(Jakarta / Nusa Dua, 24th) After nearly 10 years of negotiations, Indonesia and the European Union have reached a Comprehensive Economic Partnership Agreement. The agreement will open up investment opportunities in strategic sectors such as electric vehicles, electronics, and pharmaceuticals.
EU Commissioner for Trade and Economic Security, Maroš Šefčovič, and Indonesia's Coordinating Minister for Economic Affairs, Airlangga, signed the agreement on Tuesday (September 23) in Bali, Indonesia. This marks the EU's third trade agreement with a Southeast Asian country after those with Singapore and Vietnam.
According to the agreement, Indonesia will eliminate import tariffs on 98.5% of products coming from the EU and will simplify customs procedures for EU products. These products include vehicles, powdered milk, cheese, meat, chocolate, and baked goods.
The average annual export tariff rate levied on the EU is 10%. The agreement with Indonesia is expected to save the EU 600 million euros (about 3.215 billion ringgit) in export tariffs.
Indonesian products will also enjoy zero-tariff rates in 90% of the EU market. The Indonesian government anticipates this will boost exports of palm oil, coffee, textiles, and apparel.
The agreement is expected to come into effect on January 1st next year. Airlangga said: “We are focusing on the next stage, including the fine-tuning of the legal text, as well as translation and ratification, and we reiterate our determination to bring the agreement into effect as soon as possible.”
The EU is Indonesia's fifth largest trading partner, with bilateral trade last year reaching $30.1 billion (about 126.2 billion ringgit). The Indonesian authorities expect that in the first five years after the agreement takes effect, trade volume between Indonesia and the EU will double.
Airlangga said that authorities look forward to building supply chains between Indonesia and Europe in critical minerals, renewable energy, innovation, and investment. Indonesia is currently consulting with European car manufacturers to cooperate in manufacturing electric vehicles and batteries in Indonesia.
After the signing ceremony, Šefčovič said the agreement will help European businesses invest in Indonesia and facilitate supply chain diversification. “By reaching this agreement, the EU and Indonesia send a strong signal to the world that we are united and committed to building a rules-based, mutually beneficial international trade system.”
European Commission President Ursula von der Leyen also said in a statement that EU exporters will save on tariffs, while Indonesian consumers will be able to access European products more easily and at more affordable prices. She noted that the agreement will secure the EU with a stable supply of key minerals such as nickel and cobalt.
Indonesia and the EU began negotiations in 2016, but little progress was made in the early stages. However, the tit-for-tat tariffs imposed after U.S. President Trump returned to the White House and the resulting global trade wars prompted Indonesia and the EU to speed up talks, reduce risks, and create stable conditions. In July this year, Indonesian President Prabowo visited Brussels and, together with von der Leyen, announced that the two sides had reached a political agreement after 19 rounds of negotiations.
During the negotiations, disputes occasionally arose between Indonesia and the EU over issues such as palm oil and deforestation. The EU had proposed banning the import of products linked to deforestation, leading to tensions with Indonesia, a major exporter of palm oil.
The EU has since postponed the implementation of this regulation until the end of this year. Airlangga said Šefčovič promised to grant “special treatment” regarding this regulation to countries that have signed trade agreements with the EU.
Reportedly, the EU demanded that deforestation-related provisions be written into the trade agreement, though authorities have not disclosed the details.
The Chairman of the Indonesian Palm Oil Association, Eddy, said the trade agreement will eliminate tariff barriers for exports to the EU, but the industry still faces obstacles due to non-tariff barriers. He pointed out that the EU’s ban on products related to deforestation must be resolved immediately.
Environmentalists, on the other hand, are concerned that the trade agreement between Indonesia and the EU will drive up demand for Indonesian palm oil, resulting in more deforestation.
EU Commissioner for Trade and Economic Security, Maroš Šefčovič, and Indonesia's Coordinating Minister for Economic Affairs, Airlangga, signed the agreement on Tuesday (September 23) in Bali, Indonesia. This marks the EU's third trade agreement with a Southeast Asian country after those with Singapore and Vietnam.
According to the agreement, Indonesia will eliminate import tariffs on 98.5% of products coming from the EU and will simplify customs procedures for EU products. These products include vehicles, powdered milk, cheese, meat, chocolate, and baked goods.
The average annual export tariff rate levied on the EU is 10%. The agreement with Indonesia is expected to save the EU 600 million euros (about 3.215 billion ringgit) in export tariffs.
Indonesian products will also enjoy zero-tariff rates in 90% of the EU market. The Indonesian government anticipates this will boost exports of palm oil, coffee, textiles, and apparel.
The agreement is expected to come into effect on January 1st next year. Airlangga said: “We are focusing on the next stage, including the fine-tuning of the legal text, as well as translation and ratification, and we reiterate our determination to bring the agreement into effect as soon as possible.”
The EU is Indonesia's fifth largest trading partner, with bilateral trade last year reaching $30.1 billion (about 126.2 billion ringgit). The Indonesian authorities expect that in the first five years after the agreement takes effect, trade volume between Indonesia and the EU will double.
Airlangga said that authorities look forward to building supply chains between Indonesia and Europe in critical minerals, renewable energy, innovation, and investment. Indonesia is currently consulting with European car manufacturers to cooperate in manufacturing electric vehicles and batteries in Indonesia.
After the signing ceremony, Šefčovič said the agreement will help European businesses invest in Indonesia and facilitate supply chain diversification. “By reaching this agreement, the EU and Indonesia send a strong signal to the world that we are united and committed to building a rules-based, mutually beneficial international trade system.”
European Commission President Ursula von der Leyen also said in a statement that EU exporters will save on tariffs, while Indonesian consumers will be able to access European products more easily and at more affordable prices. She noted that the agreement will secure the EU with a stable supply of key minerals such as nickel and cobalt.
Indonesia and the EU began negotiations in 2016, but little progress was made in the early stages. However, the tit-for-tat tariffs imposed after U.S. President Trump returned to the White House and the resulting global trade wars prompted Indonesia and the EU to speed up talks, reduce risks, and create stable conditions. In July this year, Indonesian President Prabowo visited Brussels and, together with von der Leyen, announced that the two sides had reached a political agreement after 19 rounds of negotiations.
During the negotiations, disputes occasionally arose between Indonesia and the EU over issues such as palm oil and deforestation. The EU had proposed banning the import of products linked to deforestation, leading to tensions with Indonesia, a major exporter of palm oil.
The EU has since postponed the implementation of this regulation until the end of this year. Airlangga said Šefčovič promised to grant “special treatment” regarding this regulation to countries that have signed trade agreements with the EU.
Reportedly, the EU demanded that deforestation-related provisions be written into the trade agreement, though authorities have not disclosed the details.
The Chairman of the Indonesian Palm Oil Association, Eddy, said the trade agreement will eliminate tariff barriers for exports to the EU, but the industry still faces obstacles due to non-tariff barriers. He pointed out that the EU’s ban on products related to deforestation must be resolved immediately.
Environmentalists, on the other hand, are concerned that the trade agreement between Indonesia and the EU will drive up demand for Indonesian palm oil, resulting in more deforestation.