Indonesia and the European Union are set to sign a comprehensive trade agreement, marking a significant milestone in their economic relationship. The agreement, to be signed on the resort island of Bali, aims to strengthen trade ties between the resource-rich Indonesian nation and the 27-member European bloc. This development comes after nearly a decade of negotiations, which gained momentum following US President Donald Trump’s tariff policy.
The Indonesia-European Union Comprehensive Economic Partnership Agreement (CEPA) is the third trade agreement the EU has signed with Southeast Asian countries, following similar agreements with Singapore and Vietnam. The CEPA is expected to bring numerous benefits to both parties, including increased trade and investment opportunities. Around 80 percent of Indonesian exports to the EU will be tariff-free, benefiting key exports such as palm oil, footwear, textiles, and fisheries.
The EU is Indonesia’s fifth-largest trading partner, with bilateral trade reaching $30.1 billion last year. The agreement will further open up EU access to the Indonesian market of around 280 million people, providing a significant boost to trade and economic growth. The deal will also ensure equal legal protection for Indonesian and EU businesses, promoting a stable and predictable trade environment.
However, the agreement has not been without its challenges. Ties between the two parties have been frayed by issues such as deforestation, with the EU proposing an import ban on products linked to deforestation. This has angered Indonesia, a major palm oil exporter. Despite these tensions, the EU has reportedly agreed to give “special treatment” to countries that have signed trade agreements with the bloc, regarding the deforestation regulation.
The signing of the CEPA marks a significant step forward in the economic relationship between Indonesia and the EU. The agreement is expected to be implemented by 2027, following legal checks, translation of official documents, and ratification by EU members, the European Parliament, and Indonesia’s parliament. As the two parties move forward with the agreement, they will be closely watched by businesses, investors, and environmental groups, who will be eager to see the impact of the CEPA on trade, economic growth, and the environment.
