According to the EU, the losses would come as Indonesian products become less competitive than that of its ASEAN peers, such as Singapore and Vietnam, both of which have effective free trade agreements with the EU.

The loss would also come as the EU excludes Indonesia from its Generalised Scheme of Preferences (GSP) – a preferential tariff reduction on various products given to developing countries – following Indonesia's ascent into middle-income country status.

“Without a comprehensive CEPA, Indonesia’s exports to the EU could drop by 20 percent or US$4.4 billion annually,” Marika Jakas, head of the EU Delegation to Indonesia and Brunei Darussalam's trade and economic section, wrote in her presentation on Tuesday during the CEPA Roadshow and Business Forum for East Kalimantan.

The EU's remarks are seemingly meant to pressure Indonesian negotiators into quickly concluding talks over the Indonesia-EU (IEU) CEPA, which has been ongoing since 2016, as policies on palm oil and high-emission goods remain major sticking points.

Indonesian and EU negotiators completed their 10^th round of negotiations in March and are slated to have their 11^th round in November.

The Office of the Coordinating Economic Affairs Minister, which oversees the Trade Ministry, initially hoped to finish IEU-CEPA negotiations this year, but rounds were postponed several times because of the COVID-19 pandemic.

“Hopefully, there will be progress,” Ni Made Ayu Marthini, director of bilateral negotiations at the Trade Ministry, said of the 11^th round on Sept. 29 as quoted by Antaranews.

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The EU is one of Indonesia’s biggest trading partners. Indonesia exported $1.63 billion in non-oil and gas products to the EU in August, making the region Indonesia’s fifth-largest export partner, according to Statistics Indonesia (BPS). 

Indonesia imported $92 million in non-oil and gas products from the EU in August, making the region Indonesia’s third-largest import partner, BPS data shows.

Anne Patricia Susanto, head of the permanent committee on free trade agreements at the Indonesian Chamber of Commerce and Industry (Kadin), contested the EU’s estimate, saying it did not reflect a “drop” in exports but an "opportunity loss" in raising exports.

“It's a potential that we can get, so it's an opportunity loss, not a real loss,” she told The Jakarta Post on Wednesday, adding that Indonesia was committed to finishing the IEU-CEPA.

“The issue is not on our side [...] the EU itself also needs to be committed and consistent with the initial talks.”

Meanwhile, the European Commission said in a report about the 10^th negotiation round that “further progress was recorded in several chapters but without major breakthroughs on the more difficult outstanding issues that would require a change of policy or legislation".

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Vincent Piket, EU Ambassador to Indonesia and Brunei Darussalam, told reporters on Tuesday that the IEU-CEPA was expected to help create hundreds of thousands of new jobs, improve the incomes and working conditions for Indonesian workers and foster industrialization.

The EU estimated that the CEPA would raise Indonesia’s exports to the EU by 17.7 percent, adding between $5.34 billion and $6.04 billion to the country’s gross domestic product (GDP) by 2032.

“This agreement will bring to Indonesia extra economic growth, extra GDP, and that is the amount of around 5 billion euros [$5.79 billion] every year. That is massive,” he said.

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