After nearly a decade of negotiations, the European Union (EU) and Indonesia have concluded an ambitious trade agreement known as the Comprehensive Economic Partnership Agreement (CEPA), alongside an Investment Protection Agreement (IPA).
This pact marks a strategic step toward opening new markets and reshaping trade flows between Europe and Southeast Asia.
Main points of the agreement
- Tariffs will be eliminated on 98.5% of tariff lines for EU products entering Indonesia, benefiting sectors such as automotive, machinery, chemicals, and pharmaceuticals.
- European exporters are expected to save around 600 million euros per year in tariffs when selling products in the Indonesian market.
- The agreement simplifies customs procedures and facilitates access for EU companies to key sectors in Indonesia, such as telecommunications, electronics, automotive, and services.
- On the Indonesian side, improved conditions are granted for agricultural and processed food exports: products such as dairy, meat, fruits, vegetables, and processed foods will benefit from tariff reductions.
- The agreement includes robust clauses on sustainability, environmental protection, labor rights, and binding mechanisms for resolving trade disputes.
- For certain “sensitive” products (such as rice and sugar), safeguard measures or quotas remain in place to protect European agricultural sectors.
Context and motivations
This agreement does not arise in isolation. In recent years, global trade tensions — especially the tariff policies led by the United States — have prompted the EU to diversify its trade partners.
Indonesia holds significant reserves of strategic raw materials essential for the energy transition (such as nickel and copper), making it a key ally for Europe’s green strategy.
Discussions over the link between trade and deforestation — particularly concerning products like palm oil — have long been a sticking point. The agreement now includes provisions to mitigate environmental risks.
Challenges and next steps
Although the pact has been politically “concluded,” it must still undergo legal review, be translated into the EU’s official languages, and then ratified by the EU Council, national parliaments, and the European Parliament.
Its entry into force will not be immediate, implementation is expected to begin around 2027.
Ensuring the effective implementation of the sustainability clauses (deforestation control, environmental compliance) will be a key challenge to guarantee that trade growth does not come at the cost of ecological harm.
European companies will need to adapt to new regulations and opportunities, while Indonesian producers will have to meet stricter environmental and labor standards.
Implications and expectations
Bilateral trade, which reached approximately 30 billion US dollars last year, is expected to double within the first five years following the agreement’s implementation.
For Europe, the pact represents a lever to revive exports amid the impact of external protectionist measures.
For Indonesia, it is an opportunity to strengthen its export position in agricultural, textile, and manufacturing products, while attracting European investment in strategic sectors.
Moreover, this agreement could serve as a model for future EU partnerships with other Southeast Asian countries.
Our added value at Feliu N&I
The signing of this pact opens a window of opportunity for European companies interested in expanding into Southeast Asia. At Feliu N&I, we provide our clients with expert advice and comprehensive support to:
- Identify business opportunities within the framework of the new agreement.
- Develop safe and effective internationalization strategies.
- Overcome legal, customs, and regulatory barriers in both markets.
Now that trade relations between Brussels and Indonesia have strengthened, this is the ideal time for your company to explore new international opportunities with the support of Feliu N&I.
