The European Union and Indonesia have signed a free trade agreement that will remove 98% of all tasks in both directions immediately after it has been implemented, which is expected to be next year. In the high -quality shoe world there is a great potential for more of the fine handmade boots and shoes made in Indonesia are sold by European retailers.
I have to admit that when the EU Japan’s free trade agreement went into place in 2019, and all customs were immediately removed from Japan to Europe (and stepped down step by step for three years in the other direction), I thought we would see many more Japanese shoes in the EU. That did not really happen, even if we have new brands available, there has been no big change. Of people I talk to, many believe that it is due to the relatively comparable basic costs for shoes, and when the fairly high European VAT is added, the price of the Japanese shoes are comparable in price as a European ratio. So not so many more retailers have gone for Japanese shoes.
For Indonesian shoes I think things can be different with the new deal. But first some background. For nine years, EU and Indonesia have been in discussion about a free trade agreement. And after the US has taken steps in the other direction, conversations are intensified and a free trade agreement has now been signed. It now goes through a process that is approved by all 27 EU countries (easier for Indonesia), but hopefully it will be formally present for a while next year.
From that moment on, 98% of all goods will have no habits between countries (with a few exceptions such as European cars, etc. where things will be taken in five years). The bilateral trade, worth $ 30.1 billion for goods in 2024, is expected to double in the first five years.
The reason that the Indonesian shoes has a good potential to grow in the EU is that the living costs in Indonesia and in turn salaries are much lower, resulting in much cheaper shoes. Already today Indonesian shoes are really affordable, a reason that European giants and ECCO have both factories and tanneries in Indonesia. But as Shoegazing -readers would know, Indonesia also has a number of great brands that make handmade work clothing shoes and many other fully handmade shoes (read more in this article). And with customs removed, even with a high VAT added, the price of this will be very competitive in the EU. Good potential for sure, look at it from a customer perspective.
Conversely, it will probably also mean that the stronger footwear brands in particular will see increased sales in Indonesia, and to add that, it can be really positive for European tanners and producers of shoe materials, given that Indonesia is a large shoe and also producer of leather goods. As I have said before, I believe in free trade, so these steps are all positive.
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