Indonesia will not appeal WTO ruling on US tobacco ban

Senin, 16 Januari 2012 | 10:09

Director general for international trade Gusmardi Bustami told reporters on Friday that Indonesia had won the backing of the WTO on its stance regarding the discriminatory nature of the US import ban.

The US Food and Drug Administration banned cigarettes with fruit, confectionery or clove flavors in September 2009, arguing such cigarettes were particularly attractive to children.

The ban affected Indonesia’s clove cigarette industry, as it immediately blocked nearly US$200 million in exports to the US market. The Indonesian government deems the ban discriminatory as the US still allows the sales of menthol flavored cigarettes that are produced widely in the US and smoked by about 19 million Americans.

Indonesia launched a formal dispute at the WTO against the ban on April 7, 2010, armed with two arguments — first that the ban was discriminatory, and second that it was unnecessary in efforts to prevent the young from smoking.

The WTO’s Dispute Settlement Body issued a ruling on Sept. 2, 2011 that acknowledged Indonesia’s grievances on the discriminatory nature of the import ban, saying that the US violated international trade rules by favoring domestically produced menthol-flavored cigarettes.

The settlement body, however, said the notion that the ban could prevent youths from smoking was relevant and logical.

Disputing parties are given 60 days to submit an appeal before the appellate body can make a final decision on the matter.

The US filed an appeal on Jan. 5, arguing that the panel of WTO judges erred both in concluding that clove and menthol cigarettes were comparable products and in ruling that US laws treated the imports less favorably than similar cigarettes made domestically.

Gusmardi said that his office was preparing a submission on Indonesia’s legal position on the WTO ruling and in response to the arguments in the US appeal. He said the submissions were scheduled for Jan. 23.

According to Gusmardi, Indonesia will stick to its earlier argument that the ban of cigarette sales in the US is a technical regulation, which should have been raised with WTO members before its entry into force and the US failed to do so. The labor-intensive clove cigarette industry creates jobs for around 6 million Indonesian workers, according to the government. Indonesia has annually suffered around $200 million in loss from exports of clove cigarettes, made by Gudang Garam and Djarum, following the halt of shipment in 2009 after the ban was implemented, according to the Trade Ministry.

Indonesian exports of tobacco and tobacco substitutes were valued at $508.8 million in 2008, prior to the implementation of the US import ban. Those exports increased to $595.6 million in 2009, and climbed to $672.6 billion in 2010. During January-October last year, they stood at $596.9 billion.

by Linda Yulisman,
Source :