The EU–Indonesia Economic Partnership: A Socialist View

Similar to this, the European Union has clear economic and strategic reasons for seeking a free trade agreement with Indonesia under the framework of the IEU-CEPA. The most important of these is that Indonesia has the biggest economy in Southeast Asia. With a middle class that is expanding quickly and a population of over 270 million, Indonesia positions itself as a very appealing and growing consumer market. The demographic trends in Indonesia offer substantial business opportunities for European exporters in industries like services, auto manufacturing, machinery, and pharmaceuticals.

Although on different scales of significance, the trade dynamics between Indonesia and the EU show how much both sides value one another. The EU lists Indonesia as its fifth-largest trading partner in ASEAN, highlighting the significance of preserving a solid bilateral relationship from an economic standpoint. For Indonesia, trading with the EU is not yet one of its top priorities as the EU is placed 33rd among Indonesia’s global trading partners, however there is a definite benefit for both parties: in 2023, Indonesia and the EU recorded a USD 30.8 billion trade surplus. This development hints at the growing importance of trade between these two economic powers.

The recent developments in global capitalism and the geopolitical conflict between the US and China have also shaped Indonesia’s preference to recalibrate its position in the international economic system. By getting closer to the EU, Indonesia hopes to balance its relationships with major economies, such as China and the US, while strengthening its role in global supply chains and within ASEAN. Together, these ambitions reflect Indonesia’s determination to utilize the IEU-CEPA as a transformative catalyst for Indonesia’s national development and to increase its international influence.

This recalibration will make significant use of Indonesia’s position as the world’s largest nickel producer today. The EU, in particular, is keen to secure long-term access to nickel, which is crucial for developing electric vehicle (EV) batteries and other green technologies. As China has become the dominant exporter of Indonesia’s nickel, direct economic engagement with Indonesia can prevent the EU from having to depend on China in the supply chain. This makes Indonesia an economic partner and a strategic partner in the EU’s green transition agenda. With direct access to nickel, the EU at least sees a stronger relationship with Indonesia as a gateway to deepen its influence in the ASEAN region. As the most prominent ASEAN member, Indonesia plays a significant role in shaping regional dynamics, and a successful trade agreement would increase the EU’s presence in Southeast Asia, particularly as a counterweight to China’s expanding economic footprint. The EU also aims to diversify its trade relationships and reduce over-reliance on China by integrating alternative supply chains. Indonesia’s growing manufacturing sector and natural resources make it an attractive partner in this diversification strategy.

Societal Risks in the IEU-CEPA

Most civil society organizations in Indonesia and Europe have strongly criticized the IEU-CEPA. One of the main issues raised by these groups is the loss of national balance and spatial policy. Indonesia has put investor protections, export bans, and local content regulations in place in order to protect itself from external powers like the EU that directly threaten Indonesia’s capacity to pursue its self-determined industrial strategy. For example, the EU and the World Trade Organization have challenged Indonesia’s ban on nickel exports, which is intended to promote downstream processing and domestic value addition. Civil society groups are concerned that the IEU-CEPA will eliminate these restrictions, limiting the country’s ability to regulate its national interests.

Environmental groups also warn that the IEU-CEPA could intensify extractive activities and ecological degradation. The expansion of palm oil plantations, mining operations, and industrial fisheries to meet EU demand risks accelerating deforestation, polluting ecosystems, and displacing Indigenous communities. A joint statement on raw materials organized by the European civil society group Transnational Institute (TNI) highlighted how commodifying Indonesia’s resource base under the IEU-CEPA could undermine public control over strategic sectors. Despite the EU’s rhetoric on sustainability, critics argue that its standards are often designed to protect European markets rather than change corporate behaviour.

Although free trade is often considered a tool for capital accumulation, with the right strategy, the socialist and labour movements can turn it into a tool for class struggle.

Trade unions and human rights advocates have pointed out the weak and non-binding nature of the IEU-CEPA’s social clauses. They fear the agreement could legitimize ongoing labour exploitation in Indonesia’s key export sectors without enforceable labour standards and redress mechanisms. Many have also highlighted democratic deficits in the negotiation process, mainly excluding workers, Indigenous groups, small farmers, and environmental movements. These groups are demanding complete transparency, public access to draft texts, and institutionalized civil society participation. Some have gone further, calling for a complete rethink of trade policy based on solidarity, ecological justice, and food and energy sovereignty principles.

