European Union and Indonesia Finalize Free Trade Agreement

The European Union (EU) and Indonesia have successfully concluded a comprehensive free trade agreement after nearly a decade of negotiations. This significant milestone aims to eliminate tariffs on a wide range of goods and foster deeper economic ties between the two regions.

Signed in Bali by EU Trade Commissioner Maros Sefcovic and Indonesian Economic Affairs Minister Airlangga Hartarto, the Comprehensive Economic Partnership Agreement (CEPA) is expected to bring considerable benefits to both parties. The agreement is designed to remove tariffs on EU exports, particularly in sectors such as automotive parts, agriculture, and pharmaceuticals, while simultaneously opening Indonesia to investments in emerging industries like electric vehicles.

Officials have indicated that this agreement will lead to substantial savings for EU exporters, with estimates suggesting a reduction of approximately EUR600 million ($708 million) in annual duties. Furthermore, around 80% of Indonesia's exports to the EU, including palm oil, textiles, footwear, and fisheries, will benefit from tariff eliminations under the new pact.

European Commission President Ursula von der Leyen emphasized that the agreement would enhance job creation and stimulate economic growth, while also ensuring access to essential raw materials for Europe's clean technology sectors. The deal is seen as a strategic response to the current global economic landscape, particularly in light of recent tariff policies introduced by the United States.

Although the negotiations began in 2016, progress had been hampered by disputes over palm oil and environmental regulations. However, the urgency created by US tariff policies prompted both parties to accelerate discussions and reach a consensus.

Currently, the EU ranks as Indonesia's fifth-largest trading partner, with bilateral trade reaching $30.1 billion last year. This agreement will not only strengthen economic relations but also provide EU businesses and farmers with access to Indonesia's expansive market of 280 million consumers.

As this agreement moves forward, it must now undergo ratification by EU member states, the European Parliament, and Indonesian authorities before it can take effect, which is anticipated to occur by 2027.