Indonesia Ready to Face EU Complaints to WTO

Jakarta. Indonesia stands ready to face a few official complaints from the European Union to the World Trade Organization, or WTO, as trade tension between the two economic powerhouses heightens. 

Indonesia and the EU were already in dispute on how the Europeans increased tariff on palm oil, the Southeast Asia largest export commodity, casting shadows on a bilateral trade and investment deal the two economies were negotiating. 

The plot thickened as the Indonesian embassy in Geneva received an official letter from the EU representative there on Nov. 22 to inform that the regional bloc will file formal complaints against Indonesia to WTO, Indonesian Ambassador in Geneva Hasan Kleib said.

One of the complaints was about Indonesia’s policy on restricting the export of mineral products, especially nickel, iron and chromium ores, used in the stainless steel industry in Europe. Indonesia banned nickel ores export in October to preserve the raw material it planned to use to develop its lithium-ion battery industry.

From the EU perspective, Indonesia has violated WTO’s General Agreement on Tariffs and Trade (GATT) about the restriction on export or import.

The second complaint was about Indonesia's new tax incentives for investors. The government announced in September that it would grant a tax holiday for five to 20 years to investors invest Rp 500 billion to Rp 30 trillion ($35.7 million to $2.1 billion) in Indonesia. The government hoped the incentive could attract more investors to Indonesia to rejuvenate the country’s economic growth.

But, the EU saw the new taxation rules as a violation against WTO’s Agreement on Subsidy and Countervailing Measures.

The last complaint against Indonesia was the latter's requirement for importers to comply with domestic content regulation (TKDN). Under the rule, some imported goods and services should contain a certain level of Indonesia material or involvement in the production process.

The EU sees the policy that was issued last year has violated GATT’s rules, in particular, on transparency obligation.

Responding to the complaints, President Joko "Jokowi" Widodo rallied resistance.

“For the sake of our national interests, we will face protests from any country. Do not falter," Jokowi said on Thursday in Karawang, West Java. 

"The European Union is suing us. Face it,” he said.

The president said that value-added policy for exporting mineral products, including restriction for nickel ore, is a form of the government effort to improve a downstream industry that will create jobs.

Jokowi said the government had prepared top lawyers who will fight to win the dispute.

“The important thing is not to deviate [from the goals]. Don't immediately retreat just because we got complaints. Actually, I am more excited when sued, just do not lose,” he said.

Process

The bloc called for a consultation with Indonesia, the initial step in dispute solving procedure at WTO, Ambassador Hasan said last month. Indonesia should give its respond whether agree or not for a consultation that is required by the EU within10 days after receiving its letter.

If Indonesia agreed for a consultation session, it should start in 30 days or as decided by the two parties after the EU receives the reply. If Indonesia declines to have a consultation, the EU can call WTO for setting a dispute panel.

Hasan said Indonesia usually accepted the offer for consultation.

“Is it possible to hold the consultation session sometime in December before Christmas or in January, depends on our agreement,” Hasan told the Jakarta Globe.

He said if the process continues to dispute panel at WTO and if Indonesia loses, the government should revise laws and regulations that are part of the complaint or implement other solutions mutually agreed by the parties.