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Indonesia seeks EU trade deal to compete against Vietnamese footwear

Jakarta Globe - 24 January 2024

Indonesia seeks EU trade deal to compete against Vietnamese footwear
By Jayanty Nada Shofa

Indonesia wants to secure a trade deal with the European Union (EU) in hopes that Jakarta can compete with fellow ASEAN member Vietnam, particularly on footwear exports, according to a senior minister on Wednesday.

Hanoi today already has a trade pact with the European bloc — something that Indonesia has been eyeing for years. The EU-Vietnam Free Trade Agreement (EVFTA) seeks to eliminate 99 percent of all tariffs, thus paving the way for more Vietnamese footwear products to enter the European market.

“Vietnam has struck a trade deal with Europe. … So Vietnam enjoys zero import duties for almost all of its manufactured goods,” Chief Economic Affairs Minister Airlangga said at the Investor Daily Roundtable conference in Cirebon on Wednesday evening.

“For instance, in the footwear industry. ... We have to face 20-percent import duties when we export to Europe, as well as the US. While our competitor Vietnam gets zero tariffs,” Airlangga said.

The EVFTA entered into force in 2020. As of October 2023, 16 European members have ratified the trade pact.

Footwear is one of the Vietnamese main exports to the European market. The Observatory of Economic Complexity (OEC) database puts EU members Germany and Belgium in the top five Vietnamese footwear export destinations in 2021. Germany was in third place as Vietnam exported $1.04 billion worth of footwear that year. In fifth place was Belgium ($722 million). Vietnam’s overall footwear exports amounted to $19.9 billion.

According to the OEC, Indonesia’s footwear exports were only a fraction of Vietnam’s. In 2021, Indonesia exported $5.8 billion worth of footwear. About $505 million worth of those exports went to Germany. The Southeast Asian country shipped $284 million worth of footwear to Belgium that year.

Indonesia has been negotiating a comprehensive economic partnership agreement (CEPA) with the EU since 2016. Both sides have concluded the 16th round of talks and will hold the next meeting next month. The government wants to wrap up the CEPA talks this year.

“A trade agreement is important to open up market access,” Airlangga said.

 source: Jakarta Globe