After nearly ten years of painstaking negotiations, Indonesia and the European Union have finally sealed a landmark trade agreement. The Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) was signed in Bali on Tuesday, September 23, 2025, by Indonesia’s Coordinating Minister for Economy Airlangga Hartarto and EU Trade Commissioner Maros Sefcovic.
The timing couldn’t be more strategic. With the US imposing tariffs and global trade tensions mounting, this deal represents far more than just tariff reductions—it’s a calculated move in the geopolitical chess game of economic alliances.
The Numbers Behind the Partnership
The EU ranks as Indonesia’s fifth-largest trading partner, while standing as ASEAN’s third-largest after China and the United States. Last year, bilateral trade in goods totaled €27.3 billion, with the EU exporting €9.7 billion and importing €17.5 billion from Indonesia, according to European Commission data.
What’s on the Table?
The agreement promises substantial tariff eliminations. Indonesia will see 80 percent of export duties removed immediately upon the deal’s entry into force, climbing to 96 percent within five years. This opens significant market access for Indonesian products across EU member states.
For Indonesia, the deal means duty-free access for EU agricultural exports including dairy and meat, alongside zero tariffs on industrial goods such as pharmaceuticals, machinery, and motor vehicles.
Bhima Yudhistira, Executive Director of CELIOS and prominent economist, sees particular promise in the fisheries sector.
“Most fishery products consumed in Europe currently come from Vietnam and Thailand,” Bhima explained in an interview. “This agreement provides an opportunity for Indonesian seafood products—particularly processed fish—to capture greater market share in Europe.”
The tourism industry also stands to benefit, with EU cooperation expected to enhance Indonesia’s tourism infrastructure and accelerate sustainable tourism development.
How Indonesia Compares to Its ASEAN Neighbors
The EU’s approach varies significantly across Southeast Asia. Vietnam’s agreement (EVFTA), which took effect in August 2020, eliminated 99 percent of tariffs on Vietnamese manufacturing. Singapore’s 2019 deal focused heavily on digital trade, cross-border data flows, and services rather than commodities.
Indonesia’s agreement differs markedly—it’s commodity-driven, reflecting the country’s status as ASEAN’s largest economy and a G20 member rich in resources critical to the EU’s green industrial agenda, particularly nickel and minerals essential for EV batteries and supply chains.
Meanwhile, the EU’s negotiations with Malaysia and Thailand remain mired in challenges—palm oil sustainability concerns in Malaysia’s case, labor issues for Thailand. Malaysia only resumed FTA talks with the EU this past January 20, 2025.
The Thorny Issues That Remain
Not everything is resolved. The controversial crude palm oil (CPO) and nickel sectors remain flashpoints.
Indonesia suffered a defeat at the WTO over nickel following its ore export ban mandated by mining law. While Indonesia has challenged EU biodiesel duties at the WTO, the CPO situation differs due to persistent concerns about deforestation and labor practices.
“The EU has established standards for CPO-related products that Indonesia hasn’t yet met,” said Yusran, an international relations expert from Budi Luhur University. “But we need to understand the broader context—the Russia-Ukraine conflict drags on, and US tariffs are pushing the EU to seek new economic partners.”
Bhima pointed to a critical gap: Indonesia’s government hasn’t adequately incentivized independent and smallholder palm oil farmers to meet environmental standards.
“If we comply with these standards, we could significantly increase CPO exports to Europe,” he noted, adding that the EU employs traceability systems to verify plantation origins and sustainability practices.
On nickel, Bhima argues Indonesia squandered the decade-long negotiation period that could have been used to address the sector’s systemic problems.
“Our nickel industry is plagued with issues—massive coal power plants in mining areas, water pollution, hazardous working conditions for workers. There’s a long list that needs fixing,” he said.
While Indonesia can still export processed ore following the WTO ruling, environmental compliance issues in the nickel sector may ultimately undermine the EU’s willingness to source nickel from Indonesia.
Why This Deal Matters Despite Its Flaws
The IEU-CEPA represents a pragmatic win-win, even with unresolved issues lingering. Indonesia will need to demonstrate genuine commitment to meeting EU green standards—and other emerging economies watching these negotiations will pay close attention to how Indonesia implements environmental safeguards.
More broadly, this agreement reinforces ASEAN’s position as a pivotal player in global trade. Its successful conclusion may well pressure Malaysia and Thailand to accelerate their own stalled negotiations with Brussels.
In an era of trade wars and shifting alliances, Indonesia has secured its seat at the table. Now comes the harder part: delivering on the promises.
