Indonesia and EU Finalize Free Trade Agreement After a Decade of Negotiations to Counter Trump Tariffs

After a long negotiation, Indonesia and the EU signed a free trade agreement - the Comprehensive Economic Partnership Agreement (CEPA) - on Tuesday, September 23, in Bali. The agreement still needs approval from the 27 EU countries and the Indonesian parliament, and is expected to take effect in 2027.

As the largest economy in Southeast Asia, the US tariff policy affected Indonesia's negotiation process with the EU.

Previously, the negotiations were stalled due to issues related to products associated with deforestation. However, after President Trump imposed tariffs on many countries, the negotiations accelerated significantly. Currently, 19% tariffs are imposed on Indonesian products exported to the United States, so it turned to seek preferential trade agreements with the EU. The 27 EU countries affected by the Trump administration's tariff policies are also actively seeking to diversify their trade partners. "The reason this agreement could be finally signed is because of Trump's trade war. Indonesia needs to find alternative markets in Europe, and Europe also needs to open up new markets," said Bima Yudistira, Executive Director of the Jakarta Center for Economics and Law, to AFP.

According to the agreement, 80% of goods exported from Indonesia to the EU will enjoy zero tariffs. This will benefit Indonesia's main export products, such as footwear, textiles, aquaculture, and palm oil. Ursula von der Leyen, President of the European Commission, stated in a statement: "The agreement we have reached with Indonesia creates new opportunities for businesses and farmers, and ensures stable and predictable supply of key raw materials." The EU is Indonesia's fifth-largest trading partner, with bilateral trade reaching about 25.6 billion euros in 2024. Deni Fria Wang, a researcher at the Center for Strategic International Studies (CSIS), pointed out: "This agreement will make EU products easier to enter Indonesia's market of 280 million people."

At the same time, the EU's openness also brings new opportunities for Indonesia's textile and footwear industries, which were previously at a disadvantage compared to Vietnam. Vietnam signed a free trade agreement with the EU as early as 2019, while Singapore reached an agreement even earlier in 2018. The agreement will also encourage EU investments in Indonesia, especially in strategic areas such as electric vehicles, electronics, and pharmaceuticals. According to the statement, EU exporters will save approximately 600 million euros in tariff costs annually when entering the Indonesian market.

Previously, the negotiations were once suspended because the EU proposed a ban on importing products related to deforestation, causing tension between Brussels and Jakarta. As one of the world's major palm oil exporters, Indonesia expressed strong dissatisfaction with this. However, the implementation of this legislation has been postponed until the end of this year. The agreement signed this time includes a "palm oil protocol" aimed at "maximizing the potential of CEPA in supporting sustainable palm oil trade." The European Commission added that the protocol will establish a dialogue platform, especially for communication regarding regulatory changes related to the palm oil industry, but did not disclose more details. Environmentalists have expressed concerns over the "special treatment" given to Indonesia by the EU on its deforestation policy, as the agreement may lead to increased demand for palm oil, further accelerating deforestation.

Source: rfi

Original: www.toutiao.com/article/1844076339499020/

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