Indonesia 's Sche dule of services and investment market access commitments indicates that 
there is a joint venture requirement to enable market access for Australian service suppliers of 
airport operation services and airport activity services (which includes ground handli ng services) 
under Mode 3 and a restriction of the national treatment obligation under Mode 3 requiring that no 
more than 49 % of the capital share in a joint venture will be owned by an Australian supplier.  
Further detail can be found here:  
 
Annex II: Schedule of Indonesia | Australian Government Department of Foreign Affairs and Trade 
(dfat.gov.au)  
 
Question s from the delegation  of China  
 
1.4.  Australia, New Zealand and ASEAN have already signed  ASEAN -Australia -New 
Zealand FTA ( AANZFTA ). How do parties evaluate the added  value of the IA-CEPA  to 
AANZFTA ? 
 Could the Australian side introduce the differences of the liberalization level 
between the IA -CEPA and other FTAs signed by Australia, such as CPTPP?  
Joint r esponse  
 
 IA-CEPA is a bilateral FTA that has created the framework for a new chapter of closer economic 
engagement between Australia and Indonesia, opened new markets and opportunities for 
businesses, primary producers, service providers and investors,  as well as economic cooperation,  
additional to AANZFTA.  
 
 IA-CEPA has additional provisions to address impediments to bilateral trade, including both 
tariff and non -tariff barriers. IA -CEPA contains improved access to each other's services markets 
and address impediments to increasing Australian investment in Indonesia and Indonesian 
investment in Australia. The IA -CEPA Economic Cooperation Program (Katalis)  will assist in the 
implementation of the Agreement  and support trade facilitation.  
 
Response from Australia  
 
 The level of liberali zation in IA -CEPA reflects negotiated outcomes between Australia and 
Indonesia, building on the foundation of AANZFTA.  
 
• Goods : As with all of Australia 's in-force FTAs, Australia has eliminated all tariffs under 
IA-CEPA. Over 99% of Australian goods exports by value to Indonesia will enter duty free or 
under significantly improved preferential arrangements. This is a similar outcome to Australia 's 
other bilateral and plurilateral FTAs, including CPTPP.  
• Services and Investment : Market access outcomes on services and investment will provide 
increased certainty to Australian businesses and services suppliers in the Indonesian market, 
including guaranteed levels of Australian ownership. Indonesia's commitments are much 
stronger than they have ever agreed to before in a trade agreement. Australia's services and 
investment commitments in IA -CEPA lock in Australia's existing open policy settings, similar 
to those in other trade agreements, including CPTPP. Indonesian investment in Australia will 
be subject to  Australia's foreign investment policy, including screening by the Foreign 
Investment Review Board.  WT/REG446/2  
 
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  1.5.  As mentioned in paragraph 2.3, a general review of the Agreement will be 
undertaken in 2025 (and every five years thereafter) with a view to updating and 
enhancing the Agreement.   
 What is the consideration of this provision? In which sectors do the Parties see great 
room for enhancement?  
 
 Australia and Indonesia agreed to conduct a general review five years after entry into force of 
the Agreement and every five years thereafter reflecting the Parties ' mutual desire to ensure the 
Agreement 's smooth implementation and responsiveness to emerging and new bilateral trade 
priorities , particularly after the advent of the digital age . With the Agreement having been in force 
for just over a year, the Parties cannot answer based on prejudice regarding what will happen in the 
future  and we have not yet identified sectors for consideration in a general review . 
 
1.6.  As mentioned in paragraph 5.2.b of the factual presentation , the Parties agree to 
establish a High Level Dialogue  on trade remedy systems and practices, but so far no 
meeting has taken place. What are the Parties' considerations for the next steps in the 
work of this mechanism?  
 Under IA -CEPA, the Parties agreed to establish a High Level Dialogue to enhance transparency 
and mutual understanding on trade remedies, including on their respective trade remedies systems 
and practices. A meeting of the High Level Dialogue would take pla ce at the request of either Party.  
 
