Introduction

On 23 September 2025, the European Union (EU) and Indonesia concluded negotiations on the Comprehensive Economic Partnership Agreement (CEPA). This landmark accord represents the most ambitious trade deal ever reached between the EU and a Southeast Asian economy, providing near-total tariff liberalization, stronger regulatory alignment, and new cooperation on sustainability. It also signals broader momentum in EU-ASEAN trade engagement, which continues to expand across the region.

Overview of the EU–Indonesia CEPA[1]

Tariff Elimination

• Over 98% of tariff lines and close to 100% of trade value will be liberalized.
• Indonesia commits to phasing out high tariffs on motor vehicles, machinery, chemicals, and pharmaceuticals within 3–5 years.
• The EU will remove duties on Indonesian exports, including palm oil, textiles, footwear, and key agri-food products.

Rules of Origin and Customs Facilitation

• A self-certification system that complies with current standards will be implemented to streamline exporters’ eligibility for tariff benefits.
• The collaboration between the EU and Indonesia in the areas of customs risk management, valuation, and fraud prevention will be further strengthened through the implementation of a protocol on Mutual Administrative Assistance.
• The Automotive Annex streamlines vehicle trade by eliminating duplicative testing, aligning Indonesia with the United Nations Economic Commission for Europe (UNECE) standards by 2033, and establishing a framework that lowers compliance costs, facilitates market access, particularly for electric and advanced vehicles, and embeds EU regulatory norms globally.

Sustainability and Labour Standards

• The EU and Indonesia commit to binding commitments on climate action under the Paris Agreement, forest conservation, biodiversity, and sustainable palm oil production.
• International Labour Organization (ILO) core principles on labour rights and safe working conditions are also required under the deal.

Investment Protection

• A parallel Investment Protection Agreement (IPA) will ensure fair treatment of EU and Indonesian investors, protection from expropriation, and transparent dispute settlement mechanisms.

Implications for Businesses

• Indonesian Exporters: Indonesian businesses in palm oil, textiles, and footwear gain preferential access to the EU market, while SMEs benefit from simplified rules of origin and customs procedures.
• EU Exporters: Significant new opportunities open in pharmaceuticals, agri-food, automotive, and renewable energy equipment. Annual EU duty savings are projected at €600 million.[2]
• Investors: Stronger legal certainty and protection frameworks are expected to spur new EU capital inflows into Indonesia and ASEAN more broadly.
• Regional Supply Chains: The CEPA supports diversification, supply chain resilience, and sustainable investment in energy and raw materials, aligning with broader EU-ASEAN cooperation on green technologies.[3]

Next Steps

The negotiated CEPA and IPA texts will now undergo the following steps:

1. Legal and linguistic review and translation into all EU languages.
2. Signature by the EU Council and the Government of Indonesia.
3. Consent by the European Parliament and ratification by Indonesia’s legislature.

Entry into force will follow upon completion of both ratification processes, which are anticipated to conclude in early 2027.[5]

Indonesia’s Current Development with Canada as a Newest Trading Partner[6]

• Indonesia has also signed a Comprehensive Economic Partnership Agreement (CEPA) with Canada. The agreement becomes Canada’s first-ever bilateral trade deal with an ASEAN country and is expected to take effect in 2026.
• The CEPA will eliminate or reduce tariff and non-tariff barriers, making trade more transparent and predictable for businesses in both countries.
• Once fully implemented, over 95% of Canadian exports to Indonesia will face reduced or zero tariffs. This boosts competitiveness for goods like wheat, potash, wood, and soybeans.

How Alvarez & Marsal Can Help

Alvarez & Marsal (A&M) provides strategic guidance to help businesses navigate opportunities and compliance under these new economic partnership agreements and ASEAN-wide developments. Our support includes:

• Trade Impact Assessment: Evaluating tariff savings, rules of origin eligibility, and customs facilitation measures.
• Sustainability and Compliance Advisory: Preparing companies for obligations on environmental standards, palm oil sustainability, and labour rights.
• Market Entry and Risk: Navigating EU-Indonesia and Canada-Indonesia CEPAs to access new markets and manage trade risks when entering or expanding in these regions.
• Investment Structuring: Advising on investor protections, dispute mechanisms under IPA, and structuring cross-border investments for tax efficiency and compliance.

With our deep expertise in global trade rules, A&M can help firms capture early-mover advantages as these economic partnership agreements move toward ratification and beyond.