Jakarta, July 20, 2025. Publish What You Pay (PWYP) Indonesia and the Transnational Institute have issued a critical response to two recent trade agreements reached by the Indonesian Government with the United States (US) and the European Union (EU), particularly concerning critical minerals. Indonesia has successfully increased value addition by 20-30% for commodities like nickel since implementing the raw export ban in 2020.
Critical minerals have often been used by the Indonesian Government as a key bargaining chip in negotiations with the US and EU to secure favorable deals. However, the lack of transparency in the negotiation process—including the final agreement details—has raised concerns about potential “quid pro quo” arrangements that could undermine Indonesia’s energy sovereignty and resources, especially in the context of a just green economic transition. Based on the latest updates as of July 19, 2025, the reciprocal tariff agreement with the US (announced on July 15) includes Indonesia’s commitment to purchase 50 Boeing jets and increase imports of US agricultural and energy products, while the Comprehensive Economic Partnership Agreement (CEPA) with the EU (political agreement on July 13) aims for finalization in September 2025, with liberalization of 80% of tariffs on goods and services.
Securing critical mineral supply chains has become a strategic issue in international trade negotiations, now weaponized by advanced economies like the US and EU to pressure mineral-rich developing countries. This struggle often puts pressure on developing nations building value-added industries, creating direct contradictions with Indonesia’s downstreaming policy.
Contradictions with Indonesia’s Downstreaming Agenda
In the reciprocal tariff agreement with the US, the Indonesian Government claims to have secured a tariff reduction of up to 19% (from a threatened 32%), opening broader market access. However, the US gains 0% tariffs on nearly all its products, including guarantees for purchases by Indonesia in the agriculture and energy sectors, which could flood the domestic market and lead to a trade deficit nearing $18 billion, as seen in 2024. This agreement involves trade-offs in critical mineral sectors like copper, where Coordinating Minister for Economic Affairs Airlangga Hartarto has repeatedly called minerals Indonesia’s “strongest card.” Yet, it appears to lead to compromises that weaken downstreaming, including potential relaxation of the copper concentrate export ban imposed in December 2024.
TNI researcher Rachmi Hertanti argues that the US has a strong interest in accessing critical minerals like copper for its defense industry and chip technology. Trump’s protectionist policies, including “Made in America,” close off opportunities for Indonesia to maintain domestic value addition. “The effectiveness of Indonesia’s mineral downstreaming negotiations is threatened by Trump’s policies. Including minerals in negotiations becomes irrelevant, and Indonesia ends up compromising for tariff reductions, sacrificing copper downstreaming and locking the country back into raw exports at the bottom of the global value chain,” Rachmi emphasized.
Furthermore, Rachmi stresses that the policy banning raw mineral exports is key to boosting economic value addition and must remain a non-negotiable position amid global geopolitics. The US and EU have previously protested this policy: the EU sued Indonesia at the WTO over the nickel export ban (with the US as a third party), and the US 2024 National Trade Estimate (NTE) report labeled it a trade barrier, including for copper. The Indonesia-EU CEPA includes a chapter on energy and raw mineral materials that liberalizes market access and investment, including bans on export restrictions, elimination of export duties, and local content requirements (TKDN) directly contradicting downstreaming.
“The tug-of-war for US tariff reductions and EU market access only weakens Indonesia’s bargaining position. For instance, the US today wants to strengthen its domestic mineral processing capacity, especially for copper, to reduce dependence on China. As a result, Indonesia will be pressured to lift the concentrate export ban, including TKDN, and ambitions to strengthen the downstream copper industry could be dashed,” Rachmi concluded.
PWYP Indonesia Deputy Director Meliana Lumbantoruan notes that tariff negotiations with the US could impact the consistency of copper downstreaming in Indonesia, which has faced many twists and turns, including back-and-forth between the Indonesian Government and Freeport McMoRan, a major US-based mining company.
“Freeport continues to seek loopholes to secure relaxations on copper concentrate exports. Of course, Trump’s policy to build mineral processing industries in the US could be a setback for Indonesia in consistently implementing the copper concentrate export ban rules set in December 2024,” Meliana explained.
Far from Environmental Sustainability Commitments
Meliana further asserts that the surge in demand for critical mineral raw materials has triggered excessive natural resource exploitation, which can damage ecosystems, cause ecological disasters, and exacerbate the climate crisis. For her, Indonesia’s raw mineral export ban policy could be a momentum for the Government to control mining concession permits and commodity production in a measured way, ensuring responsible management aligned with environmental and planetary sustainability.
Aryanto doubts that both trade agreements include commitments to environmental sustainability issues.
“For example, in the Indonesia-EU CEPA, there appears to be no firm mechanism for assessing environmental impacts that imposes strict legal implications on parties that fail to comply. Especially with the US President Trump is not someone who believes in environmental sustainability. In fact, from the start of his administration, Trump withdrew from the Paris Agreement’s climate action commitments and reinstated fossil fuels as the US’s primary energy source,” Aryanto concluded.
For this reason, PWYP Indonesia and the Transnational Institute urge the Indonesian Government to be transparent and open public access to the contents of the trade agreements with the US and EU, so that risks and potential damages can be measured. Moreover, the potential damages must be comprehensively assessed by the Indonesian House of Representatives (DPR RI) before granting approval for ratification.
Contacts
Meliana Lumbantoruan, PWYP Indonesia: aryanto@pwypindonesia.org
Rachmi Hertanti, Transnational Institute: r.hertanti@tni.org