Indonesia and Canada’s landmark ICA-CEPA trade agreement marks a ‘game changing’ era, boosting exports, reducing tariffs, and driving investment. Explore what this pact means for both nations.
When Indonesia’s President Prabowo Subianto and Canada’s Prime Minister Mark Carney stood together at Parliament Hill in late September 2025, they signed more than a trade deal they launched a new era. Indonesia - Canada Comprehensive Economic Partnership Agreement (ICA-CEPA) represents a landmark in bilateral ties: it is Indonesia’s first major free trade agreement with a North American country, and Canada’s first with an ASEAN member. In many ways, its scope, ambition, and expected impact make it truly game changing.
From studies of past free trade agreements and economic union literature, what sets ICA-CEPA apart is combination of tariff liberalization with regulatory alignment, investment protection, and sectoral cooperation. Canada has committed to abolishing or reducing duties on approximately 90.5 percent of tariff lines for Indonesian goods; Indonesia, in turn, will liberalise around 85.8 percent of its market for Canadian exports. These thresholds are high compared to many similar bilateral deals, which often cover narrower product categories or impose long phase in periods. Analysts of trade policy argue that such deep liberalization tends to generate stronger stimulus for export growth, innovation, and foreign direct investment.
Projections tied to ICA-CEPA suggest Indonesian exports to Canada could rise to about US$11.8 billion by 2030, moving needle on trade volume and contributing modestly to Indonesia’s GDP estimated at a gain of roughly 0.12 percent while also improving investment inflows by nearly 0.38 percent. These figures draw on comparative literature from past agreements in Southeast Asia, where such levels of market access have helped stimulate growth in SME (small and medium enterprise) sectors and export of value added goods, such as processed food, furniture, textiles, and light electronics.
President Prabowo has called ICA-CEPA historic, not only for its economic promise but for its political symbolism. For Indonesia, this pact signals a shift toward greater diversification in trade partners, moving beyond traditional markets in Asia and reinforcing its role as a major actor in global supply chains. From Canada’s side, this agreement supports its Indo-Pacific strategy and its desire to reduce overdependence on trade with United States, a topic often addressed in trade and geopolitical analyses. By opening up its exports including agriculture, potash, and wood products to Indonesian demand with lower or removed tariffs, Canada aims to make its goods more competitive, while Indonesian companies will gain clearer legal protection and access to Canadian investment.
Trade literature emphasizes that trade agreements do more than remove tariffs. Key also are non tariff barriers, regulatory transparency, intellectual property protection, digital trade rules, and investment safeguards. ICA-CEPA includes provisions in many of these realms. It promises greater predictability in trade and investment rules, giving firms in both countries higher certainty about which regulatory standards they must meet. Such legal certainty reduces risk, a factor that many firms cite in literature as a precondition for cross border investment. In addition, small businesses in both countries are expected to benefit more than usual, since many of newly liberalised lines concern light manufactured goods and processed goods, sectors that often include micro, small, and medium enterprises.
Another dimension of ICA-CEPA’s literature relevance relates to critical minerals and clean technologies. Indonesia is rich in minerals needed for green energy transitions nickel, copper, bauxite among them and Canada brings experience and investment potential. Jointly, they can harness these resources in sustainable supply chains. Comparative case studies suggest that when developing nations partner with technologically advanced ones under trade agreements, synergy of resource endowment plus capital/know how creates competitive advantages in global markets, especially in sectors related to renewable energy, batteries, and clean infrastructure.
However, trade policy scholars warn of challenges. One is implementation gap: signing a trade pact is one thing; delivering on its promises is another. Infrastructure, regulatory reforms, customs efficiency, and local capacity building must follow swiftly. For Indonesia, ensuring that exporters especially SMEs in remote or less developed regions can meet Canadian standards (quality, safety, packaging, logistical requirements) will be essential. For Canada, ensuring that lowering tariffs does not unduly harm local industries unless balanced by competitive improvements is also vital. Literature on trade adjustment costs indicates that certain sectors or geographic regions may initially lose competitiveness, requiring support or transition assistance.
Another challenge is political and social acceptance. Trade agreements sometimes spark domestic resistance from sectors fearing competition or job losses. Ensuring transparency, public communication, and stakeholder engagement is thus crucial. Lessons from previous ASEAN and Asia-Pacific trade agreements suggest that where governments involve business associations, civil society, and provincial/local authorities early, there is better compliance and smoother implementation.
From a strategic perspective, ICA-CEPA fits into a larger pattern: Indonesia seeking more diversified trade partnerships, stepping further into global trade architecture, possibly moving toward CPTPP (Comprehensive and Progressive Agreement for Trans Pacific Partnership) membership, while Canada cements its Indo-Pacific outreach. Agreement’s timing effective in 2026, with commitments already in place gives both countries breathing room to calibrate policy, strengthen logistical chains, and adapt regulatory regimes.
Historically, trade agreements that achieve high tariff liberalization and strong investor protections, as ICA-CEPA aims, tend to yield not just economic gains, but geopolitical dividends. They build deeper networks of interdependence which can stabilize bilateral relations, encourage cooperation beyond trade (defense, diplomacy, environmental cooperation), and anchor both parties in broader strategic alliances. Prabowo and Carney both emphasized these dimensions in their speeches: it is not just about goods crossing borders, but about trust, shared norms, and mutual growth.
In summary, ICA-CEPA is more than just another free trade agreement; it reflects a literature validated model of trade pacts that combine liberalisation, regulatory reform, sector cooperation, and strategic diversification. Its projected outcomes, while modest in GDP percentage terms, may translate into significant real effects: more jobs, stronger exports, more competitive small businesses, and better access to foreign capital. Yet realising these potentials depends on rigorous implementation, policy coherence, and capacity building.
As both nations look ahead, hope is that this deal will deliver real results on ground better market access, fairer trade, enhanced investment flows and not just linger in rhetoric. A game changing trade agreement only becomes so when its promises reach farmers, factories, workers, and small entrepreneurs, not just cabinet chambers.
For more deep dives into Indonesia’s evolving trade policies, analyses of bilateral agreements, and OSINT based reports on global economic partnerships, visit Dark OSINT. Stay informed, and together let’s track how this ICA-CEPA unfolds in practice.
