The European Commission (EC) and the Indonesian government reached a political agreement on 13 July in Brussels to finalise their Comprehensive Economic Partnership Agreement (CEPA) by September.

Indonesian President Prabowo Subianto described the deal as a win for economic sovereignty. “We agreed to deepen the Comprehensive Economic Partnership Agreement or CEPA to open up greater opportunities for sustainable trade and investment in the country,” Subianto wrote on Facebook.

Subianto added that the EU had adopted a tailored Schengen visa policy to support strategic sectors such as education and multilateral relations. “This step will facilitate the visit of Indonesian citizens and strengthen the partnership based on trust and connectivity,” he said.

EC President Ursula von der Leyen called the agreement “a turning point in EU–Indonesia relations”, adding: “We are showing the world that trade works better through partnership than protectionism.”

Tariff-busting deal due for ratification

The CEPA is expected to remove tariffs on more than 80% of Indonesian exports to the EU and covers trade in goods, services, investment, digital trade, customs procedures and sustainable development. The legal text is set to be finalised by September, with ratification to follow.

Bilateral trade between the EU and Indonesia reached EUR 27.3bn in 2024, according to the EC. The EU’s foreign direct investment stock in Indonesia stood at EUR 25.1bn that year.

While no joint projections were released, Indonesian media cited internal estimates suggesting the CEPA could significantly increase exports to the EU over the next five years. Observers expect digital services, processed foods and textiles to benefit most from tariff cuts and investment protections.

EU seeks closer SEA trade amid US tariffs

The agreement comes as the EU seeks to deepen ties across Southeast Asia (SEA), in response to US protectionism and growing strategic rivalry with China. On 15 July, the US imposed a 19% tariff on Indonesian goods, prompting EU officials to reaffirm the bloc’s commitment to open trade, sustainability and legal certainty.

The CEPA is the EU’s most significant bilateral trade breakthrough in SEA since the EU–Vietnam Free Trade Agreement entered into force in 2020. Trade talks with Malaysia and the Philippines remain suspended, while negotiations with Thailand resumed in 2022 but have yet to reach a similar stage.

The deal with Indonesia may be a reference point for future regional agreements. Palm oil sustainability and deforestation had previously delayed talks. The Diplomat reported that the agreement includes a roadmap for joint monitoring of environmental benchmarks and gradual alignment on palm oil standards.

Dombrovskis: Fair trade, sovereignty, sustainability can coexist

“This agreement proves we can advance fair trade while respecting sovereignty and sustainability,” European Commissioner for Trade Valdis Dombrovskis said on 13 July.

The EC said the agreement followed 19 rounds of negotiations since 2016 and marked a “clear signal to the world that openness and cooperation are the way forward”.

CEPA’s inclusion of digital trade provisions aligns with ASEAN-wide efforts to reduce friction in cross-border data flows. Digitalisation and e-commerce governance are expected to feature at the 2026 ASEAN Digital Ministers’ Meeting in Laos.