The evolution of the European trade corridors in the Indo-Pacific
On September 23, in Bali, the European Union and Indonesia concluded negotiations on the Comprehensive Economic Partnership Agreement (CEPA), along with an Investment Protection Agreement. After nearly ten years of negotiations, the signing marked a turning point of the relations between Brussels and Jakarta, placing Southeast Asia’s largest Country in a prominent position in Europe’s trade diversification strategy. The agreement provides for the gradual elimination of tariffs on more than 90% of goods, with significant effects for both partners.
On the European side, the benefits primarily concern the manufacturing sector. Cars, currently subject to a 50% tax, will have the tariff lifted over a period of five years, while industrial machinery and electronic equipment, subject to a 30% duty, will be liberalized sooner. In this regard, the European Commission estimates that EU companies will save around €600 million per year thanks to the reduction in tariff barriers. The agri-food sector also stands to gain substantially: dairy products such as cheese and milk powder, which account for one-third of European agricultural exports to Indonesia, will have privileged access, whereas specific sensitive goods, such as sugar, eggs, and ethanol, will remain protected by quotas or targeted tariffs. For the first time, Indonesia has also granted a limited and subtle opening to European alcoholic beverages, through tariff quotas of approximately 2,000 tons for wine and 400 tons for spirits, subjected to a reduced tax of 5%.
On the Indonesian side, the agreement will allow around 80% of its exports to the EU to benefit from 0% tariffs. The government expects trade to double in the first five years of the agreement, with a strong boost to key sectors such as palm oil, coffee, textiles, clothing, furniture, and fishery products. The value of bilateral trade, estimated at $30 billion in 2024, could quickly exceed the $60 billion threshold, reinforcing Jakarta’s goal of consolidating its transition to a middle-income economy status. Equally relevant is the removal of clauses in strategic sectors such as renewable energy and electric vehicles, which opens the door to partnerships between European and Indonesian industry to produce batteries and technological components, which remain strategic for the resilience of their value chains.
CEPA also includes specific stipulations on investments, aiming to attract European capital into infrastructure, innovation, and high value-added manufacturing. For Brussels, the key issue concerns access to critical raw materials such as copper, bauxite, and tin, which are essential for Europe’s green transition. However, the nickel issue remains unresolved: Jakarta’s ban on exports of such crucial material for batteries, has not been included in the agreement and is subject of dispute at the World Trade Organization.
Given the above, CEPA reflects a convergence of interests accelerated by the changed international context. Trump’s willingness to use economic barriers, mainly through the introduction of generalized tariffs on US imports, has prompted Brussels to rapidly diversify its trading partners, strengthening ties with Mercosur, Mexico, India, and now Indonesia. For the EU, the agreement with Jakarta is not only a way to protect its companies against competitive erosion of the global market, but also a fundamental step toward securing stable supplies of strategic mineral resources, reducing dependence on Beijing.
For Indonesia, the agreement is part of a multipolar opening strategy: in addition to its recent membership of BRICS, Jakarta has signed agreements with the Eurasian Economic Union, Peru, and Canada, and has relaunched talks with regional partners. The CEPA with the EU further enhances the Country’s credibility as a manufacturing and logistics hub in the heart of the Asia-Pacific region, strengthening its appeal for foreign direct investment.
The quick conclusion of negotiations in 2025, after years of deadlock mainly due to disputes over palm oil and deforestation, should be seen in view of the pressure exerted by US tariffs. The generalized tariff measures imposed by Washington forced both Brussels and Jakarta to overcome internal differences and accelerate the conclusion of an agreement that, under normal circumstances, would have required several more years of technical fine-tuning. This acceleration paves the way for wider consideration: the Indonesian model could serve as a prototype for future agreements, especially with India. Although negotiations between Brussels and New Delhi are still hampered by structural issues, such as the access to the agricultural market and barriers on digital services, the pressure from Trump’s tariff policy on both sides could play a similar role to the one that prompted Indonesia to sign the CEPA.
The combination of economic incentives, geopolitical fears, and the urgent need to protect supply chains could also accelerate progress on the Indian case, replicating a model of compromise which, although not free of contradictions, has proven capable of producing tangible results. In this context, the agreement with Indonesia is not only a bilateral success, but a signal that the EU is adapting its trade policy. The EU-CEPA therefore represents a part of the new multipolar balance currently under construction, capable of offering both sides a resilient platform against fluctuations in the international system.