The recent announcement by Indonesian president Prabowo Subianto and European Commission president Ursula von der Leyen of a "political agreement" on the Indonesia-EU Comprehensive Economic Partnership Agreement (CEPA) marks a significant milestone after nine years of negotiations.
This breakthrough is both an economic opportunity and a chance to rebuild trust between strategic partners at a time when global trade faces unprecedented challenges.
Indonesia and the EU have both recognised that strengthening economic ties is essential in today's global trading environment. Indonesia has been actively diversifying its trade relationships through bilateral and multilateral frameworks like ASEAN, while the EU seeks to expand export markets and enhance competitiveness.
The path to this point has been marked by numerous roadblocks, with agricultural trade — particularly palm oil — at the centre of disputes.
The EU's Renewable Energy Directive (RED) II, which effectively excluded palm oil from renewable energy targets, led Indonesia to file a WTO complaint in 2019. The EU Deforestation Regulation (EUDR) has created additional tensions.
However, these challenges have created opportunities for constructive dialogue and mutual understanding.
Despite the political agreement, some important issues remain to be resolved, but there are clear pathways forward.
The January 2025 WTO ruling on the RED vindicated Indonesia's position, finding that while the EU has the right to pursue environmental objectives, certain aspects of RED II's implementation discriminated against palm oil in violation of international trade rules.
This ruling provides a clear framework for bringing RED measures into WTO compliance, creating a foundation for more equitable trade relations.
The EUDR presents opportunities for collaboration.
Indonesia has consistently advocated for four key elements: greater smallholder inclusion, recognition of Indonesian Sustainable Palm Oil (ISPO) certification, acknowledgement of Indonesia's substantial deforestation reduction efforts, and recognition of Indonesian data for risk benchmarking.
These represent practical steps toward achieving shared environmental objectives while ensuring fair treatment for Indonesia's 2.7 million smallholder farmers, who deserve access to global markets.
The EU has the opportunity to demonstrate leadership by providing concrete assistance and capacity building for small farmers. Supporting the development of a compliance module for ISPO certification would help Indonesian producers meet EU standards while strengthening environmental protections—a win-win outcome.
The EU's own farmers recognise the importance of practical compliance solutions, and this shared understanding can bridge the gap with developing country producers.
The EU's internal disagreements over the EUDR reflects growing recognition of these realities: the European People's Party's proposals for implementation timelines and introduction of a "negligible risk" category, supported by agriculture ministers from member states, show a willingness to find new solutions.
An additional delay would provide valuable time for Indonesian smallholders to prepare while allowing meaningful EU support to materialise.
A "negligible risk" category could drive wholesale improvement of the EU's risk benchmarking approach, creating more nuanced and technically sound criteria. This presents the commission with an excellent opportunity to simplify procedures for farmers while ensuring equal treatment for all countries and firms — moving beyond geographic preferences toward merit-based assessments.
The EU has correctly maintained that the FTA and EUDR operate on separate tracks.
However, regulations affecting Indonesia's largest exports — palm oil, coffee, cocoa, and rubber — present opportunities for innovative solutions that serve both trade and environmental objectives.
Indonesia-EU relations have overcome challenges before and can do so again. The foundation for success lies in principled approaches based on good faith negotiation and non-discriminatory treatment.
EU trade commissioner Maroš Šefčovič's recent commitment that Indonesian products will receive special treatment is a promising start. The real success will come through collaborative implementation of trade rules and environmental regulations that work for all stakeholders.
The EU's reputation as a rules-based actor in international trade creates opportunities for leadership in ensuring environmental measures are scientifically sound, technically feasible, and non-discriminatory.
By recognising the genuine efforts of partner countries to achieve sustainability goals and providing necessary technical and financial support, the EU can help developing country producers meet higher standards while strengthening global environmental protection.
Indonesia has made remarkable progress, investing heavily in sustainable palm oil production, reducing deforestation rates by 90 percent, and developing robust certification systems.
These achievements demonstrate our commitment to sustainability and our readiness for partnership based on equal treatment and mutual recognition of efforts.
The political agreement provides a clear framework for progress.
The work ahead involves ensuring that trade rules serve both economic development and environmental protection. This is not only achievable but represents a unique opportunity to demonstrate that sustained good faith engagement and mutual respect can create lasting solutions.
With genuine commitment from both sides, the Indonesia-EU partnership can become a model showing that trade and sustainability are indeed complementary elements of a more prosperous and environmentally responsible future.
Eddy Martono is chairman of the Indonesian Palm Oil Association (GAPKI)
Eddy Martono is chairman of the Indonesian Palm Oil Association (GAPKI)