Indonesia and the European Union have finalized negotiations on a comprehensive trade agreement, marking a significant milestone after nearly a decade of talks. The Indonesia-European Union Comprehensive Economic Partnership Agreement (CEPA) is the third deal Brussels has signed with Southeast Asian countries, following similar agreements with Singapore and Vietnam.
The pact, signed by EU Trade Commissioner Maros Sefcovic and Indonesian Minister of Economic Affairs Airlangga Hartarto, aims to open investment in strategic sectors such as electric vehicles, electronics, and pharmaceuticals. According to EU President Ursula von der Leyen, EU exporters will save approximately 600 million euros ($708 million) annually in duties paid on goods entering the Indonesian market, making European products more affordable and accessible to Indonesian consumers.
The trade deal has been in the works since 2016, but negotiations initially saw little progress due to issues such as palm oil and deforestation. However, the urgency to expedite an agreement was created by US President Donald Trump’s sweeping tariff policy, according to Deni Friawan, a researcher at the Centre for Strategic and International Studies. The trade deal includes a protocol on palm oil, although details have not been disclosed.
The signing of the agreement is expected to mitigate risks from the global tariff war and provide a stable bilateral agreement between the two parties. Around 80 percent of Indonesian exports to the EU will be tariff-free once the deal comes into force, benefiting the country’s top shipments to the bloc, including 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 approximately 280 million people. However, tensions remain due to the EU’s deforestation regulation, which prohibits exports of goods produced on land deforested after December 2020. Activists have expressed concerns that the trade agreement may lead to increased deforestation driven by demand for Indonesian palm oil.
The deal will now undergo legal checks, translation, and ratification by EU members and lawmakers in the European Parliament and Indonesia. It is expected to be implemented by 2027. The signing of the Indonesia-EU trade agreement marks a significant step towards strengthening economic ties between the two parties and promoting open, rules-based international trade.
