ASEANEWS HEADLINE-ECONOMY | JAKARTA: Prabowo in Brussels to seal European Union deal amid US tariff threat

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EU LIVE: EU Chief Von der Leyen, Indonesian President Prabowo’s Joint Presser | N18G

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EU chief announces ‘political agreement’ on trade deal with Indonesia | AFP

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Coordinating Economic Minister Airlangga Hartarto emphasized that “shifting global geopolitics”, a likely reference to Washington’s protectionist tariff hikes, has made Europe a more attractive alternative for Indonesian exports.

JAKARTA: With trade tensions between the United States and its partners on the rise, President Prabowo Subianto arrived in Brussels over the weekend in a bid to finalise Indonesia’s most ambitious trade pact yet, the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA).

The trip follows the completion of substantive negotiations between Jakarta and Brussels, with both sides now preparing to sign the deal in Jakarta later this year.

Coordinating Economic Minister Airlangga Hartarto, speaking from Brussels, said that “all issues have now been resolved” and called the deal “a milestone” that could reshape Indonesia’s trade orientation in an increasingly uncertain global environment.

“This is certainly a milestone amid the uncertainty between Indonesia and the EU. Our products can now enter Europe at zero tariffs,” Airlangga told reporters in a video interview issued in Jakarta on Sunday (July 13).

He added that the agreement’s final signing is expected in the third quarter of 2025, pending a formal announcement from the President.

The IEU-CEPA spans 21 areas of cooperation, including trade in goods and services, investment, customs procedures, digital trade and sustainable growth.

Key sectors like textiles, garments and fishery products are expected to benefit from reduced barriers.

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Prabowo’s visit to Brussels officially begins on Sunday, and includes scheduled meetings with European Commission President Ursula von der Leyen and European Council President António Costa, as well as King Philippe of Belgium.

Airlangga emphasised that “shifting global geopolitics”, a likely reference to Washington’s protectionist tariff hikes, has made Europe a more attractive alternative for Indonesian exports.

He also pointed to Indonesia’s bid to join the Organisation for Economic Co-operation and Development (OECD) as one reason why Brussels now views Jakarta as a “like-minded” and strategic partner.

Trade Minister Budi Santoso, also in Brussels, echoed that sentiment, saying that Indonesia had gained leverage during the final stretch of negotiations.

“When IEU-CEPA neared completion, the EU started to soften on things like the deforestation regulation,” he said.

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“They too want to work with us going forward.”

The visit of the high-level Indonesian delegation comes just weeks after the EU reclassified Indonesia as a “standard-risk” country under its deforestation regulation (EUDR), which had long been a sticking point for EU-bound palm oil shipments from Indonesia, the world’s largest producer and exporter of the commodity.

Budi also noted that Europe presents a more sizable and potentially stable market amid growing uncertainty.

“EU imports are about US$6.6 trillion globally, compared to around $3.3 trillion for the US. If we can grow our exports to the EU, that’s a strong alternative market for us,” he said in a separate video interview.

The EU is currently Indonesia’s fifth-largest trading partner, with bilateral trade reaching $30.1 billion in 2024.

The CEPA deal, once ratified, is expected to boost Indonesian exports to the EU by up to 50 percent due to lower tariffs and non-tariff barriers and attract more investment in key sectors such as electric vehicles, semiconductors, renewable energy and palm oil processing.

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While full ratification may not occur before 2027, Indonesian businesses are already aligning with EU partners to prepare supply chains ahead of its entry into force.

“After Indonesia, countries like Malaysia and Thailand are lining up. We are now the front-runner in forging deeper cooperation [with Europe],” Airlangga said.

The US tariff threats, pegged between 20-40 percent for countries in Southeast Asia, have prompted Asean economies to diversify trade partners and bolster their domestic supply chains.

Of Asean’s current 10 member states, only Vietnam has signed a deal with the US to mitigate the tariff threat.

In an attempt to appease the region, US Secretary of State Mark Rubio argued last week that “many of the countries in Southeast Asia are going to have tariff rates that are actually better than countries in other parts of the world,” news wires reported.

In response to a question on the ongoing Indonesia-US negotiations, Airlangga claimed that the US had agreed to a “pause” on imposing tariffs for the next three weeks to allow for the fine-tuning and completion of the tariff deal. – The Jakarta Post/ANN