Transparency has been a persistent concern throughout the negotiations on the IEU-CEPA. Civil society organizations, trade unions, environmental groups, and Indigenous peoples have criticized the Indonesian government for conducting the talks in a largely opaque and technocratic manner, with minimal public oversight or inclusive consultation. While official statements have sometimes emphasized the government’s commitment to protecting national interests, the negotiation process lacks mechanisms for meaningful engagement with affected constituents.

The existence of Indonesia’s oligarchic political system plays a role in exacerbating this situation, where political power is concentrated in the hands of a small elite with close ties to the private sector and large industries. This oligarchy controls most economic decisions, including trade policy, with little room for democratic oversight. This opaque process is further complicated by Indonesia’s lack of mechanisms for public participation in policy, where the executive leads international trade policy without adequate oversight from parliament or civil society. The lack of transparency in the negotiation process reinforces the view that the agreement was driven by the interests of elites and transnational corporations, rather than by the voice of the people.

Socialist Positions on Free Trade: Politicizing the IEU-CEPA, Moving Beyond GSP+ 

Socialist views on free trade vary widely, with the majority of socialists influenced by dependency theory, viewing free trade as a tool used by developed countries of the Global North to enrich themselves while worsening the underdevelopment of poor countries in the Global South. In contrast to David Ricardo’s theory of comparative advantage, this socialist perspective views free trade as a mechanism that traps developing countries in a cycle of underdevelopment by making them dependent on the export of low-value, resource-based commodities such as coffee, minerals, and cotton. It criticizes the free trade model for the fact that it reinforces global inequality.

However, there is another more positive socialist view of free trade, which sees it as a tool of class struggle. Karl Marx argued that free trade could benefit the struggle of the working class. Politically, free trade can erode the power of the feudal class, which hides behind protectionist policies, and clarify the contradictions of exploitative capitalism, which is needed to raise the consciousness of the working class so as to overthrow capitalism. In this context, and with the right strategy, free trade agreements such as the IEU-CEPA can benefit the working class. The European Union’s Generalized Scheme of Preferences Plus (GSP+) mechanism — which provides tariff reductions or duty-free access to the European Union market for developing countries on the condition that they ratify and implement 27 international conventions related to human rights, labour rights, environmental protection, and good governance — can be used by Indonesian socialists and labour groups as a tool to advance the interests of the working class.

Although the European Union unilaterally implements GSP+, this can be an opportunity to force the Indonesian state and entrepreneurs to pay more attention to workers’ rights and social protections. By utilizing GSP+ provisions, labour groups can pressure the Indonesian government if labour rights violations occur, such as union busting or unilateral layoffs, by reporting these cases to the European Union and related international institutions.

Indonesian workers can build cross-country solidarity with European trade unions to push for a fair trade model and protect workers’ rights.

Moreover, socialist groups can use the IEU-CEPA as a space for political intervention to fight for the interests of the working class. One strategic step is to demand binding social clauses, such as the protection of living wages, the right to organize, and safe working conditions. Although the negotiation process takes place in a closed room, socialists and labour movements can still influence the process through street politics. This means that trade unions need to be involved in mobilization to pressure the government of Indonesia to ensure that workers’ demands are included in the IEU-CEPA. This involvement is essential so that the IEU-CEPA not only becomes an arena for labour market liberalization but also a process that can be criticized and directed to reduce the dominance of international capital interests. Through this engagement, the IEU-CEPA can become an “opening up” space for civil society. Thus, socialist groups can build a counter-narrative to the neoliberalism that underlies the IEU-CEPA agreement and fight for an international trade policy that is more just and pro-worker.

In addition, the IEU-CEPA has also had a significant impact on workers in Europe. The relocation of industry to countries with lower wages, such as Indonesia, has caused unfair competition and reduced the bargaining position of European workers. Deregulating labour standards triggered by market liberalization has also worsened labour protections in developed countries. In this context, Indonesian workers can build cross-country solidarity with European trade unions to push for a fair trade model and protect workers’ rights. This solidarity can strengthen resistance to global exploitation and lead to a more ethical, democratic, and socially-just trading system. 

In conclusion, GSP+ and IEU-CEPA should be important in the context of class struggle. Although free trade is often considered a tool for capital accumulation, with the right strategy, the socialist and labour movements can turn it into a tool for class struggle. Pressure on the state and international capital can force them to be held accountable for exploitation and for violations of workers’ and peoples’ rights. This requires a substantial consolidation of the labour movement and popular organizing at the national level, strategic relations with European trade unions and international NGOs, and direct political intervention in the IEU-CEPA negotiations in order to reclaim a space for economic sovereignty that favours working people.