Indonesia & US Agree To End Clove Cigarette Dispute

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Indonesia has agreed to end a four-year dispute with the US over clove cigarettes, with the two countries striking a new deal that better accommodates their interests.

As the world’€™s top producer of clove cigarettes, Indonesia had pursued a policy of retaliation as its key trading partner did not revise its tobacco rules that banned the sale of clove cigarettes and was ruled as discriminatory by the WTO.

Trade Ministry director general for international trade cooperation Bachrul Chairi claimed the bilateral deal would bring more benefits to Indonesia but would not eliminate the fact that the US has violated WTO rules.

‘The benefits that Indonesia can obtain through settlement outside the WTO mechanism are more significant compared to the compensation of US$55 million of its total imports from the US,’ Bachrul said in a statement.

The US law has caused problems for Indonesian cigarette producers, which produce more than 90 percent of clove cigarettes consumed in the US market.

Retaliation, a type of trade sanction charged by a complainant against its trade partner, is usually pursued under the world trade governing body when there is a disagreement over compensation in a trade dispute.

The sanction may come by way of a tariff reduction by the losing country equal to the value lost or suspension of certain tariff concessions that the winning country offers to the losing country.

In August last year Indonesia filed a request at the WTO’s dispute settlement body to authorize the retaliation sanction against the US, after it was dissatisfied with the latter’s move to address its concern.

To meet the WTO’s ruling, the US carried out public health campaigns against menthol cigarettes instead of changing its 2009 Tobacco Control Act, which prohibits the sale of clove cigarettes and allows the distribution of other flavored cigarettes, including menthol cigarettes largely made by US producers.

However, both countries in June this year requested the arbitrator to suspend proceedings as they worked on the recently signed deal.

In the deal, the US will not disrupt the market access of Indonesian cigars and cigarillos until there are further regulations, which will not be arbitrary and discriminative in nature, according to the statement.

The world’s biggest economy has also vowed to consider additional tariff cuts under the generalized system of preferences and expand products covered in the program.

The US will not lodge a complaint with the WTO over Indonesia’s mineral export ban, which has largely affected US companies. It will also provide assistance to help protect and enforce intellectual property rights, which have been a concern of foreign investors in the Indonesian economy.

Source: The Jakarta Post.


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