The EU has signed a commercial agreement with the largest Southeast Asia economy: “We send the world a powerful message”

Indonesia and the European Union concluded on Tuesday, in Bali, a free exchange agreement, after long negotiations that accelerated following the increase of US customs duties, reports France Presse.

Signed, after nine years of negotiations, by the Indonesian Minister of Economy, Airlangga Hartarto, and the European Trade Commissioner, Slovak Maros Sefcovic, Cepa (the global economic partnership agreement) will facilitate trade between the 27 nations of the European Block and the largest economy in South-East Asia.

“The EU and Indonesia convey a powerful message to the world, according to which we are united in our commitment to an open international trade, based on rules and mutually advantageous,” said Sefcovic.

Delayed especially by the thorny problem of agricultural products from deforestation, negotiations have accelerated after the decision of US President Donald Trump to impose an increase in customs duties for many countries.

“It is a ten -year course that led to an important stage, reflecting our commitment in favor of an open, equitable and sustainable economic (added),” added Airlangga.

As its products exported to the United States are now taxed with 19 %, Jakarta has been facing EU to achieve preferential access. For their part, they are also targeted by the Trump administration, the 27 Member States of the Union seek to diversify their commercial partnerships.

“This signature (…) has been completed due to Donald Trump's Customs Taxes. Indonesia has to look for an alternative market in Europe, and Europe (…) needs a market to enter,” commented for AFP Bhima Yudhistira Adhinegara, executive director of the Center for Economic and Legal Studies.

Zero customs duties

According to the agreement, 80% of Indonesian products exported to the EU will benefit from zero customs rights, Airlangga explained.

This should be for the benefit of the main Indonesian products, especially footwear, textiles, fishing products or palm oil, he added.

“Our agreement with Indonesia creates new opportunities for companies and farmers” and “also provides us with a stable and predictable supply of essential raw materials,” said the president of the European Commission, Ursula von Der Leyen, according to a statement

The EU is the fifth trade partner of Indonesia, with $ 30.1 billion (25.6 billion euros) in trade in 2024.

With this agreement, “the products (EU) will be able to penetrate more easily” in Indonesia, a market of 280 million inhabitants, stresses Deni Friawan, a researcher at the Center for International and Strategic Studies (CSIS).

Instead, the EU opens perspectives for Indonesian sectors such as textiles or footwear, strongly competed by Vietnam, which signed a commercial agreement with the EU in 2019, one year after Singapore.

The agreement will also allow investments in Indonesia, especially in strategic sectors such as electric vehicles, electronics and pharmaceuticals.

In total, European exporters “will save about 600 million euros per year from the customs duties applied to the goods” entering Indonesia, adds in the statement of Brussels.