EU, Indonesia Set to Begin Trade Talks

21 July 2016

The EU and Indonesia have now launched negotiations for a Comprehensive Economic Partnership Agreement (CEPA), officials confirmed this week, with the first round of talks due before year’s end.

In a joint statement issued on 18 July, EU Trade Commissioner Cecilia Malmström and Indonesian Minister of Trade Thomas Lembong highlighted the mutually beneficial nature such an accord could have for both economies, which together would cover a population of 750 million people.

"Our trade relationship has enormous untapped potential. The EU – the world's largest trading block – and Indonesia – the largest player in the dynamic region of South-East Asia – have lots to gain from a deeper trade and investment relation," they said.

The planned bilateral pact would cover both trade and investment, and include services, government procurement, competition policy, economic and social development, and intellectual property rights, among other subjects.

EU-ASEAN trade ties

One of the ten member states of the Association of Southeast Asian Nations (ASEAN), Indonesia is the region's largest and most populated economy, and the sixth to begin bilateral free trade negotiations with the EU.

The EU has already reached deals with Singapore and Vietnam, though these are not yet in force. The EU-Vietnam deal is currently undergoing a “legal scrub,” while the EU-Singapore deal is awaiting an opinion from the European Court of Justice on whether the deal should be approved as a mixed agreement, with shared competences between the EU and individual member states, or if should be treated as one whose subjects fall entirely under EU competence.

While the EU and ASEAN had initialled vied for a region-to-region agreement between them, those efforts have slowed in recent years. However, Brussels maintains that these individual negotiations can lay the groundwork for a future EU-ASEAN accord, "which remains the EU's ultimate objective."

Indonesian officials, for their part, have flagged the potential of having increased access to the European market as a draw for them. Indonesia’s exports to the 28-nation bloc are dominated primarily by agricultural goods, along with machinery, textiles, and plastics.

The Southeast Asian economy already benefits from having nearly one-third of its goods entering the EU being imported under the bloc’s Generalised Scheme of Preferences (GSP). That system involves providing tariff preferences on certain goods, which are accorded to developing countries depending on their meeting certain criteria.

“CEPA puts a roadmap for us to raise our environmental, hygienic, and safety standards for our products and hopefully after doing so, we would earn a little premium from the EU for managing to meet that quota. We aspire to uphold our standards and quality to the EU’s level,” said Lembong, underlining Indonesia's commitment to a more open and competitive economy.

The EU is Indonesia's fourth largest trading partner, with total bilateral trade in services between them amounting to €6 billion in 2014. Bilateral goods trade the following year totalled €25.3 billion.

“The EU is the world’s biggest economic bloc. We are very happy to be able to start the negotiation rounds. This shows the spirit of partnership between Indonesia and the EU is very strong,” said Lembong, according to comments reported by the Jakarta Post.

ICTSD reporting; "EU and Indonesia Launch Bilateral Trade Talks," EIN NEWS, 19 July 2016; "EU, Indonesia Launch Free Trade Talks," AGENCE FRANCE PRESSE, 19 July 2016; "RI, EU Launch Trade Deal Negotiations," JAKARTA POST, 19 July 2016; "EU and Indonesia Launch Bilateral Trade Talks," EUROPA, 18 July 2016; "Indonesia-EU CEPA set for 2019,"JAKARTA POST, 26 April 2016; "Indonesia to speed up EU CEPA negotiation," JAKARTA POST, 26 January 2016.

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