Indonesia and the European Union concluded a free trade agreement yesterday after nine years of talks, with both aiming to boost exports and investment and to offset the impact of US President Donald Trump’s tariffs.
Both sides will remove import duties on more than 90 per cent of products, most of them as soon as the deal enters force, with the rest, including Indonesia’s 50pc duty on EU cars, phased out over five years.
Indonesia says it expects bilateral trade, worth $30.1 billion for goods in 2024, to double in the first five years.
Since Trump’s re-election last November, the EU has gone into overdrive to forge new trade alliances, including with the South American bloc Mercosur and Mexico and also accelerating negotiations with India.
The 27-nation EU hopes these alliances will offset the impact of Trump’s tariffs, as well as reducing dependency on China, particularly for minerals required for its green transition. Indonesian exports are also subject to a broad 19pc US tariff.
The EU says its exporters will be spared 600 million euros ($707.4m) of Indonesian duties and envisages selling more chemicals, machinery, automobiles and food products, notably milk powder and cheeses.
Indonesia expects a boost to its exports of palm oil, coffee, textile and clothing and other products, and aims for the pact to enter force by January 1, 2027. At that juncture Indonesia, a vast archipelago with more than 284m people, is set to become an upper-middle-income country and so lose access to the preferential duties the EU grants to developing countries.
The agreement in the coming months will need to undergo legal checks and be translated into the EU’s official languages. EU governments and the European Parliament will then need to give their formal consent to the deal.
Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto said he looked forward to closer supply chains, including for critical minerals, renewable energies, innovation and investment. Indonesia is in talks with EU automakers on partnerships in battery and electric vehicle production in the Southeast Asian country, he told reporters.
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