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The worst-case scenario of RI-EU dispute on nickel ore export ban
Imposing taxes on nickel ore exports is the most WTO-compatible option if the export ban must be revoked.
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Hot topic: A furnace operates at the nickel smelting facility belonging to PT VDNI on the Morosi industrial estate in Konawe, Southeast Sulawesi on Sept. 9. The company processes nickel to produce stainless steel. (Antara/Jojon)
"It looks like we’ll lose but it's okay, our industry has been created. So why be afraid? Losing is okay, grateful for winning," said President Joko "Jokowi" Widodo when opening an economics conference on Sept. 7. Jokowi hinted that Indonesia could lose in the dispute with the European Union at the Dispute Settlement Mechanism (DSM) of the World Trade Organization (WTO) on Indonesia’s nickel ore export ban.
The export ban is based on Law No. 4/2009 on minerals and coal mining, amended by Law No. 3/2020. The law deems minerals and coal contained in Indonesia's mining zone as non-renewable natural wealth. The state must control the management of mining products to provide maximum value-added to the national economy.
As a sovereign country, Indonesia has the right to implement its domestic policy as regards the export ban. Yet, as a WTO member, Indonesia must comply with WTO rules and must defend the policy when other members appeal against it.
Will Indonesia lose in the dispute? What are the ramifications of losing it?
The export ban was imposed on Jan. 1, 2020, by obliging miners to sell nickel ore – with a concentration below 1.7 percent – to domestic smelters at the domestic benchmark selling price for further processing. The ban secures raw material supply for Indonesia's processed nickel industry but disrupts material supplies to industries in importing countries.
Considering the vital requirement of nickel for its steel industry, the EU filed a lawsuit against Indonesia with the WTO (DS 592), arguing that measures restricting nickel ore exports and the additional export requirements of domestic processing, domestic marketing obligations and export licensing, appear to be inconsistent with Article XI:1 of the General Agreement on Tariffs and Trade (GATT) 1994.
On April. 29, 2021, the WTO composed a Dispute Settlement Body (DSB) panel and 15 countries joined the EU as third parties. A series of panel sessions convened in November 2021 to examine the EU's appeal and Indonesia's counterarguments.
