14. EU-Indonesia Trade Relations

After decades of neglect, trade relations between the EU and Indonesia have gained momentum after the launch of free trade talks in 2016. In this chapter, we analyse the geopolitical, commercial, and regulatory motives that have shaped negotiation strategies. The EU is trying to strike a balance between the interests of exporters pursuing market access, domestic vegetable oil producers seeking protection, and regulatory issues based on social goals beyond trade. For Indonesia, free trade with the EU is expected to stimulate FDI inflows, which would strengthen its manufacturing sector. While Indonesia has risen in global business climate rankings, the Indonesian government has implemented protectionist measures, which are aimed at eradicating poverty and promoting inclusive economic development. We argue that the successful conclusion of negotiations will depend on two things: one, the EU’s ability to decide which of its interests to prioritize with Indonesia, and two, the attractiveness of Indonesia’s outside options. Indonesia’s willingness to cooperate with the EU depends on the extent to which Jakarta wants to lessen its dependence on countries that abuse their trade power to extract painful concessions and defy multilateralism.