Indonesia-EFTA CEPA Trade Deal Signed, Will it Bring New Trade Opportunities?
On Sunday 16 December 2018 Indonesia and the European Free Trade Association (EFTA), which consists of non-EU member countries Switzerland, Norway, Liechtenstein and Iceland, signed the Indonesia-EFTA Comprehensive Economic Partnership Agreement (CEPA). The signing ceremony, which was held in Indonesia’s capital city of Jakarta, effectively ends nearly eight years of negotiations between both sides.
The EFTA was established in 1960 as a trade-bloc alternative for those European countries that were unwilling - or unable - to join the European Economic Community (now the European Union or EU). It consists of non-EU countries Iceland, Switzerland, Norway and Liechtenstein.
Although currently trade between Indonesia and the EFTA members is still relatively small, the signing of the Indonesia-EFTA CEPA does usher in a new chapter in Indonesian trade relations as it is the start of more intensive economic relations with European nations. Moreover, EFTA members could function as the access point for Indonesian export products to other countries in Europe, including the EU member nations.
However, despite scrapping most import tariffs there are still various challenges related to the Indonesia-EFTA CEPA. For example, there remain some non-tariff barriers that undermine the flow of goods to these four nations (for example palm oil). Another concern is that the Indonesia-EFTA CEPA will encourage a bigger rise of imports from EFTA members into Indonesia than exports from Indonesia into the EFTA members (after all Indonesia has been running trade deficits with Switzerland, Liechtenstein, Norway, and Iceland so far in 2018).
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Read the full article in the December 2018 edition of our monthly research report. You can purchase this report by sending an email to info@indonesia-investments.com or a WhatsApp (WA) message to the following number: +62.(0).8788.410.6944
