Jakarta. Indonesia and Canada are expected to ease a huge chunk of the tariffs on their bilateral trade in goods starting in 2026 as Jakarta hopes to narrow its trade deficit with Ottawa, according to a minister. 

Both countries inked Monday a joint ministerial statement that marked the substantive conclusion of the Comprehensive Economic Partnership Agreement (CEPA) -- about three years after the trade deal negotiations began. There are still many steps ahead before the deal can enter into force, including the so-called legal scrubbing process in which lawyers would review the text. Both countries also need to sign and ratify the treaty for it to come into effect. 

Trade Minister Budi Santoso told reporters that Indonesia and Canada would sign the CEPA in mid-2025 with a target to implement the trade pact the following year. The CEPA deal will grant Indonesia a trade liberalization that covers up to 90.5 percent of the import tariffs for its goods entering the Canadian market. This is equivalent to $1.4 billion worth of trade. Bilateral trade in services will be subject to preferential treatment. The deal will also facilitate investments in agricultural and manufacturing sectors. 

“The Indonesia-Canada CEPA will be implemented in 2026. Some Indonesian goods that will get prioritized access to the Canadian market include paper products, processed food, edible bird’s nest, and palm oil,” Budi told reporters in Jakarta.  

Indonesia banks on the CEPA to have a more balanced trade with Canada. Government data shows Indonesia’s deficit with Indonesia has dropped from $1.7 billion in 2022 to $846.8 million the following year. The annual bilateral trade totaled $3.4 billion in 2023, down from around $4.3 billion posted the previous year. 

“We hope that we will have a surplus with Canada since the CEPA will expand our market access,” Budi said. 

Canadian Trade Minister Mary Ng said that the CEPA would mutually benefit both sides, while adding that Canada could be the gateway to the North American market for Indonesian businesses. Canada is the only G7 country that has comprehensive free trade agreements with the six other world’s largest economies, thus potentially expanding Indonesia’s global reach. 

“Canada boasts a network of agreements that can give Indonesian companies access to 1.5 billion customers in the international marketplace,” Ng said.