Indonesia and EU seal landmark trade deal after nearly a decade of talks

INDONESIA/EUROPE: After nearly 10 years of negotiations, Indonesia and the European Union (EU) have finalised a landmark trade agreement, signalling a major step forward in economic cooperation between Southeast Asia’s largest economy and the 27-nation bloc. The Indonesia-European Union Comprehensive Economic Partnership Agreement (CEPA), signed on Tuesday in Bali, marks the third such deal the EU has struck with countries in the region, following similar agreements with Singapore and Vietnam.

EU Trade Commissioner Maros Sefcovic and Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, signed the agreement, which opens doors for investment in high-potential sectors such as electric vehicles, electronics, and pharmaceuticals. “By finalising this agreement, the EU and Indonesia are sending a powerful message to the world that we stand united in our commitment to open, rules-based, and mutually beneficial international trade,” said Sefcovic.

The trade pact promises significant economic benefits for both sides. EU exporters are expected to save around €600 million (US$708 million or S$908.3 million) annually in duties on goods entering the Indonesian market. At the same time, around 80% of Indonesian exports to the EU will become tariff-free once the deal is implemented—potentially as early as 2027.

Indonesia’s top export sectors—palm oil, footwear, textiles, and fisheries—are poised to gain from broader market access. “This is a 10-year journey that has resulted in a milestone reflecting our mutual commitment to open, fair, and sustainable trade,” Airlangga said at a press conference.

Despite the celebratory tone, the deal does not entirely smooth over long-standing tensions, particularly surrounding environmental concerns.

While the arrangement purportedly contains a guideline on palm oil, specifics remain confidential. Environmental advocates, including Greenpeace Indonesia, have voiced alarm over the potential for increased deforestation linked to rising palm oil demand. “The remaining natural forests in palm oil concessions will potentially be cleared in the near future and converted into plantations,” said Syahrul Fitra of Greenpeace.

Still, Airlangga noted that Commissioner Sefcovic promised “special treatment” for countries like Indonesia that have signed trade deals with the EU, suggesting some flexibility in implementing the bloc’s deforestation regulation—now postponed until the end of the year after backlash from trading partners.

Negotiations for the CEPA began in 2016 but had stalled for years due to political and environmental disagreements. However, shifting global dynamics—including rising protectionism and trade tensions sparked by former U.S. President Donald Trump’s tariff policies—breathed new urgency into the talks.

“This signing came at the right moment. It was finalised because of Donald Trump’s tariff war,” said Bhima Yudhistira Adhinegara, Executive Director of the Center of Economic and Law Studies. “We need to seek an alternative market in Europe, and Europe has the same interest.”

With bilateral trade between Indonesia and the EU reaching US$30.1 billion last year, both parties are betting on the deal to deepen their economic ties and insulate themselves from future global trade shocks.

Both the European Parliament and individual EU member states must endorse the arrangement, together with Indonesia’s government. Legal assessments and versions of the contract will be undertaken temporarily.

If everything proceeds smoothly as planned, the Indonesia-EU CEPA is projected to be completely executed by 2027—shepherding in a new era of collaboration between two progressively connected economic allies.