EU and Indonesia Reach Historic Breakthrough with Comprehensive Economic Partnership Agreement

Strategic Insights -

The European Union and Indonesia have concluded the negotiations for a Comprehensive Economic Partnership Agreement (CEPA), marking a significant milestone in their economic partnership. The agreement will eliminate over 98% of tariffs, opening up new pathways for trade and investment between the two sides. The EU and Indonesia have strong economic ties, with trade between them exceeding €27 billion in 2024, with Indonesia maintaining a goods trade surplus. The partnership also paves the way for closer cooperation in cutting-edge sectors like electric cars, pharmaceuticals, and electronics, and facilitates digital trade.

Key Takeaways:

  • The EU-Indonesia Comprehensive Economic Partnership Agreement (CEPA) eliminates over 98% of tariffs, removing nearly all barriers to trade and investment.
  • Trade between the EU and Indonesia exceeded €27 billion in 2024, with Indonesia maintaining a goods trade surplus.
  • The agreement benefits key sectors on both sides, including palm oil, textiles, and footwear in Indonesia, and agri-food, automotive, and chemical industries in the EU.
  • Indonesia's 50% import tariff on cars will be gradually eliminated over five years, opening the door for EU automotive exports and fostering EU investment in electric vehicles.
  • EU exporters alone are set to save more than €600 million in customs duties on goods shipped to Indonesia.
  • The CEPA paves the way for closer cooperation in cutting-edge sectors like electric cars, pharmaceuticals, and electronics, and facilitates digital trade.
  • The partnership also helps secure critical raw materials for green and digital tech, encourages renewable energy investment, and upholds strong environmental and labour standards.
  • The agreement facilitates digital trade, particularly helping small and medium businesses.
  • Indonesia is already among the top 12 countries with the highest number of postgraduate students in the EU, with approximately 4,000 in total, and around 300 Indonesian students participating in the Erasmus programme each year.

Statistics:

  • Goods trade between the EU and Indonesia exceeded €27 billion in 2024.
  • Indonesia maintains a goods trade surplus.
  • European investment in Indonesia tops €25 billion, underscoring growing confidence and opportunity.
  • Over 98% of tariffs will be eliminated under the EU-Indonesia CEPA.
  • Indonesia's 50% import tariff on cars will be gradually eliminated over five years.
  • EU exporters alone are set to save more than €600 million in customs duties on goods shipped to Indonesia.
  • Indonesia is among the top 12 countries with the highest number of postgraduate students in the EU, with approximately 4,000 in total.

Sources:

  • [EU-Indonesia Comprehensive Economic Partnership Agreement news release]
  • Commissioner Sefcovic's statement at the conclusion of negotiations for an EU-Indonesia Free Trade Agreement.