Avoiding a WTO panel<\/p>\n
The Indonesian government has apparently not given much leeway
\nto its negotiating team to maneuver in the bilateral talks over
\nthe Timor car with each of the three complaining parties, Japan,
\nthe European Union and the United States. From the snippets of
\ninformation that leaked out of the supposedly confidential
\nnegotiations at the World Trade Organization (WTO) in Geneva over
\nthe past two months and then on the sidelines of the WTO
\nconference in Singapore, it appears the Indonesian negotiators
\nsimply dragged their feet and stuck to the rigid position
\ndemanded by Jakarta.<\/p>\n
Foot-dragging not only worsens Indonesia's position but also
\nentails a greater cost in terms of the foreign exchange spent on
\nthe negotiating team and the foreign lawyers, and of the bad
\npublicity resulting from the opaque policy. It would be much
\nbetter for Indonesia to settle the dispute during the bilateral
\nnegotiations as all parties could focus attention on the broader
\naspects of their relationships rather than being preoccupied with
\nthe car policy. Most previous trade disputes have been settled
\nduring such bilateral negotiations under WTO auspices.<\/p>\n
Proceeding to an independent panel of judges would be
\ndetrimental to Indonesia's position as the judges would consider
\nonly the General Agreement on Tariffs and Trade (GATT) rules and
\nwould not take other factors into account.<\/p>\n
A Japanese negotiator was quoted as complaining that the
\nIndonesian team could not answer satisfactorily several basic
\nquestions on the logic and viability of the national car policy.
\nThe Indonesian team remained stubbornly persistent in its
\noutlook, claiming that Indonesia had the right to a pursue a
\nspecial policy-- which temporarily departs from the GATT rules--
\nto develop its national car industry.<\/p>\n
GATT (Article XVIII) does allow member countries, especially
\ndeveloping ones, to take special measures with the objective of
\ndeveloping a particular industry. The GATT Agreement on subsidies
\nand countervailing measures also allows Indonesia to grant
\nsubsidies to a particular industry. However, such special
\nmeasures are subject to a clear set of rules, such as
\nnotification procedures, and have to be supported by logical
\nexplanations justifying the measures and the viability of the
\nprograms.<\/p>\n
Both the manner in which the policy was unexpectedly launched
\nlast February, to the shock of existing automobile assemblers,
\nand the underlying principles of the program seemed to fail to
\nmeet the GATT procedures. The most damaging element of the
\nnational car policy is the preferential treatment granted to one
\nparticular company. Its is against both the most-favored nation
\nand national treatment rules, two of the four GATT cornerstones.<\/p>\n
Furthermore the Indonesian government failed to fulfill WTO
\nnotification procedures, in spite of strong advice to do so from
\nthe Indonesian mission to the WTO.<\/p>\n
It seemed that the government could neither come up with
\nreasonable justification for the policy-- which runs against the
\nbasic principles of the prevailing automobile program implemented
\nsince the 1980s-- nor explain its economic feasibility. We can
\nimagine how difficult it has been for the negotiating team to
\ndefend the policy, which even in Indonesia has been condemned as
\na failure by most automobile analysts. It is a delicate, uphill
\ntask for the team to explain why only one company, PT Timor Putra
\nNasional-- which has no previous experience in the car industry
\nand happens to be owned by a politically well-connected
\nbusinessman-- has been chosen as the beneficiary of the policy,
\nat least for the first three years.<\/p>\n
It has been even harder for the team to explain why the Timor
\ncar is treated as an Indonesian national car when it is fully
\nmanufactured in South Korea by Kia Motor. Since PT Timor Putra
\nNasional has had to start its operations virtually from scratch,
\nit has been an equally formidable task to convince the
\ncomplainants that the Timor car would achieve a minimum local
\ncontent of 60 percent within three years. Failure to defend the
\neconomic viability of the national car program would kill the
\ncredibility of Indonesia's claim that invoking the special
\nmeasures is necessary to develop a national car industry.<\/p>\n
It appears the government needs to come up with some
\nconcessions to avoid the proceedings progressing to a WTO panel
\nand therefore further negative publicity which has already
\naffected Timor car sales.<\/p>",
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"sponsor": "Okusi Associates",
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