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On 23 September 2025, the European Union and Indonesia reached a major trade and investment agreement known as the Comprehensive Economic Partnership Agreement (CEPA). This agreement marks a significant milestone in the EU’s economic engagement with the Indo-Pacific region. CEPA not only opens new markets for goods and services on both sides, but also reflects the EU’s vision of promoting diverse, sustainable, and balanced trade cooperation.
The agreement aims to strengthen economic ties between the EU and Indonesia, the largest economy in ASEAN with a population of over 280 million and a key player in global supply chains. In terms of goods trade, Indonesia will eliminate import tariffs on approximately 98.5% of all EU-imported products, covering both industrial and agricultural goods such as automobiles, machinery, chemicals, pharmaceuticals, dairy products, and processed foods. This is expected to save EU exporters over 600 million euros per year and boost trade, investment, and employment in both regions.
Beyond economic benefits, CEPA reflects a shared commitment to sustainable development and the transition to a green economy. The agreement designates the Paris Agreement as a core component of cooperation and establishes frameworks in areas such as environmental protection, renewable energy, and electric vehicles. These provisions offer new opportunities for EU investors in green industries. Meanwhile, Indonesia, as a major global supplier of nickel and cobalt, will serve as a strategic source of raw materials for strengthening Europe’s supply chain security.
A notable feature of CEPA is its support for digital-era trade. The agreement includes provisions to facilitate electronic transactions, the use of digital signatures, and the protection of digital data. It also sets rules on customs duties for the transfer of electronic content, such as software and digital media. Importantly, this is the first time Indonesia has allowed 100% foreign ownership in the telecommunications and computer services sectors.
In the agricultural sector, CEPA will provide greater access to the Indonesian market for European agricultural products such as dairy, meat, fruit, and processed foods, while protecting over 221 geographical indications. At the same time, the agreement safeguards the EU market from certain sensitive agricultural imports, such as rice, sugar, and fresh bananas.
This agreement represents a strategic trade framework that systematically integrates economic goals with sustainable development. CEPA includes a legally binding Sustainability Chapter, covering environmental standards, labor rights, and gender equality. It promotes market access for green goods and services such as renewable energy and low-carbon technologies. A dedicated protocol on palm oil also supports the sustainable production and trade of palm oil. Moreover, CEPA upholds core labor principles of the International Labour Organization (ILO), including freedom of association, elimination of forced and child labor, and non-discrimination in the workplace. It also encourages civil society participation through advisory groups and public forums.
The EU–Indonesia CEPA represents a new model of trade agreement—one that moves beyond tariff liberalization toward structural cooperation in economic, social, and environmental dimensions. While the agreement introduces challenges for certain industries and includes strict standards, it also offers a crucial opportunity to enhance Indonesia’s production capacity and set a precedent for integrating free trade with sustainability in the 21st century. If ratified by the respective parliaments, CEPA is expected to enter into force in 2027.
Author:
Mr. Wimon Punkong
Deputy Executive Director (Academic)
International Institute for Trade and Development (ITD)
www.itd.or.th
Publication: Bangkok BIZ Newspaper
Section: First Section/World Beat
Volume: 38 Issue: 13006
Date: Wednesday, Oct. 8, 2025
Page: 8 (bottom-left)
Column: “Asean Insight”
