Indonesia and the european Union Formalize Extensive Trade Agreement
Jakarta, Indonesia – Indonesia and the European Union signed a long-awaited Comprehensive Economic Partnership Agreement (CEPA) on Tuesday, marking the culmination of a decade of negotiations aimed at bolstering trade and economic cooperation. The deal arrives amid global economic uncertainties fueled by “tariff wars and protectionism” between major countries, prompting both sides to seek stability through a bilateral framework, according to Indonesian Chief Economic Minister Airlangga.
The CEPA is expected to eliminate tariffs on approximately 80 percent of Indonesian exports to the EU, benefiting key sectors including palm oil, footwear, textiles, and fisheries. Bilateral trade between Indonesia and the EU reached $30.1 billion in 2023, making the EU Indonesia’s fifth-largest trading partner. The agreement will also open EU access to Indonesia’s market of around 280 million consumers.
Negotiations were partially spurred by the impact of former U.S. President Donald Trump’s tariff policies, as Indonesia sought option markets, and the EU looked to expand its reach in Asia. “This signing came at the right moment…we need to seek an alternative market in Europe, and Europe has the same interest, they need a market to penetrate,” explained Bhima Yudhistira Adhinegara, executive director of the Center of economic and Law Studies.
The agreement’s signing follows a period of strained relations, particularly concerning the EU’s proposed deforestation regulation, which would restrict imports of goods linked to deforestation. Airlangga stated that EU Vice President Maroš Šefčovič pledged “special treatment” regarding the regulation for countries with trade agreements with the bloc. The EU has since postponed the regulation’s full implementation to the end of 2024 following criticism.
However, the CEPA has drawn concern from environmental activists. Greenpeace Indonesia’s Syahrul Fitra warned that increased demand for Indonesian palm oil could accelerate deforestation, stating, “The remaining natural forests in palm oil concessions will potentially be cleared in the near future…and converted into plantations.” While Brussels reportedly sought to include deforestation provisions in the agreement, details remain undisclosed.
Following the signing, the CEPA will undergo legal reviews, translations, and ratification processes by EU member states, the European Parliament, and indonesian lawmakers.Full implementation is anticipated by 2027. Airlangga described the agreement as “a milestone that reflects our commitment and the commitment of stakeholders to an open, fair, and enduring economic assistance.”