1.7.  As mentioned in paragraph 5.37 and 5.38 of the factual presentation, IA-CEPA  
provides for cross -border transfer of information by electronic means, subject to 
limitations needed for achieving a legitimate public policy o bjective  or national security 
reasons , but the prohibition of local requirements for computing facilities  has no such 
exceptions. What is the definition of "legitimate public policy objectives "? Is there any 
practice on citing this concept ? The prohibition  of the cross -border transfer of information 
of due to a legitimate public policy objective  or national security reasons may result in 
localization of  computing facilities, which  may violate the provision of prohibition of local 
requirements for computing facilities . How would the Parties reconcile this contradiction?  
 The provisions relating to Cross -Border Transfer of Information by Electronic Means 
(Article  13.11) and Location of Computing Facilities (Article 13.12) in the IA -CEPA Electronic 
Commerce cha pter are both subject to measures maintained to achieve a legitimate public policy 
objective (Article 13.11 para 3(1); Article 13.12 para 3(1)) and measures necessary for the 
protection of a Party 's essential security interests (Article 13.11 para 3(2); Ar ticle 13.12 para 3(2)). 
This is set out in paragraph 5.38 of the factual presentation which provides '[t]he same limitations 
as described in the paragraph above also apply vis-à-vis these disciplines. ' 'Legitimate public policy 
objective ' is not defined in  the IA -CEPA agreement and our intention is for the concept to be 
understood on the basis of its ordinary meaning.  
 
1.8.  As mentioned in paragraph 5.41 of the factual presentation, the Side letter signed by 
the Parties lists improving the capacity of SMEs to ut ilize the Agreement as one priority 
area . What  specific measures would the P arties take to achieve this goal?  
 The nine Medium Term Objectives for Economic Cooperation Under IA -CEPA listed in the 
Economic Cooperation Side Letter, including on SMEs, is being taken forward under the IA -CEPA 
Katalis program. The program will focus on agrifood, advanced manufacturing/s ervices and skills.  
More information can be found here: https://www.iacepa -katalis.org/ . 
 
Questions from the delegation of the European Union  
 
Provisions on trade in goods  
 
ANNEX 2  
 
1.9.  There are three TRQ s (TRQ4, TRQ6 and TRQ7) where both the in -quota rate and the 
out-of-quota rate are zero. Indeed, for these three groups of products (i.e.  1) oranges, 
2) lemons and limes, 3) feed grains) Indonesia granted a zero duty under the AANZFTA.  WT/REG446/2  
 
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   Why did Indonesia an d Australia negotiate these three TRQs, if the imports of the 
relevant products from Australia to Indonesia are already duty free under the current 
AANZ FTA?  
 
 Australia and Indonesia negotiated Tariff Rate Quota (TRQ) outcomes for oranges, lemons and 
limes and feed grains under IA -CEPA to give increased certainty to Australian exporters and 
Indonesian importers , since a t that time (when the TRQ arrangement was agreed ), there were still 
import tariffs for these three groups of products under the AANZFTA . Under IA -CEPA's TRQ 
arrangements, Australian exporters can avail themselves of preferential tariff access to Indonesia 
for a set volume of goods. For TRQ goods, IA -CEPA also provides that Indonesia shall issue import 
permits, or equivalent instruments used f or import authorisation, automatically and on an annual 
basis without seasonality. AANZFTA does not include such provisions.  
 
Provisions on trade in services and investment  
 
General provisions on trade in services and investment  
 
Movement of natural persons  
 
Table 4.1  
 
1.10.   It is stated that economic needs tests apply for managers and experts. Under the 
Agreement, the same statement is not made. Could Parties confirm that this in formation 
is correct, i.e. that the same limitation does not apply under the Agreement?  
 Yes, Australia has waived the requirement for labour market testing for Indonesian Intra -
Corporate Transferees, subject to the conditions and limitations associated wi th commitments on 
that category of entrant in IA -CEPA.  In the case of Indonesia,  under the IA-CEPA agreement,  the 
limitation on economic need test applies for managers and technical experts for all sectors unless 
specified otherwise.  
 
