Indonesia seeks trade deal with EU to compete with Vietnam

January 29, 2024 | 16:23
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Indonesia is urgently pursuing a trade agreement with the European Union, according to newswire JakartaPost. This initiative, according to Indonesian Economic Affairs Coordinating Minister Airlangga Hartarto, is largely motivated by the desire to level the playing field with Vietnam, which currently benefits from the EU-Vietnam Free Trade Agreement (EVFTA).
Indonesia seeks trade deal with EU to compete with Vietnam

Minister Airlangga Hartarto pointed out that Vietnam's existing trade deal with the EU, which has been an aspiration of Indonesia for many years, is significantly advantageous for Vietnamese exporters. The EVFTA, effective since 2020, eliminates 99 per cent of tariffs, paving the way for an array of goods, especially footwear, from Vietnam to penetrate the European market.

"Our footwear faces a 20 per cent import tax when exported to Europe and the US, while our competitor Vietnam enjoys a zero tariff," Minister Airlangga stated at an investor roundtable conference in Cirebon, a city in southwest Indonesia.

Footwear is one of Vietnam's key export items to the EU under the EVFTA.

The Observatory of Economic Complexity lists Germany and Belgium, both EU members, among the top five destinations for Vietnamese footwear exports in 2021. Vietnam's total footwear export value for that year was just under $20 billion.

By contrast, Indonesia's exports were a fraction of Vietnam's, totalling $5.8 billion in 2021, with exports to Germany and Belgium valued at $505 million and $284 million, respectively, compared to Vietnam's $1.04 billion and $722 million.

Since 2016, Indonesia has been negotiating a Comprehensive Economic Partnership Agreement (CEPA) with the EU. The two parties have concluded their 16th round of negotiations and plan to meet again next month. The Indonesian government is keen to conclude the CEPA negotiations this year.

"This trade agreement is crucial for opening up market access opportunities," said Minister Airlangga.

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By Tri Lam

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