Monday, October 2, 2023

Mercosur-Indonesia Trade Pact Talks Delayed as Bloc’s Deal with EU Stalls

Jayanty Nada Shofa
September 19, 2023 | 10:02 am
President Joko "Jokowi" Widodo shakes hands with his Brazilian counterpart Luiz Inacio Lula da Silva in Hiroshima on May 20, 2023. (Photo Courtesy of Presidential Press Bureau)
President Joko "Jokowi" Widodo shakes hands with his Brazilian counterpart Luiz Inacio Lula da Silva in Hiroshima on May 20, 2023. (Photo Courtesy of Presidential Press Bureau)

Jakarta. Indonesia’s trade deal with the Mercosur bloc of Argentina, Brazil, Paraguay, and Uruguay is facing a delay, as negotiations will likely start in 2024, only after the group takes care of its long-overdue pact with the European Union (EU).

Indonesia and Mercosur in Dec. 2021 agreed to discuss a comprehensive economic partnership agreement, also known as the IM-CEPA, for greater market access. Almost two years have passed since then, but the first round of negotiations has not even taken place. According to an Indonesian diplomat, Mercosur wishes to conclude its trade pact with the EU first before negotiating an agreement with Jakarta. 

Mercosur and its European counterpart clinched an initial trade deal in 2019 after two decades of negotiations. However, the yet-to-be-ratified Mercosur-EU trade pact hit an environmental snag. The Amazon rainforest deforestation -- which soared under former Brazilian President and far-right leader Jair Bolsonaro’s term -- drew concerns from the EU. Leftist Luiz Inácio Lula da Silva then took over Bolsonaro’s post after winning the 2022 election.

“Indonesia is eager to start the first round of talks as soon as possible, … but Mercosur would like to close their pact with the EU first. … Under Bolsonaro’s presidency, the EU held back on signing the pact with Mercosur … The EU demands greater environmental protection, among others, as part of the deal,” Nidya Kartikasari, a senior official at the Foreign Affairs Ministry, told reporters in Jakarta on Monday.


“So Mercosur asked Indonesia if we could start the [IM-CEPA] negotiations next year. Since Mercosur and the EU want to focus on concluding their trade agreement this year,” Nidya said.

Nidya also told the Jakarta Globe that the internal dynamics within Mercosur were another factor in the stalled trade deal negotiations. Mercosur member Uruguay is seeking membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP is a free trade agreement between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam. This sparked tension within the Mercosur as Uruguay tried to strike the CTPP deal on its own.

“Internal dynamics is a factor. Uruguay wants to join the CPTPP, so Mercosur itself is not yet solid,” Nidya said.

The first round of negotiations would typically discuss all working groups within a trade agreement document. Nidya also could not say how big the tariff reductions that the IM-CEPA would bring as the talks were very much at a nascent stage. Nidya said she hoped the IM-CEPA could slash the high import tariffs that the Latin American countries impose today.

Government data shows Indonesia’s trade with individual Mercosur countries is on the rise. 

The value of Indonesia-Brazil trade hit $5.4 billion in 2022, up from $4.1 billion the previous year. The Southeast Asian country also reported that its trade with Argentina had risen from $2.3 billion in 2021 to $2.7 billion a year later. Trade between Uruguay and Indonesia rose from $55.7 million in 2021 to $81.5 million the following year. Indonesia-Paraguay trade jumped from $55.9 million in 2021 to $78.3 million in 2022.

Read More: Argentina, Peru, Chile Potential Partners for Indonesia’s EV Ambition

Tags: Keywords:


News 5 hours ago

Megawati Dismisses Speculations of Prabowo-Ganjar Pairing for 2024 Election

The PDI-P has consistently asserted that Ganjar will not contest as a running mate.
Business Oct 1, 2023 | 12:57 am

IDX Poised to Break Membership Record

The IDX currently boasts more than 850 members.
News Sep 30, 2023 | 11:19 pm

Who is to Blame for Looming Shutdown in the US?

After all, it's House Republicans who have been paralyzed by their inability to pass a funding package.
News Sep 30, 2023 | 10:56 pm

Jakarta Implements Higher Parking Tariffs for Vehicles Skipping Emission Tests

This policy acts as a disincentive to high-carbon emitting vehicles, which are blamed for worsening air quality in Jakarta.
News Sep 30, 2023 | 10:55 pm

PDI-P Confirms Prabowo's Request for Gibran as Running Mate

Gibran won’t be able to meet the minimum age for a vice presidential candidate of 35 years old by the time the election is held on Feb. 14.