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Cablegate: Goi Objects to U.S. Tobacco Legislation

VZCZCXRO5763
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #2409/01 2430924
ZNR UUUUU ZZH
R 310924Z AUG 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 6033
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHKL/AMEMBASSY KUALA LUMPUR 2376
RUEHBK/AMEMBASSY BANGKOK 8116
RUEHGP/AMEMBASSY SINGAPORE 6128

UNCLAS SECTION 01 OF 02 JAKARTA 002409

SIPDIS

SINGAPORE FOR SUSAN BAKER

SIPDIS
SENSITIVE

DEPT PASS TO USTR SCHWAB
DEPT FOR EAP/MTS, EAP/RSP, EB/TPP, EB/TPP/BTA
COMMERCE FOR SBERLINGUETTE
USTR FOR DKATZ, RBAE
TREASURY FOR IA-BAUKOL

E.O. 12598: N/A
TAGS: BEXP EINV ECON ID
SUBJECT: GOI OBJECTS TO U.S. TOBACCO LEGISLATION


1. (SBU) SUMMARY: On August 31, Embassy received official
correspondence from Government of Indonesia (GOI) Minister of Trade
Mari Pangestu addressed to United States Trade Representative (USTR)
Susan C. Schwab. The letter details GOI objections to draft tobacco
control legislation under consideration by the U.S. Congress.
Pangestu argues that the legislation, if enacted, would constitute a
violation of World Trade Organization (WTO) agreements. The full
text of the letter is included below. End Summary.

2. (SBU) Begin text:

Minister of Trade of the Republic of Indonesia
Our Ref: 1093/M-DAG/8/2007
Jakarta, 28 Augustus 2007

H.E. Ambassador Susan C. Schwab
United States Trade Representative
Washington, D.C.
United States of America

Re: The "Family Smoking Prevention and Tobacco Control Act" (S.625)

Dear Ambassador Schwab,

It was a pleasure meeting with you a few months ago in Washington
D.C, in which I had enjoyed discussing with you about the
increasingly strong relationship between our two countries in trade
and investment sectors. I would like to take this opportunity, to
thank you again for the excellent arrangements made during my visit
to Washington, D.C.

I am writing to you to raise my Government's concern over an
introduction of a draft legislation entitled the "Family Smoking
Prevention and Tobacco Control Act" (S.625), which currently being
considered in the U.S. Congress. This draft Act contains a
provision, which, if enacted as currently drafted, will
unjustifiably discriminate against Indonesia's cigarette exports in
favor of competing, domestically produced U.S. cigarette products.
We understand that Senator Kennedy, who has been supportive of
addressing our concerns with appropriate legislative language, has
written to you about this matter.

Specifically, the "special rule for cigarettes" in section 907 of
the legislation states that, beginning 3 months after the date of
enactment:

(a) In General.
(1) SPECIAL RULE FOR CIGARETTES. A cigarette or any of its component
parts (including the tobacco, filter, or paper) shall not contain,
as a constituent (including a smoke constituent) or additive, an
artificial or natural flavor (other than tobacco or menthol or an
herb or spice, including strawberry, grape, orange, clove, cinnamon,
pineapple, vanilla, coconut, licorice, cocoa, chocolate, cherry, or
coffee, that is a characterizing flavor of the tobacco product or
tobacco smoke.

The United States does not produce clove cigarettes at all,
Indonesia produces cigarettes containing cloves and over 99% of the
clove cigarettes Imported into the United states come from
Indonesia, That entire volume of imports would be prohibited under
section 907 of the proposed bill.

In direct contrast, cigarettes containing menthol sold in the U.S.
are almost exclusively produced In the United States as imports of
menthol cigarettes are negligible. However, menthol cigarettes are
explicitly excluded front the prohibition in section 907. The fact
that Section 907 would prohibit the importation and sale of clove
cigarettes from Indonesia while arbitrarily permitting domestic
production and sale of menthol cigarettes raises serious concerns
about the consistency of this proposed provision with the United
States' obligations under the agreements of the World Trade
Organization, In particular, 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 that 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

JAKARTA 00002409 002 OF 002


are not more trade-restrictive than necessary, thereby creating
unnecessary obstacles to International trade. In that regard, the
TST Agreement requires that the United States take account of

SIPDIS
scientific and technical information, as well as the special
development and trade needs of developing country Members, such as
Indonesia. Similar obligations exist under the WTO Agreement on
Sanitary and Phytosanitary Measures (SPS Agreement) and the General
Agreement on Tariffs and Trade 1994.

A stated purpose of the standards in the proposed U.S. legislation
is to restrict advertising promotional practices most likely to
entice youth into tobacco use, while affording ample opportunity to
market tobacco products to adults. Like menthol cigarettes (and
unlike other flavored cigarettes), clove cigarettes are not targeted
at youth smokers, Clove cigarettes are estimated to account for only
0.1% of the total number of cigarettes consumed in the United States
and only approximately 0.8% of youth smokers have smoked clove
cigarettes and that number of youths is declining based on recent
studies. Menthol cigarettes, on the other hand, are estimated to
account for approximately 26% of the cigarettes consumed in the
United States and approximately 29.7% of youth smokers smoke menthol
cigarettes. Moreover, there is no scientifically supportable
evidence or risk assessment establishing specific human health risks
associated with clove cigarettes that would justify banning those
cigarettes while continuing to permit the sale of menthol
cigarettes.

These facts are compelling. Imports of Indonesia's clove cigarettes
are prohibited for no reason other than they contain it natural
herbal additive, while U.S. cigarettes containing menthol - a
processed herbal additive - are explicitly exempted from the
prohibition. The Government of Indonesia firmly believes that such
discriminatory treatment is inconsistent with the United States'
International obligations and, if enacted, will have a significant
adverse effect on Indonesian trade.

The Government of Indonesia therefore respectfully asks that you
carefully consider our concerns and, in the Interest of our positive
trade relationship, ensure that both the spirit and the requirements
of the WTO agreements are observed. Further, absent elimination o of
the prohibition on imports of clove cigarettes, pursuant to Article
2.5 of the TST Agreement and Article 5.8 of the SPS Agreement, we
ask the United States to explain how that prohibition is justified.

As you are aware, Indonesia has expressed concern over the Bill at
previous meetings of the Indonesia-US Trade and Investment Council.
We trust that your government would understand the difficulties we
arc faced with, as well as the severity and the urgency of this
matter to our people whose livelihood very much depends on the
existence of the cigarettes industry. We would be very appreciative
of your attention to this matter and would welcome the opportunity
to discuss it further with you, at your convenience.

We look forward to an opportunity in building and strengthening the
robust relationship between our two countries. Thank you,

Yours sincerely,
Mari Elka Pangestu

End text.

HUME

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