Indonesia’s government says that free trade negotiations with the European Union are on track for completion by the end of this month, after nine years of negotiations, the country’s chief economic minister said over the weekend.
In a statement on Saturday, Airlangga Hartarto said that negotiations between the two parties had “entered their final phase,” the Jakarta Post reported.
“This is a significant milestone, particularly amid today’s unpredictable global economic conditions. It underscores the importance of cooperation in addressing global challenges,” Airlangga said in the statement. He added that Indonesia and the EU “are committed to resolving the remaining issues and are ready to announce the substantial conclusion of negotiations by the end of June 2025.”
The statement came after Airlangga met with EU Commissioner for Trade Maros Šefčovič in Brussels a day earlier. In a post on LinkedIn, Šefčovič said that the two sides were “making strong progress” in finalizing the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA), which “offers truly transformative potential for our economic operators.”
Airlangga later told a press conference that under the agreement, Indonesia would gain improved market access for its footwear, garments, fisheries products, and palm oil. With the finalization of the IEU-CEPA, Indonesia will see tariffs removed on 80 percent of its goods exports to the EU, he said. The European bloc will also remove a range of non-tariff barriers.
The EU and Indonesia officially launched negotiations for a free trade agreement in July 2016, but these have stumbled over a number of trade disagreements about Jakarta’s protectionism and the European bloc’s policies toward palm oil, a key Indonesian export. The two nations have also engaged in trade disputes over Indonesia’s nickel export ban, the EU’s imposition of anti-dumping and countervailing duties on certain types of Indonesian stainless steel products, and a new EU anti-deforestation rule that could impact Indonesian exports of palm oil, one of the country’s main agro-industrial products. According to a Reuters report, Airlangga said the EU deforestation rules were not included in the free trade negotiations, but that under the agreement, Šefčovič had “promised to provide special treatment towards Indonesia regarding deforestation.”
Despite their various disagreements, the two sides have had increasing strategic incentives to finalize the agreement. As Alif Alauddin wrote for The Diplomat in October, shortly before Indonesia’s President Prabowo Subianto took office, both Jakarta and Brussels share “a common goal of ‘de-risking’ from China.”
The EU itself has stated that the “ultimate objective” of bilateral agreements with Southeast Asian governments, such as the IEU-CEPA, is “to serve as building blocks towards a future region-to-region agreement between the EU and ASEAN.” In Southeast Asia, the EU has already concluded free trade pacts with Singapore and Vietnam, which entered into force in November 2019 and August 2020, respectively. In March 2023, the European bloc agreed to resume free trade negotiations with Thailand after a long hiatus, and did the same with the Philippines in March of last year.
The strategic imperatives have grown more pressing in recent months as the U.S. government has undertaken a sharp turn toward protectionism under President Donald Trump, which has made the need for economic diversification even greater for both parties.
In Trump’s “liberation day” tariff announcement on April 2, Indonesia was hit with a 32 percent import tariff, which will come into effect next month. The EU has also been singled out by the Trump administration, which has imposed a 50 percent tariff on U.S. imports of steel and aluminium from the bloc and a 25 percent tariff on cars. The U.S. president has threatened to impose a blanket 50 percent tariff on the EU if the two sides don’t strike a trade deal by July 9.
According to the Jakarta Post, total trade between Indonesia and the EU reached $30.1 billion in 2024. The EU is Indonesia’s fifth-largest trading partner, while Indonesia ranks as the EU’s 33rd. Airlangga predicted that Indonesian exports to the EU could increase by more than 50 percent within three to four years of the IEU-CEPA coming into effect.