A new chapter was reached after a long negotiation process. On Sunday at the European Union Headquarters Berlaymont Building, Brussels, July 13, 2025, Coordinating Minister for Economic Affairs Airlangga Hartarto and European Union Commissioner for Trade and Economic Security Maroš Šefčovič signed an exchange letter that serves as a guideline to accelerate the completion of the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA).
This agreement is targeted to be officially signed in Indonesia in September. Airlangga continued, when the Maros Commissioner comes to Indonesia in September 2025, there will already be a memorandum that can be signed. From there, the legal process will continue, which requires ratification from 27 EU member states as well as Indonesia.
In the agreement document, some of the main commodities that dominate Indonesian exports to the EU are palm oil and its derivatives, copper ore, fatty acids (oleochemicals), footwear products, coconut meal, steel, brown fat and copra, as well as rubber-based products and machinery.
Indonesia is entering a strategic phase in strengthening its economic relations with the European Union (EU) through the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA). Economic relations between Indonesia and the EU continue to show a positive trend with trade value reaching USD 30.1 billion by 2024. The balance of trade between the two parties also remains in surplus for Indonesia, with a significant increase from USD 2.5 billion in 2023 to USD 4.5 billion in 2024.
Trading to Europe, a way out
The government is targeting 20 prime commodities for Indonesian exports to the European Union. These commodities will benefit from the implementation of IEU CEPA by the end of 2026.
Coordinating Minister Airlangga Hartarto is confident that the value of Indonesia's exports to the European Union will increase by 50% within three years after the implementation of IEU CEPA. The value of Indonesia's exports to the EU itself in 2024 amounted to US$ 17.3 billion, an increase of 4.01% from the previous year.
The increase in export value is due to the increasingly open market access of Indonesia's mainstay export commodities to the European Union, because the trade tariff will reach 0%. Consisting of 98.61% of the total tariff posts, and 100% of the total value of EU imports from Indonesia.
The opening of the European market is also a new hope for Indonesian entrepreneurs after the tariff war imposed by the United States. Blue Continent countries can become new markets for Indonesian products.
Trade Minister Budi Santoso believes that the European Union will be a promising new potential trade market for Indonesia. In fact, Budi said the European market has far greater potential than the United States.
He explained that until now, the European Union has imported goods from all over the world amounting to US$ 6.6 trillion. Meanwhile, America only imports US$3.3 trillion worth of goods. This means that the European Union market has twice the potential of the United States. "This is a new alternative for our market," Budi said.
The EU market is twice as large in potential as the United States.
According to him, if Indonesia can utilize the EU trade market more, of course this will be good for boosting exports. And become an alternative market to the existing ones. "So if we can enter more into Europe, I think this is a good market for us as an alternative to markets in other countries," Budi said.
Chairman of the Indonesian Fiber & Filament Yarn Manufacturers Association (APSyFI), Redma Gita, agrees that the IEU-CEPA agreement with the European Union, which will take effect soon, can be a positive alternative for exports of Indonesian products. Moreover, when this agreement runs, export tariffs to Europe will be 0%.
According to him, this could be a new opportunity, although it cannot be utilized in the short term. Therefore, while waiting for the final certainty from the United States regarding the 19% tariff, Redma said that business actors can still continue to establish communication with buyers in America.
Apart from Europe, another potential market that has opened up is BRICS as a potential region. One of the BRICS members, Russia, is a country with large purchasing power that can be explored. However, he said the main obstacle is not the buyer, but the transaction system. "All transactions still use US$, through banks connected to the US," he said.
Redma explained that if fund transfers are detected as coming from Russia or Iran, accounts can be frozen. This situation is a remnant of the old geopolitical tensions between the United States and Russia. To overcome this, he said the barter option had been done and proven effective in the past. The government, according to him, must intervene to open export avenues to alternative markets such as Russia.
Indonesian products and environmental issues
Chairman of the Indonesian Palm Oil Association (Gapki) Eddy Martono said that his party strongly supports the government's move and gives appreciation, regarding the efforts to open export taps to Europe. However, Gapki is not sure that CPO exports to the European Union can increase, because there are still non-tariff barriers, namely the European Union Deforestation Regulation (EUDR).
Europe still considers Indonesian CPO to be environmentally unfriendly, an issue that has been faced for years but has yet to find an agreement. In the EUDR regulation, Indonesia is categorized as a medium-risk country, meaning that palm oil products from Indonesia will go through stricter checks, includingtraceability and legality certification.
The solution to this problem is for the government to take a more serious approach and bring scientific evidence that Indonesian CPO products are safe and have not damaged the land.
Eddy explained that currently, Gapki continues to diversify export destination markets, in addition to the United States, BRICS member countries are also being targeted. Latin America and Africa are alternative markets that are being explored, Eddy also expressed his concern about the risk of a global recession that could suppress export demand in general, and emphasized the importance of a strategy that is not only reactive to the United States, but also anticipatory of global dynamics.
Opportunities to expand export markets remain open if the government is serious about working on cooperation such as IEU-CEPA and BRICS.
Deputy Director of the Institute for Development of Economics and Finance (Indef) Eko Listiyanto sees that the opportunity to expand export markets remains open if the government is serious in working on cooperation such as IEU-CEPA and BRICS. According to him, alternative markets need to be built from now on to reduce dependence on the US. However, he warned that the results will not be seen in one or two years.
"Strengthening economic strategy must be done systematically. The government needs to carry out business matching, trade promotion, and activation of economic information networks in partner countries. If it is not done from now on, it will be difficult," said Eko.
The EU market is cited as a promising opportunity as its demand for footwear and apparel is even greater than that of the US. On the other hand, stable markets such as China and ASEAN also need to be worked on more aggressively. With the current geopolitical map, Eko believes it is important for Indonesia to immediately expand its export base.
According to him, the expansion or search for alternative export markets must start with a concrete and measurable plan. "Because our network in the European Union is still small. It must be built, not waited for," he said.
He cautioned that the government cannot just rely on momentary reactions to American policies. According to Eko, BRICS is suitable for sectors with high price competitiveness. In contrast, the EU is more suitable for labor-intensive industries that emphasize quality.
For the European Union, the challenge is about standards. Indonesian export products must meet premium quality to compete. In BRICS, the main challenges are price and product homogeneity.
If we want to compete in BRICS, we must strengthen our pricing strategy and production cost efficiency.
If we want to compete in BRICS, we need to strengthen our pricing strategy and production cost efficiency. Countries like Malaysia are also interested in joining BRICS, so the competition will be tighter. Cooperation on energy and raw materials is considered to be the key so that Indonesia will not be left behind.
