After nearly a decade of talks, the European Union and Indonesia have signed a free trade agreement that will eliminate tariffs on most goods. The motivation for reaching this trade deal has increased following the introduction of new US import tariffs earlier this year, which disrupted global trade. The FESI welcomes the agreement.
The free trade agreement, known as the Comprehensive Economic Partnership Agreement (CEPA), has been welcomed by European sporting goods and footwear industry associations, along with other industry players, as it is expected to come with benefits for businesses and consumers in both economies. Among these are the combined €600 million that the EU estimates its exporters will save in duties paid on goods entering the Indonesian market.
After being signed by EU and Indonesian officials in Bali, CEPA must go through legal checks and be translated into the EU’s official languages. European Union member states and the European Parliament, along with the Indonesian legislature, must also give their formal approval before it goes into effect. Airlangga Hartarto, Indonesia’s Coordinating Minister for Economic Affairs, said at the signing ceremony that officials are aiming to ratify the trade pact by January 1, 2027.
EU is Indonesia’s fifth-largest trading partner
The European Union is Indonesia’s fifth largest trading partner, accounting for 6.4 percent of its total trade, while Indonesia is the EU’s 33rd largest trading partner. Indonesia is also the EU’s fifth biggest trading partner in the 10-member Association of South East Asian Nations (ASEAN). That fifth-place ranking comes despite Indonesia having the largest economy among ASEAN countries and accounting for about 35 percent of the ASEAN region’s total GDP, leading EU trade commissioner Maros Sefcovic to comment that EU trade with Indonesia is “really below the potential.”
The Indonesian government said it expects bilateral Indonesia-EU trade, worth $30.1 billion for goods in 2024, to double in the first five years.
CEPA is a “landmark step”
“The EU-Indonesia CEPA is a landmark step for our industry and one of the key priorities of my mandate,” at the Federation of the European Sporting Goods Industry (FESI), commented Neil Narriman, FESI’s President. “Once again, we are also strengthening our ties with the ASEAN region, further deepening mutually beneficial partnerships that open new opportunities for our industry and our partners alike.”
Indonesia is already a major manufacturing hub for the sporting goods industry, with production facilities that supply European and global markets. FESI anticipates that Indonesian employment will benefit greatly from CEPA, with an estimated 300,000 new jobs that could be created in the garment sector alone.
Alongside eliminating tariffs, the trade agreement will streamline customs procedures, increase regulatory cooperation and “support more sustainable and resilient” supply chains, FESI said.
CEPA shall phase out high tariffs
According to data provided by FESI, Indonesian exports of footwear to the EU totaled about €1.6 billion in 2024, while Indonesian exports of apparel to the bloc amounted to roughly €1.1 billion and exports of sporting equipment to €31 million. Footwear is the fourth most imported Indonesian good to the EU and apparel the seventh, together representing over 16 percent of total EU imports from Indonesia.
Sporting goods manufactured in Indonesia and imported to the EU currently face relatively high tariffs, even under the EU Generalised System of Preferences Mechanism (GSP). For example, footwear manufactured in Indonesia and imported into the EU faces tariffs of nearly 12 percent and apparel about 10 percent, FESI said. With CEPA, most of those duties should be phased out, and many from day one.
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CEC welcomes the agreement
“Free access to any new market is an opportunity for our companies, and therefore this agreement is very welcome,” commented Carmen Arias, the Secretary General of CEC, the European footwear confederation. “Indonesia’s economy is growing, and it can become an important destination for European footwear in the future.”
Currently, the trade balance for footwear is clearly tipped in Indonesia’s favor. Arias noted that the EU in 2024 imported almost 100 million pairs of shoes from Indonesia at an average price of €15.80 per pair, while the EU exported about 300,000 pairs to Indonesia at an average price of €48.80 a pair.
EU footwear imported into Indonesia faces tariffs that go from five percent to 30 percent depending on the footwear category. “We see this agreement as an opportunity to operate on a level playing field not only when it comes to progressive tariff liberalization, but also when applying similar safety, environmental and social standards. In this regard, it will be key that the necessary verification and enforcement mechanisms are in place and well-functioning,” said Arias.
Negotiations for a free-trade agreement between the EU and Indonesia began in July 2016, with the 19th and last formal negotiating round held in July 2024, followed by discussions at the technical and political level. European Commission President Ursula von der Leyen and Indonesian President Prabowo Subianto reached a political agreement this July that paved the way for the finalization of negotiations.
Earlier in September, the EU said that it is committed to finalizing a trade agreement with India by the end of 2025.
