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Jakarta Post

RI pursues retaliation on US over cigarette row

  • Linda Yulisman

    The Jakarta Post

Jakarta   /   Sat, March 15, 2014   /  10:14 am

Indonesia is pushing for sanctions against a defiant United States for the latter'€™s unfair treatment of Indonesia'€™s clove cigarettes, via a second request for retaliation at the World Trade Organization (WTO).

The Trade Ministry'€™s director general for international trade cooperation, Iman Pambagyo, said Friday that Indonesian officials were set to submit a detailed explanation of the case to arbitrators at the global trade governing body by the end of this month.

That would be a further step toward seeking compensation, which could amount to US$50 million per year, to end the row that has already dragged on for more than three years.

'€œThe figure may be small but in the end, it'€™s not about the value; it'€™s about principle,'€ Iman said.

'€œWe have WTO agreements and rules. If any member breaches those rules and harms our interests, we must act instead of remaining silent,'€ he added.

Retaliation, a form of trade sanction imposed by a complainant on its trade partner, is usually resorted to if a disagreement over compensation arises between the disputing parties.

Retaliation may include a tariff cut by the losing country equal to the value lost or suspension of certain tariff concessions the winning country provides to the losing country.

Indonesia, the world'€™s top clove cigarette manufacturer, lodged a request with the WTO last August to authorize the retaliation against the US for failing to fulfill a tobacco dispute ruling.

In its ruling in April 2012, the WTO'€™s Dispute Settlement Body (DSB) determined that the US ban on clove cigarette sales was discriminatory, as the country still allowed sales of similarly flavored cigarettes, such as menthol cigarettes, which are widely produced by domestic manufacturers.

Following the ruling, the US was required to change its 2009 Tobacco Control Act, by barring sales of menthol and other flavored cigarettes, which it did not execute.

US compliance in barring the sales of menthol cigarettes may well have affected its local cigarette makers, which include Lorillard Inc., the Philip Morris USA unit of the Altria Group, RJ Reynolds Tobacco Co. of Reynolds American Inc. and Liggett Vector Brands LLC.

When the deadline for compliance passed last July, the US carried out public health campaigns against smoking menthol cigarettes through, among other things, the issuance of a scientific review by the US Food and Drug Administration.

The review says menthol cigarettes are potentially more addictive than regular cigarettes, thereby posing a public health risk beyond that of non-menthol cigarettes.

Iman said that the campaigns did not benefit Indonesian clove cigarettes as, in fact, menthol cigarettes were still sold in the US market.

'€œAt the same time, it continues to affect our exports as our clove cigarettes are still prohibited from entering the US market,'€ he said.

The ban has caused major injury to Indonesia'€™s clove cigarette producers, who delivered more than 90 percent of the clove cigarettes consumed by US buyers and contributed up to $200 million in annual exports.

According to Iman, no time frame had been set for the conclusion of the dispute settlement process at the WTO, but the Indonesian government was assessing what products may be subject for the retaliation. He added that, once chosen, the government would arrange consultations with those affected.

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