EU and Indonesia finalize key trade deal marking substantive conclusion

EU and Indonesia finalize key trade deal marking substantive conclusion

The European Union and Indonesia have finalized a landmark trade agreement, set to significantly boost bilateral trade and reduce tariffs on a majority of goods. The deal, which has been in the making for nearly a decade, aims to create a more robust and interconnected trading relationship between the two economic powerhouses.

Under the agreement, tariffs on 96% of goods will be eliminated or reduced to zero within five years, saving European exporters approximately €600 million annually . This move is expected to increase EU exports to Indonesia by at least 30%, translating to around €3 billion in increased trade .

Key sectors such as cars, machinery, and agriculture are set to benefit substantially from the tariff reductions. Duties on EU cars will fall from 50% to zero, while levies on machinery and appliances will drop from 30% to zero over the same period . Agricultural and food products will also see significant improvements in trade conditions.

The agreement includes provisions to scrap licensing and other restrictions for materials like EU-exported chemicals, while Indonesia’s processed materials will receive preferential tariff treatment in Europe . However, the deal does not address ongoing disputes over palm oil, deforestation rules, and biodiesel duties, which remain unresolved.

The trade deal is part of the EU’s broader strategy to diversify its supply chain, particularly in light of U.S. tariffs that have impacted its exports. With a population of 300 million, Indonesia is a crucial partner for the EU, providing a significant market for its goods and a potential source of raw materials.

Despite the unresolved issues, EU trade chief Maros Sefcovic described the agreement as a "very clear framework" that will strengthen trade ties and create new opportunities for both parties . The deal must still be ratified by EU member states, the European Parliament, and Indonesia’s legislature before it can take effect.