Jakarta, March 16 2026 – On 20 February, the President of the United States and the President of Indonesia signed a trade agreement (Reciprocal Trade Agreement/RTA) that opens an exclusive pathway for trade and investment between the United States and Indonesia. For Indonesia, this trade deal brings little reciprocal benefit and instead poses risks of degrading environmental and natural resource governance.
Civil society has identified at least four aspects that may lead to such risks.
First, the provisions on good regulatory environmental law potentially position environmental regulation as an instrument to facilitate trade. Although the agreement formally includes nomenclature on good regulatory practices related to environmental law under Article 2.10: Environment and Article 2.34: Environmental Law, these provisions remain very general and are not accompanied by guarantees to strengthen environmental standards. Instead, Indonesia may be required to address environmental policy issues to ensure the smooth functioning of trade interests and supply chain security.
This situation could trigger a race to the bottom, in which environmental protection standards are lowered to maintain trade flows and mineral supply. Such a condition clearly contradicts the principle of non-regression as articulated in the IUCN World Declaration on the Environmental Rule of Law. This principle has even been adopted in other regional trade agreements, such as Indonesia’s CEPA with EFTA, which prohibits countries from lowering environmental and labor protection standards to attract investment.
Second, provisions governing critical minerals could encourage the expansion of mining and processing activities that increase environmental burdens in Indonesia. Article 6.1 of the agreement requires Indonesia to allow, facilitate, and remove investment barriers to the United States conducting exploration, mining, processing, transportation, distribution, and export of critical minerals, including rare earth minerals (REE). There is no guarantee that such activities will exclude areas with high conservation value, high biodiversity, high carbon stock, or other essential ecosystems in
Indonesia.
In addition, provisions on developing a critical minerals recycling ecosystem, including battery waste (see Article 2.36: A More Resource Efficient Economy), risk turning Indonesia into a waste-recovery hub. Without clear standards for recyclable components, this could further increase environmental burdens and risks to communities. Several countries have already implemented take-back mechanisms and established minimum requirements for recyclable components in battery waste generated during their production. However, this agreement appears to release producers from extended producer responsibility across the entire battery life cycle, including waste generated from their activities.
Third, Article 2.2, which provides exemptions from local-content and domestic-specification requirements (Tingkat Komponen Dalam Negeri/TKDN) for US products and companies, could weaken the protection of domestic industries. Currently, Indonesia’s TKDN policy sets a minimum requirement of 25 percent local content to reduce dependence on imports, empower domestic industries, and increase the utilization of local products. This provision stands out as an anomaly amid Indonesia’s efforts to strengthen domestic economic and industrial growth.
Fourth, the purchase commitments provision (Annex IV), which requires Indonesia to purchase fossil energy from the United States worth USD 15 billion (approximately IDR 235 trillion), contradicts Indonesia’s energy transition agenda. It is ironic that while Indonesia’s National Energy Policy mandates a gradual transition toward clean energy, this agreement instead locks Indonesia into a massive dependency on imported fossil fuels. This provision may also constrain Indonesia’s fiscal resources needed to support a just energy transition and the development of renewable energy.
Rather than delivering reciprocal economic benefits or even maintaining and strengthening environmental standards, this trade deal offers Indonesia no significant advantages. Instead, it risks increasing environmental burdens and weakening the governance of natural resources. The agreement even risks turning Indonesia’s policy instruments away from protecting the public interest and toward merely facilitating trade interests.