Indonesia to kick off economic partnership talks with Chile

Surabaya (The Jakarta Post/ANN) - Indonesia has agreed to begin talks on a comprehensive economic partnership agreement (CEPA) with Chile, hoping to use the nation as a trade hub in South America.

On Sunday, both nations signed terms of reference to prepare for the talks, Trade Minister Gita Wirjawan said at the end of the Asia-Pacific Economic Cooperation (APEC) forum trade ministers' meeting in Surabaya, East Java.

"We need to seek new opportunities to boost trade and create fair bilateral agreements, as well as ways to support our competitive edge," Gita told reporters.

The minister previously said that Chile could serve as the nation's trade hub in South America, which Indonesia has designated as a non-traditional export destination. While a feasibility study on the CEPA was finished in 2009, pre-negotiation talks stopped, in part because Indonesia prioritised other trade talks.

Pre-negotiation talks resumed earlier this year amid Indonesia's stepped-up measures to boost exports to South America.

Late last year, Chilean Agriculture Minister Luis Mayol Bouchon said during a visit to Jakarta that Chile was keen to increase shipments of its agricultural and forestry products to Indonesia.

The proposed deal was needed to open investment routes in both nations mainly in the fisheries, manufacturing and mining industries, according to Bouchon.

Chile has inked agreements to liberalise trade with 58 nations and regions, including deals with China, South Korea, Vietnam and Malaysia.

Meanwhile, the Trade Ministry's director general for international trade cooperation, Iman Pambagyo, said that both nations would set up a trade negotiating committee in upcoming months.

"In the terms of reference that we agreed to, the deal will cover trade in goods, trade in services and investment," Iman said. "However, we want to make it gradual, by negotiating the trade in goods first. Others will follow, depending on further agreements."

According to Iman, Indonesia and Chile also agreed to transitional safeguards that would allow both parties to impose bilateral safeguard measures.

Under current World Trade Organization (WTO) rules, safeguard measures applied to all countries can be introduced when there are significant jumps in imports. The provision is relevant, given that Indonesia's imports are now higher than exports to Chile.

Chile is the world's largest copper producer and one of the biggest global suppliers of produce, including fruits, vegetables, fish, meat and wine. In 2011, the country booked record forestry and agricultural exports totaling US$14.3 billion, up 16 per cent from a year earlier.

Bilateral trade totaled US$381.99 million last year, with Indonesia exporting $175.25 million and importing $206.64 million.

Indonesia's exports mainly comprised coal, natural gas, natural rubber, seaweed, thread, footwear and refrigerators, while importing iron, copper, fruit, chemicals and crude fish oil.

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