Indonesia to seek compensation from US in tobacco spat

JAKARTA (AFP) - Indonesia will seek compensation from the United States for pulling its clove cigarettes from shelves despite a World Trade Organisation (WTO) ruling that deemed the ban discriminatory.

Indonesia's trade ministry said it had lost between US$200 million and US$300 million (S$253 million to S$379 million) annually from the 2009 ban, aimed at helping prevent youths from taking up smoking.

The WTO found that the US had flouted trade rules in its health act - under which cinnamon, coffee, grape and strawberry-flavoured cigarettes were also banned - because it allowed menthol-laced tobacco to stay on the market.

The WTO found in favour of Indonesia's claims that allowing domestically-made menthol cigarettes and not its clove-laced cigarettes was discriminatory.

"We will seek compensation. The procedure under the WTO is if one country ignores the recommendation suggested by the dispute panel, compensation should be discussed," trade ministry director general of international trade cooperation Iman Pambagyo told AFP.

"It's baffling how the US, which is always demanding other countries to abide by WTO disciplines and regulations, is now unable to correct its policy, which is clearly in violation of WTO provisions," Mr Pambagyo said in a statement.

Mr Pambagyo said the ministry had not decided how much compensation it would seek, but that it would reflect losses, estimated at between US$200 million and US$300 million annually.

Indonesia claimed that the livelihoods of over six million citizens depended directly or indirectly on the production of clove-laced tobacco.

While the WTO ruled the ban was discriminatory, it threw out Indonesia's suggestion that a ban on flavoured tobacco in general was unnecessary, calling the US effort to curb youth smoking "legitimate".