Indonesia and the European Union have concluded negotiations on a long-awaited trade agreement, finalizing the Indonesia–EU Comprehensive Economic Partnership Agreement (I-EU CEPA) after nearly a decade of talks.
The pact was signed in Bali on September 23, 2025, and is expected to take effect at the beginning of 2027 following legal and parliamentary procedures.
The agreement will eliminate tariffs on the vast majority of goods traded between the two partners. According to the European Commission, 98.5% of EU exports to Indonesia will no longer face import duties, covering products such as cars, dairy, meat, chocolates, and bakery items. This is expected to save European exporters approximately EUR 600 million (USD 707 million) in duties each year, which currently average around 10 percent, as reported by Reuters.
On the Indonesian side, more than 90% of its goods will enter the EU market duty-free upon implementation. The Ministry of Economic Affairs highlighted that the deal is expected to increase exports of palm oil, coffee, textiles, and footwear.
“We look ahead to the next stage, [namely] the legal scrubbing, translation, and ratification. We reaffirm the determination to bring the CEPA into force at the earliest opportunity. The target should be Jan. 1, 2027,” Said Coordinating Minister for Economic Affairs Airlangga Hartarto, as quoted by Jakarta Globe.
Indonesia’s palm oil industry, a frequent flashpoint in bilateral relations, is also positioned to benefit. Airlangga previously stated that Europe would allow up to one million tons of crude palm oil to enter duty-free each year, with imports beyond that subject to a three percent tariff. The European Union added that the pact creates a platform for dialogue and cooperation on environmental and climate issues, including palm oil.
However, industry representatives cautioned that non-tariff barriers remain. Eddy Martono, Chairman of the Indonesian Palm Oil Association (GAPKI), noted that the EU Deforestation Regulation could limit the agreement’s impact. “There is still homework to be done, namely the EUDR which must also be resolved immediately because it will be implemented later this year,” he told Reuters.
The broader significance of the CEPA extends beyond trade flows. The agreement introduces new regulatory measures, including an investment court system and licensing reforms, designed to improve transparency and investor confidence. Indonesia has also committed to align with the OECD Anti-Bribery Convention, supporting its aspirations to join the OECD.
Dr. Edi Prio Pambudi, Indonesia’s Chief Negotiator, described the CEPA as a “living document,” stating: “That’s why we have to change our standard, especially at the standard in the policy, the standard of the implementation of the policy, the standard of the SOP. Indonesia needs standards because behind the trade competition is always the standard competition”
European Trade Commissioner Maroš Šefčovič welcomed the agreement, saying it would encourage further investment by European firms in Indonesia, particularly in strategic sectors such as electric vehicles, electronics, and pharmaceuticals.
“By the end of 2023, European investment stocks in Indonesia exceeded 25 billion euros. … Our agreement will foster even greater investment flows,” Šefčovič said.
Trade between Indonesia and the EU reached USD 30.1 billion in 2024, according to Indonesia’s economic ministry. Officials on both sides expect this figure to double within five years of the CEPA’s implementation.