Indonesia is targeting the signing of the Indonesia–European Union Comprehensive Economic Partnership Agreement (I-EU CEPA) in October 2026, a move that could significantly expand Indonesian exporters’ access to the European market and deepen economic ties between the two sides.
The government is accelerating preparations for the agreement as it moves from negotiation to implementation. The latest discussions were held during the Indonesia–European Union High-Level Dialogue in Jakarta on August 21, where senior Indonesian officials and representatives of EU member states reviewed the remaining steps required before the agreement can be signed and subsequently ratified.
Coordinating Minister for Economic Affairs Airlangga Hartarto led the strategic meeting, which focused on completing the legal texts, aligning technical regulations and coordinating the domestic procedures required on both sides. The emphasis now is shifting from negotiating the substance of the agreement to ensuring that the deal can be implemented without unnecessary delays.
The I-EU CEPA has been under negotiation since 2016 and reached a major milestone in September 2025, when Indonesia and the EU formally concluded the negotiations. The European Commission says the agreement will eliminate tariffs on more than 98 percent of tariff lines, with liberalisation approaching 100 percent in terms of trade value. Around 80 percent of tariff lines are expected to be liberalised when the agreement enters into force, with further liberalisation taking place during the subsequent phase-out period.
For Indonesia, the agreement could improve the competitiveness of major export industries, including palm oil, textiles, footwear, rubber and other manufactured and agricultural products. Lower tariffs would reduce one of the costs faced by Indonesian exporters and could make their products more competitive against suppliers from countries that already have preferential trade arrangements with the EU.
However, tariff reductions alone will not guarantee greater exports. Indonesian companies will still need to comply with European product standards, rules of origin, environmental requirements, sustainability standards and increasingly demanding supply-chain documentation. The agreement itself contains extensive provisions covering customs procedures, technical barriers to trade, sanitary and phytosanitary measures, services, investment, digital trade, intellectual property, government procurement, competition and sustainable development.
Trade Minister Budi Santoso has said that cross-ministerial coordination is being accelerated to complete the technical and legal preparations needed before the agreement takes effect. This stage is particularly important because an international trade agreement does not automatically become operational simply because negotiations have been concluded. The European Commission has noted that the agreement will become legally binding only after signature and completion of the necessary internal legal procedures on both sides.
The institutional process on the EU side is also moving forward. In June 2026, the European Commission presented proposals to the Council concerning the signing and conclusion of the CEPA and the accompanying Investment Protection Agreement. The agreements will require approval within the EU framework, including European Parliament consent, before they can enter into force. Indonesia is conducting its own domestic procedures in parallel.
The potential economic impact is substantial. EU-Indonesia trade in goods reached €27.3 billion in 2024, with EU imports from Indonesia valued at €17.5 billion and EU exports to Indonesia at €9.8 billion. The CEPA is therefore intended not only to reduce tariffs but also to create a broader framework for investment, supply-chain integration and economic cooperation.
One of the most important opportunities for Indonesia will be the possibility of moving beyond commodity exports toward higher-value products and more integrated manufacturing. Preferential access to the EU market could encourage Indonesian producers to increase investment in processing, quality certification, traceability and technology so they can capture more value before their products reach European consumers.
At the same time, Indonesia faces significant non-tariff challenges. European environmental rules are becoming increasingly important for exporters, particularly those operating in sectors linked to commodities and industrial production.
The European Union Deforestation Regulation, or EUDR, is particularly relevant to commodities associated with deforestation risks. The European Commission updated the regulation’s product scope and digital compliance tools in July 2026, ahead of its application at the end of December. Indonesian producers and exporters in affected supply chains will therefore need reliable traceability and due-diligence systems in addition to competitive pricing.
The Carbon Border Adjustment Mechanism, or CBAM, presents another challenge, particularly for carbon-intensive industries. The EU’s definitive CBAM regime has applied since January 1, 2026 and covers sectors including cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. Importers must account for embedded emissions in covered goods, making reliable emissions measurement increasingly important for Indonesian manufacturers seeking to expand in Europe.
This means the I-EU CEPA should not be viewed simply as a tariff-cutting agreement. Its commercial value will depend heavily on whether Indonesian businesses can meet the EU’s regulatory requirements. Companies that invest early in traceability, carbon accounting, sustainability certification, product standards and customs compliance could be better positioned to benefit once preferential access becomes available.
The government therefore faces a second task beyond completing ratification: ensuring that Indonesian businesses, particularly small and medium-sized enterprises, are prepared to use the agreement. Many smaller exporters may struggle with the documentation, certification and regulatory knowledge required to enter the EU market even when tariffs are reduced.
Closer cooperation between ministries, industry associations, exporters, financial institutions and logistics providers will be important. Export promotion should also focus on helping companies identify specific European markets, understand consumer requirements and establish distribution networks rather than assuming that lower tariffs alone will generate additional sales.
The CEPA could also strengthen Indonesia’s position in global supply chains. The agreement includes cooperation on energy and raw materials and is designed to improve the resilience and diversification of supply chains. This is strategically relevant as the EU seeks more reliable sources of critical materials and Indonesia seeks greater investment in downstream processing and industrial development.
If the agreement is signed in September or October 2026 as targeted by the Indonesian government, the subsequent ratification process will become the critical determinant of when businesses can actually begin using its preferential provisions. The government has expressed confidence that full implementation could begin in early 2027, but the precise timing will depend on completion of the required legal procedures in Indonesia and the EU.
For Indonesian exporters, the message is clear: the potential benefit of the I-EU CEPA will not begin and end with lower tariffs. The companies most likely to benefit will be those that combine price competitiveness with strong compliance, sustainability, product quality, traceability and the ability to meet the increasingly sophisticated requirements of the European market.
