June 28, 2011 / 7:05 PM / 8 years ago

EXCLUSIVE-EU, Indonesia to launch trade talks in Nov-diplomat

* Europe eyes pharma ceuticals , booming Indonesia markets

* Difficult talks ahead on biofuels, intellectual property

By Juliane von Reppert-Bismarck

BRUSSELS, June 28 (Reuters) - Indonesia and the European Union will launch talks for a trade agreement in November that would link Southeast Asia’s largest economy and the world’s biggest market, a senior Indonesian diplomat said on Tuesday.

Trade and business officials lauded the potential of a deal worth an estimated 6.8 billion euros ($9.7 billion) that could make 95 percent of goods traded between the two populous regions move duty-free, free up flows of services and investment and go some way in harmonising patent and competition rules.

Talk of such a deal came as trading powers, abandoning hopes for a global trade accord, increasingly race to secure bilateral treaties with booming markets.

“We will launch talks in November on the side of the G20 meeting. It’s probably the last major free trade agreement we’ll ever launch,” Indonesia’s ambassador to the EU, Arif Havas Oegroseno, told Reuters after unveiling a report touting the benefits of a bilateral treaty together with Europe’s trade commissioner.

The report by senior government and business officials showed Indonesia’s trade balance would benefit from the deal while creating investment opportunities for European firms in a state with a 240 million population and long-term GDP growth estimates of 7 percent.

Indonesian light industries and transport equipment makers would benefit in particular, while poverty in the largely Muslim state would fall thanks to a 1.5 percent average rise in incomes resulting from a deal, the report said.

EU firms likely would focus on investing in the pharmaceutical sector, and benefit from the removal of red tape slowing EU food and drinks sales and courier services.

“European business is in favour of negotiations. We want to have more trade with Indonesia, also in investment,” said Pascal Kerneis, senior advisor for Europe’s largest business lobby BusinessEurope and co-author of the report.

BILATERAL AGENDA

Frustrated by years of fruitless negotiations for a global trade accord at the World Trade Organization and egged on by the promise of Southeast Asia’s booming consumer markets, European negotiators have been pursuing an aggressive round of bilateral talks to lock in gains for business and importers.

Southeast Asian nations including South Korea, Thailand and Singapore are seeking to diversify their trade links and tap Europe’s 500 million-strong market and have started talks with the bloc.

Attempts by the United States to forge similar deals in the region have been slowed by divisions over trade policy in Washington, and preliminary steps for a pact with Indonesia are not expected to yield a quick result.

This week sees the first fruits of Europe’s bilateral agenda when a free trade agreement with South Korea comes into effect on Friday.

European Trade Commissioner Karel De Gucht said Europe would insist that Indonesia, where legislation varies widely between far-flung regions, agrees to European intellectual property rules and guarantees their enforcement.

“The only raw material we have in Europe is intellectual property rights,” he told industry executives and officials.

Trade talks would start “once conditions are met”, he said.

Despite such concerns, Europe has been laying the foundations for a deal, agreeing in May to strict controls aimed at stopping illegal timber imports from Indonesia at Jakarta’s request.

The two sides will also have to address Indonesian concerns that Europe could close its markets to Indonesian palm oil traditionally used for making biodiesel, on environmental grounds, according to the report. ($1 = 0.705 Euros) (Reporting by Juliane von Reppert-Bismarck; additional reporting by Doug Palmer in Washington; Editing by Michael Roddy)

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