Wed, 24 Jul 1996

Car dispute won't affect trade relations: U.S. official

JAKARTA (JP): The United States' opposition to Indonesia's policy in the automotive industry would not affect bilateral trade relations between the two countries, says a U.S. official.

Under Secretary of State Joan Spero told reporters here yesterday that the U.S. government had no plans to tie the car policy to other economic activities.

In February the Indonesian government granted tax and tariff breaks to PT Timor Putra Nasional, a company controlled by President Soeharto's son Hutomo Mandala Putra, for its "national car" which will be produced in cooperation with Kia Motors of South Korea.

"The national car policy will be negotiated separately and there is no plan to relate it to other trade issues," Spero told the journalists following a meeting with Indonesian Minister of Industry and Trade Tunky Ariwibowo.

She said the U.S. government will not offer a compromise to persuade Indonesia to change its controversial car policy.

Spero, who is here to accompany U.S. Secretary of State Warren Christopher to attend the ASEAN Regional Forum, also questioned the Indonesian government's commitment to limiting software piracy and other issues related to intellectual property rights in yesterday's meeting.

Tunky said that Indonesian and U.S. trade officials would meet in Washington by the end of this month to further discuss the car policy.

"But our stand is clear. We don't want to negotiate but to explain our car policy," Tunky told journalists following the meeting with Spero.

He emphasized that the Indonesian government would not change its stand on the "national" car in the planned Washington meeting, which will be held in the newly established Trade and Investment Framework Arrangement (TIFA) forum.

The forum was established earlier this month to settle trade conflicts between the two countries amicably.


In another development, visiting Japanese Foreign Minister Yukihiko Ikeda said here Monday that the Indonesian government's explanations on its car policy were still less than satisfactory.

However, the issue will not affect bilateral relations between Japan and Indonesia, Ikeda said during a meeting with his Indonesian counterpart Ali Alatas.

Ikeda said that it was necessary to bring the national car project in line with international trade rules.

Japanese car makers, who dominate Indonesia's automotive market, strongly oppose the car policy and are threatening to bring the issue to the judicial arm of the World Trade Organization (WTO).

Opposition also comes from U.S. and European car manufacturers, which charge the Indonesian national car program with breaking the WTO's free trade principles.

Timor Putra Nasional has introduced its "national car", called Timor, in the domestic market, but deliveries can only be made in November at the soonest.

A number of automotive companies, including one owned by Hutomo's elder brother Bambang Trihatmodjo, have applied for a similar tax facility, but were turned down. (hen)