RI-US DISPUTE OVER CLOVE CIGARETTES REFERRED TO WTO

By Andi Abdussalam

Jakarta, July 21 (ANTARA) - The Dispute Settlement Body (DSB) of the World Trade Organization (WTO) eventually decided to establish a panel that will settle a dispute between Indonesia and the United States over the ban of 'kretek' (clove-flavored)  cigarette imports to the United States.          Indonesia has so far asked the United States to lift its Family Smoking Prevention and Tobacco Control Act of 2009, which it considers discriminative.          The Act bans the importation of aromatic cigarettes, including Indonesia's 'kretek', but does not prohibits menthol cigarettes which according to the Agreement on Technical Barriers to Trade are like products.          As a last resort to settle the dispute, Indonesia last month took the ban which had been imposed since September 2009 to the Dispute Settlement Body of the WTO asking the WTO to form a panel to settle the problem.          Jakarta asked the panel to investigate the violation by the US against Article III of the GATT of 1994 and the use of Article XX of GATT 1994 without providing scientific evidence. It also failed to  meet the provisions in a number of articles in the technical Barriers to Trade (TBT) and Sanitary and Phythosanitary Act (SPS).          Finally, on July 2, the DSB fulfilled Indonesia's request to form the panel.          "Indonesia for the second time tabled its concerns at the DSB session over the US Tobacco Act 2009 which bans the importation of aromatic cigarettes, including clove cigarettes," Director General of International Trade Cooperation Gusmardi Bustami said on Wednesday.          He said that at the second session of the DSB, the Indonesian request for the establishment of the panel was fulfilled. The session also accepted the requests of Brazil, Guatemala, Turkey, European Union and Norway to serve as the third parties in the dispute settlement.          "The United States could not reject it but accept the DSB decision," he said.           He explained that in a not-too-distance time, the DSB secretariat would work out a framework and select names for panel members who would be proposed for acceptance by all parties.          The United States has imposed the ban since September 2009.          Since then, Indonesia has stopped its export this year, thus reducing its income from cigarette exports.          "Indonesia's foreign exchange income from kretek cigarette exports is expected to drop significantly this year due to the imposition of the ban," Frans Rupang, director for prosecution and prevention of the Directorate General of Customs and Excise, said.          Frans Rupang said that in 2009 cigarette exports contributed 6.451 million dollars to the state.  Indonesia's kretek cigarette exports to the United States in 2008 totaled 298.932 million pieces worth US$6.662 million and in 2009 they stood at 267.308 million pieces worth US$6.451 million.          Since the imposition of the ban,  there was practically no Indonesia's kretek exports to the United States this year.          Rupang said that the contribution to the state of the country's kretek cigarette exports to the United States was the biggest one compared to that exported to other countries. Therefore, the ban reduced Indonesia's income from kretek exports significantly, he said.          According to the Ministry of Trade, exports of various kinds of cigarettes to the US in 2007 reached US$11,165,432 and dropped to US$9,703,991 in 2008 and US$8,338,419 in 2009.          The realization of exports of the product from January to March 2010 reached US$2,531,317 higher than in the same period last year that was recorded at US$2,531,989.          During the period however no exports of cigarette tobacco that include clove cigarettes were done. This happened following the implementation of the Family Smoking Prevention and Tobacco Control Act as of September 2009.           The law prohibits sale of all kinds of flavored cigarettes including clove cigarettes in the US except menthol cigarettes, which are actually also aromatic ones.            Therefore, the Indonesian government considers the law running against the WTO regulation because it exempts menthol cigarettes while menthol and clove cigarettes are like products according to Article 2.1 of the Agreement on Technical Barriers to Trade or (TBT) Agreement.            Around 99 percent of clove cigarettes sold in the US are imported from Indonesia while all menthol cigarettes are produced in the US and because of that, according to the Indonesian government, the US implicitly bans imports of clove cigarettes.          The government considers the ban discriminative. As a member of the WTO, the US must have carried out its international obligation as mentioned in the TBT Agreement and the General Agreement on Tariff and Trade or GATT of 1994.          The director general of international trade cooperation of the ministry of trade, Gusmardi Bustami, said the move to take the matter to the WTO dispute settlement body was the last resort. He said the government has already expressed its opposition to the regulation while it was still being discussed at the US Congress.           "This is about principles. A discrimination had been made," Gusmardi said.***2*** (T.A014/A/H-NG/A/S012) 21-07-2010 22:49:3