Indonesia and the EU are set to sign a landmark trade deal, ending almost a decade of negotiations. The pact scraps tariffs, standardizes licenses and certificates, and will shield against global trade tensions.

Jakarta

The European Union and Indonesia have concluded a trade deal after almost a decade of discussions. The agreement aims to eliminate tariffs on Indonesian exports such as textiles, which currently face EU tariffs of up to 8 percent, and is anticipated to provide a significant boost to Indonesia's export industries.

The deal is also expected to enhance Indonesia's access to the European market for products like palm oil, though imports must comply with the EU's deforestation regulations. Before coming into effect, the agreement requires ratification by EU member states and both the European and Indonesian parliaments, a process that could take up to two years.

After decade of talks, EU and Indonesia seal trade deal

For Indonesia's textile industry, the pressure is on. This factory in Bandung on the island of Java is desperate for new markets and hopes to find them in Europe. Right now, this cotton linen is hit with EU tariffs as high as 8 percent. Cutting that to zero, the owner says, could save his business. The demand in Europe is there, but of course, we still have to meet their standards. Right now, we only export to Japan because they are willing to adjust to the conditions of its suppliers, like my factory. Since the US trade war, Indonesia has been flooded with cheap Chinese textiles that were once bound for the American market. So with the domestic market already saturated, this deal with Europe is getting a lot of attention. The EU is one of Indonesia's largest trading partners, with bilateral trade worth about 30 billion US dollars last year. We definitely have very high hopes. I think if we look at the trade between Indonesia and the EU in the next five years, hopefully with this agreement we can perhaps increase 30 to 50 percent even. That's really our hope that it will get there. The deal is expected to boost Indonesia's top exports to Europe, including palm oil. Under the EU's new deforestation law, palm oil can't be imported if it comes from recently cleared land. But the agreement is expected to give Indonesia some preferential treatment. Donald Trump's tariff hikes sped up trade talks around the world. Vietnam and Singapore have already signed deals with Europe. Now after nearly a decade of negotiations, Indonesia is the third Southeast Asian nation to do so. This agreement will definitely put us in the same level of playing field like Vietnam and other countries, right? Because Vietnam has earlier already a SIPA with the EU and if you've seen the number, not just trade but investment has really picked up significantly. But market access or fresh investment for Duty Gumilar's company are still some way off. The deal needs approval from EU member states and both the European and Indonesian parliaments. If all goes well, it could take effect in about two years. Thanks for watching.

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Breakdown