U.S. vs Indonesia on WTO trade agenda

JAKARTA (JP): The dispute between the United States and Indonesia over automobiles will come before the World Trade Organization this week, officials said Friday.

At a meeting of the WTO's Dispute Settlement Body (DSB) on Wednesday, Washington will ask for a panel to study U.S. complaints that Indonesia's widely criticized national car policy violates global open trading agreements, Reuter reported from Geneva.

Indonesia blocked a first U.S. request for a panel last month, but under WTO rules approval will be automatic this time.

Earlier in June, the DSB -- on which all current 131 members of the trade body can sit -- set up a panel to study similar complaints from the EU and Japan.

U.S. officials have indicated they would probably agree for their case to be heard by the same three-man board.

The three powers argue that tariff and tax concessions favoring cars produced by the PT Timor Putra Nasional company, which currently produces its Timor sedan in South Korea, amount to discrimination against their cars.

Indonesia insists that it is not in breach of WTO rules.

Timor's president, Soemitro Soerachmad, said Saturday that his company had received a letter from Kia Motor Corp guaranteeing that the current financial turmoil of the South Korean company would not put a stop to the national car program.

"The guarantee letter was signed by Kia Motor's chairman, and it proves that the Korean giant company is serious about its cooperation with us," Antara quoted him as saying Saturday.

"We will not reevaluate the car program because of the strong intention of the company," he said, adding that the letter was not requested by his company.

Soemitro said he was optimistic that Kia Group, South Korea's eighth largest conglomerate, would not go bankrupt because of its government's support in bailing out the group.

"The South Korean government has injected US$200 million into Kia to help it handle its financial problems. The group also has a rescue plan," he said.

The government granted Timor Putra exclusive rights to manufacture the so-called "national car" last year.

Timor currently imports fully assembled Sephia sedans -- renamed Timor -- from Kia, but plans to produce the car here when its manufacturing facilities are fully built.

The national car receives import duty and luxury tax exemptions, making it over 60 percent cheaper than other cars in the domestic market.

Soemitro told Antara that his company would keep its current cooperation with Kia Motor, but might consider cooperating with another country in the future.

"But we would not hastily stop our cooperation with Kia, just because of the current problem. Besides, we still need the technology transfer for the national car program," he said.

The Kia Group was recently placed under bank protection to prevent insolvency, making it the sixth conglomerate in South Korea to either go insolvent or be bailed out this year.

The group was $10.8 billion in debt, including $6.8 billion borrowed from banks. (das)