LETTER FROM MINISTER PANGESTU TO USTR: TOBACCO CONTROL ACT

UNCLAS SECTION 01 OF 02 JAKARTA 001177


SIPDIS

SENSITIVE

DEPT PASS TO USTR RKIRK
DEPT FOR EAP/MTS, EAP/RSP, EB/TPP, EB/TPP/BTA
COMMERCE FOR NSHALIZEH
USTR FOR KELHERS, BWEISEL
TREASURY FOR IA-BAUKOL

E.O. 12598: N/A
TAGS: BEXP EINV ECON ID
SUBJECT: LETTER FROM MINISTER PANGESTU TO USTR: TOBACCO CONTROL ACT


1. (SBU) On July 10, 2009, Embassy received official correspondence
from Government of Indonesia (GOI) Minister of Trade Mari Pangestu
addressed to United States Trade Representative (USTR) Ambassador
Ron Kirk. The letter details GOI concerns regarding the ban on
clove cigarettes contained in the Family Smoking Prevention and
Tobacco Control Act. The full text of the letter is included below.



2. (SBU) Begin text:

Minister of Trade of the Republic of Indonesia

No. 983/M-DAG/7/2009

Jakarta, July 3, 2009

His Excellency
Ambassador Ron Kirk
US Trade Representative
600 17th Street, N.W.
Washington, DC 20508

Dear Ambassador Kirk,

I am writing to express my deep concerns regarding the ban on clove
cigarettes contained in the Family Smoking Prevention and Tobacco
Control Act - which President Obama has just signed. The Indonesian
government has repeatedly communicated our steadfast view that
Sec.907 of the Act is inconsistent with the general principles of
the WTO on non-discrimination as well as the WTO Agreement on the
Technical Barriers on Trade.

On many occasions I have conveyed our view that the WTO Agreement on
Technical Barriers to Trade (TBT Agreement) obligates the United
States to ensure that, in respect of its technical regulations,
products imported from the territory of any WTO Member shall be
accorded treatment no less favorable than the accorded to domestic
like products and to like products originating in any other country.
The Agreement also obligates the United States to ensure that its
technical regulations are not more trade-restrictive than necessary,
thereby creating unnecessary obstacles to international trade. In
that regard, the TBT Agreement requires that the United States take
account of scientific and technical information. Similar
obligations exist under the WTO Agreement on Sanitary and
Phytosanitary Measures (SPS Agreement) and the Most-Favoured Nations
principles of the General Agreement on Tariffs and Trade 1994.

From my government's perspective, imports of Indonesia's clove
cigarettes are prohibited under the legislation for no reason other
than that they contain a natural herbal additive, while US
cigarettes containing menthol - a synthesized herbal addictive
derived from mint - are explicitly exempted from the prohibition.
Clove cigarettes have been a part of Indonesian culture for over a
century where they have been manufactured since the late 1800's and,
as a result, Indonesia produces 99 percent of the clove cigarettes
sold in the U.S. while the U.S. manufactures the bulk of regular and
menthol cigarettes consumed by Americans. Therefore, a ban on clove
cigarettes would unjustifiably discriminate under WTO standards
against Indonesia's cigarette export to the United States in favor
of competing, domestically-produced U.S. cigarette products.

Clove cigarettes are estimated to account for a miniscule amount of
the total number of cigarettes sold in the United States each year -
approximately 0.09 percent of the total. Menthol cigarettes account
for approximately 28.21 percent of the total cigarettes sold. While
any amount of youth smoking is unacceptable, clove cigarettes barely
register statistically in the U.S. among youth smokers compared to
menthol cigarettes. Clove cigarettes are estimated to account for a
small fraction (0.05 percent) of the total number of cigarettes used
by youth smokers while menthol cigarettes are estimated to account
for almost half (43.36 percent) of the cigarettes consumed by youth
in the U.S. significantly, the clove cigarette industry has done
such an effective job of keeping the product away from youth
consumption patterns for clove cigarettes because clove usage is so
insignificant among youth in the U.S. Moreover, there is no
scientifically supportable evidence or risk assessment that has
established specific human health risks associated with clove
cigarettes that can be used to justify the U.S. banning clove
cigarettes while continuing to permit the sale of menthol
cigarettes.

JAKARTA 00001177 002 OF 002



As recently as my recent meetings with you last month we expressed
my government's concern about this matter. Our concerns have also
been expressed with your immediate predecessor Mr. Peter Allgeier,
the Acting United States Trade Representative, in January of this
year as well as former United States Trade Representative Susan
Schwab.

We had hoped that Section 907 would be modified by Congress to
eliminate the discriminatory treatment of clove cigarettes prior to
final passage of the bill. Indeed, we understand that as late as
last week Senator Dodd and Senator Enzi were working on an amendment
that would have allowed the Secretary of Health and Human Services
to exempt clove cigarettes from the ban if it were necessary to
comply with trade agreements. Unfortunately, Senate leadership
blocked all amendments from being offered, including our amendment,
and time ran out.

We are deeply concerned that the passage of The Family Smoking
Prevention and Tobacco Control Act will become a significant barrier
to our ongoing bilateral relationship.

Thank you for your kind attention

Yours sincerely,
Mari Elka Pangestu

CC:

1. Ambassador of the Republic of Indonesia to USA, Washington D.C.;

2. Ambassador of the United States of America, Jakarta;

3. Director General for International Trade Cooperation, MOT;

4. Special Assistant to Minister of Trade for International
Cooperation, MOT.

End text.

HUME