Major powers challenge Indonesia over car policy

JAKARTA (JP): Indonesia remained defiant yesterday even though the world's top three trading powers -- the United States, the European Union (EU) and Japan -- had taken formal steps to challenge its national car policy at the World Trade Organization (WTO).

Minister of Industry and Trade Tunky Ariwibowo told reporters yesterday that Indonesia would not back down in the face of major-power pressure.

"Indonesia will not change its car policy. We have a policy and we will implement it and we will not change it in principle," Tunky said after reporting the current developments to President Soeharto.

The three powers are seeking formal consultations with Indonesia on the issue in the first stage of the dispute settlement procedure run by the WTO, whose rules they say Jakarta is breaking.

Request

The EU delivered its formal request for bilateral talks with Indonesia to the latter's Geneva mission late Thursday and Japan followed suit yesterday.

A U.S. envoy said the Washington request would probably be submitted next week. "We will be throwing the book at them (the Indonesians)," a U.S. diplomat, who will be closely involved in the case, was quoted by Reuters as saying in Geneva yesterday.

Under WTO rules, Indonesia has 10 days to respond to the consultation requests from the three powers and 30 days to start them. If no accord is reached 30 days after that, the three powers can ask for the creation of a WTO panel.

The initial panel has to deliver its findings within six months, but these can be appealed against and the whole process can take well over a year before the WTO's dispute settlement body hands down a final ruling.

Tunky said yesterday that Indonesia is ready and prepared to have consultations with the EU, Japan and quite possibly the United States over its car policy. He played down the dispute, saying differences between WTO members are "normal".

"This is normal in international trade practices. As the volume of international trade is getting larger, more and more problems will arise. And we cannot avoid it," Tunky told journalists at his office after receiving copies of Japan's formal request for consultations under the WTO framework.

At the consultations, Tunky said, Jakarta will be represented by three ambassadors in Geneva, including its envoy to the WTO, Halidah Miljani, and an accompanying team of foreign international trade experts and Indonesian lawyers.

The Indonesian-auto case will be the first of its significance taken to the 21-month-old WTO by the three big powers against a developing country, although all the three have been involved in a similar problem with Brazil.

Ganging up

But officials of the three insist they are not "ganging up" on a smaller power, although if, as seems certain, the dispute goes to a WTO panel, they will join forces to present their case.

"One of the advantages of the Uruguay Round agreements (which led to the creation of the WTO) is that all countries in the system had obligations and agreed to a system to enforce those obligations through impartial dispute settlements... So I don't think this is a matter of ganging up," visiting U.S. Deputy Trade Representative Jeffrey M. Lang told a press conference here yesterday.

"We're simply exercising our rights under the dispute settlement system that all of us have agreed to in the WTO," Lang added.

Sharing Lang's argument, Yasuhisa Kawamura, economic counselor at the Japanese Embassy in Jakarta, acknowledged that Japan had exchanged information with the other two powers on Indonesia's national car policy but did not advise them to take any action.

"It's up to the EU and the United States to take any action they consider necessary," Kawamura told journalists here.

Indonesia's national car policy, announced in February, grants tariff and luxury tax exemptions for three years to PT Timor Putra Nasional, a company controlled by Soeharto's youngest son Hutomo Mandala Putra, to develop a national car, known as Timor.

This week, Timor Putra began selling its fully imported Timor sedans, made by its joint venture partner Kia Motors Corp. of South Korea but deemed as Indonesia's national cars. Timor Putra plans to begin assembly of the vehicles next March before commencing full manufacturing in 1998.

Tunky, however, contended that Indonesia, as a developing country, has time until the year 2000 to adjust its trade, industry and economic policies so they comply with the WTO provisions. (pwn/rid)

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