Japan has strong case against car policy: Analyst

JAKARTA (JP): Indonesia holds a slim chance of winning when Japan takes the national car issue before a panel of judges at the World Trade Organization (WTO) later this month, auto analyst Suhari Sargo believes.

Suhari said Japan had a strong argument against Indonesia's controversial national car policy, while Indonesia's argument was very weak.

"Realistically, looking at the arguments presented by both Indonesia and Japan, I think it is difficult for us to win the case at the panel," Suhari told The Jakarta Post here Saturday.

A diplomatic source in Geneva said last week that Japan would ask the WTO to form a panel this month to hear the dispute over Indonesia's car policy.

"The request will be put forward on April 30, only by Japan, during the monthly meeting of the WTO Dispute Settlement Body, which handles trade spats," the source was quoted by AFP as saying.

The national car policy exempts PT Timor Putra Nasional from import duties and luxury taxes, which add about 60 percent to the price of cars in Indonesia, to produce the national car.

The national car is currently being imported from Kia Motors Corp. of South Korea by Timor Putra, controlled by President Soeharto's youngest son Hutomo Mandala Putra.

When lodging its complaint with the WTO last October, Japan argued that Indonesia's car policy was a violation of article I of the General Agreement on Tariffs and Trade (GATT) -- the predecessor of WTO -- on most-favored-nation treatment.

Japan also contended that the policy violated article X of GATT concerning publication and administration of trade regulations in an impartial and reasonable manner; article III on internal treatment of internal taxes and on non-discrimination under internal laws and provisions; and article II on trade- related investment measures.

The United States and the European Union (EU) have also lodged a complaint with the world trade body over what they alleged was Indonesia's discriminatory policy on automobiles.

Minister of Industry and Trade Tunky Ariwibowo has said Indonesia has very strong arguments for its national car policy, including WTO clauses related to infant industries and developing countries.

As a developing country, Tunky argued, Indonesia still had until the year 2000 to adjust its trade, industrial and economic policies, including the car policy, to comply with WTO provisions.

Today, Tunky leaves for Tokyo for a three-day trade mission. He may raise the auto issue with Japanese trade officials.

Economist Mari E. Pangestu has said that Indonesia's national car argument is very weak, and suggested the government offer compensation to Japan, the EU and the United States to avoid a potentially damaging examination by a panel.

Under WTO rules, complaints are examined by a WTO panel only if talks fail. The WTO Dispute Settlement Body clears up any further differences.

Indonesia, which has had months of consultations with the parties, has been hoping to avoid a WTO panel.

If the dispute enters the WTO panel and Indonesia loses, countries affected by the policy may impose penalties, including tariffs, on Indonesian products entering their markets.

Suhari said Japan, the EU and the United States would never give up their efforts to contest Indonesia's controversial national car policy even if the latter gave them compensation.

"Developed countries never give up on something they have started pursuing. So it is wrong to assume they will drop the case if we give them concessions," Suhari said.

He said there would be no immediate impact on Indonesia's auto industry nor its economy in general. Only when Indonesia loses the battle, would it affect its exports, but not the domestic auto industry. (rid)