Liberalization commit ments on services and investment  
 
Indonesia  
 
1.11.   "Paragraph 4.58. Distribution services and health services, including hospitals, 
have been opened up to Australia subject to the 67% foreign equity requirement."  
 It seems that distribution services and health services, including hospitals, have 
been opened up to Australia subject to a 67% foreign equity requirement. Can the Parties 
confirm that the foreign equity cap is 67%?  
 
 For distribution services, the foreign equity cap commitment is not 67 %. Indonesia offered 
commitments to Australia under IA -CEPA that cover Wholesale Trade Services of food, beverages, 
and tobacco with minimum space above 5,000 square meters (CPC 6222), Wholesale Trade Services 
of text ile, clothing and footwear with minimum space above 5,000 square meter (CPC 6223), Direct 
Selling (Multi -Level Marketing) and Franchising (Wholesale Trade Services of food, beverages, and 
tobacco with minimum space above 5,000 meter square) with no limitat ions under the Market Access 
obligation for Modes 2 and 3 except for the requirement of a Joint Venture. There are no limitations 
under the National Treatment obligation for these CPC codes except for, under Mode 3:  
 
a. No more than 51 % of the capital share in a joint venture shall be owned by foreigners;  
b. Subject to qualification and licensing requirements and procedures including registration;  
c. Required to appoint Indonesian trade enterprises as agent, single agent, distributor or 
single distributor;  
d. Obligati on to cooperate with at least 100 Indonesian Small and Medium Enterprises yearly 
as a supplier and retailer, along with training and development with due regard to the 
principles of mutual need, mutually reinforcing and mutually beneficial; and  WT/REG446/2  
 
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  e. Only permit ted to be located in the suburbs of the provincial capitals in the islands of 
Kalimantan, Sulawesi, Nusa Tenggara, Maluku and Papua.  
 For health services, including hospitals, under the National Treatment obligation for Mode 3, 
Indonesia offered Australia a 67% foreign equity cap. Under the Market Access obligation for Mode  3, 
Indonesia has a Joint Venture requirement.  
 
 Further details can be found here: Annex II: Schedule of Indonesia | Australian Government 
Department of Foreign Affairs and Trade (dfat.gov.au)  
 
Sector specific provisions on trade in services  
 
Financial services  
 
1.12.   "Paragraph 4.71. The list of exceptions to financial services (Article 10.5) builds 
upon those of the GATS and its Annex on Financial Services, and includes the ability for a 
Party to prevent or limit transfers by a financial service supplier through the 
implementation of equitable and non -discriminatory measures."  
 Why is it necessary to add a new exception for financial services that doesn't exist 
in the GATS? Under what circumstances would recourse to this exception be necessary? 
How is this compatible w ith Art. XI and XII?  
 
 The inclusion of these exceptions was a negotiated outcome and were considered necessary 
due to the sensitive nature of the financial services sector. Recourse to these exceptions may be 
necessary if circumstances arose that relate t o the maintenance of the safety, soundness, integrity, 
or financial responsibility of financial service suppliers.  
 
1.13.   "Paragraph 4.72. In case of inconsistency between Chapter 10 and the Chapters on 
Trade in Services, Telecommunications, Electronic Commerce,  Investment or 
Transparency (Chapters 9, 11, 13, 14 or 19, respectively), the provisions of the Financial 
services Chapter shall prevail.  
Paragraph 4.73. The following disciplines apply with respect to dispute settlement on 
measures affecting financial ser vices (See also Section 5.6)<…>"  
 
 What is the rationale for carving out financial services from these specific 
disciplines?  
 
 The rationale for carving out financial services from these specific disciplines in case of any 
inconsistency is due to the likelihood for the said chapters to have cross -cutting issues . In numerous 
FTAs, Financial Services Chapters have their own dispute settlement mechanisms.  
 
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