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US seeks sanctions in Indonesia for trade damage

US seeks sanctions in Indonesia for trade damage

The United States wants to impose annual sanctions on Indonesia after winning a trade dispute that it claimed cost USD $350m to domestic businesses last year.

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By Jay Banerjee 08.08.2018

The United States wants to impose annual sanctions on Indonesia after winning a trade dispute that it claimed cost USD $350m to domestic businesses last year. The US has now asked the World Trade Organization (WTO) for permission to introduce sanctions to compensate for the damage caused.

The details of the case featured in a US filing published by the WTO earlier this week. This comes after the US won WTO rulings in 2017 against restrictions implemented by the Indonesian government on a range of goods. These included foods such as grapes, apples, beef, chicken, onions, potatoes and other plant and animal products.

Indonesia did make an appeal to turn over the decision last year, but it lost. The US now claims that Indonesia has not acted in accordance with the ruling and wants significant compensation for the damage done to its own interests.

"Based on a preliminary analysis of available data for certain products, this level is provisionally estimated at up to approximately USD $350m for 2017," the filing released by the WTO on Monday said. "The United States will update this figure annually as Indonesia's economy continues to expand.”

Indonesia’s Trade Ministry Director General of Foreign Trade Oke Nurwan said that the country is still taking time to review the case and make sense of the US’ recent move to impose sanctions. He added that authorities are of the view that Jakarta has already respected and followed the decision by the WTO panel. Nurwan also claimed that rules for food imports to Indonesia have already changed.

The US is unlikely to make headway in its push for compensation in the near future, as these matters generally take a few years to come to fruition. Indonesia is also likely to make strong objections to the considerable size of the annual sanctions proposed by the US.

New Zealand won a similar ruling against Indonesia last year, but there is no indication that it will also pursue a request for sanctions in the coming months. New Zealand said after the WTO ruling that Indonesia’s import restrictions had a detrimental impact on its beef sector, costing around NZD $1bn (USD $673m).

Indonesia has been attempting to forge closer trade ties with the US and recently lobbied senior officials stateside to ensure that it continues to benefit from the Generalized System of Preferences. These special trade terms allow the Southeast Asian nation to enjoy reduced tariffs on exports worth USD $2bn.

The US Trade Representative’s Office first intimated that Indonesia may face removal from that list back in April, when it said that a review of the country’s eligibility was taking place. The US does not like Indonesia’s commitment to protectionist measures that limit trade and investment and create significantly negative effects on American commerce. Indonesia did seek to remove trade barriers on US apples last month, and it also ditched a quota system for beef imports two years ago.

In other news, Indonesia handed the multi-million-dollar superyacht Equanimity to Malaysia on Monday as the US Justice Department looked to suspend legal efforts to seek custody of it. The yacht’s impoundment was part of an anti-kleptocracy investigation involving 1Malaysia Development Berhad, which has caused an ongoing political scandal.

“The government proposes that all proceedings in this action be suspended in order to give the government and any interested claimant the opportunity to inquire of Malaysia through formal channels what its intentions are with respect to the defendant yacht,” the US Justice Department said in a filing on Monday. 

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