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