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NEWS UPDATES 20 October 2009

Indonesia to look into US trade allegations

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Indonesia is taking steps to fight back in a trade row with the US over allegations of subsidies and dumping concerning Indonesia’s coated paper products, reported the Jakarta Post.

The Indonesian government is to respond after the US government announced last Thursday it would initiate an investigation into   allegations by US firms and  unions, says the Trade Ministry’s director general for international trade cooperation Gusmardi Bustami.

“We’ll be ready when they send their questionnaires. We’ll be cooperative and will surely present all the data required.

“The Finance Ministry and the Forestry Ministry [which are also involved in the allegations], among others, will [respond] too,” he told The Jakarta Post last week.

“We’ll [also] cooperate with lawyers hired by the Sinar Mas Group.” Gusmardi said the US government would send its questionnaires a week after the investigation was officially initiated.

The US government is accusing the Indonesian government of providing coated paper producers with subsidies via tax incentives made possible under a 2007 Indonesian government regulation to facilitate investment in priority business lines and/or designated regions.

The regulation, which has since been replaced by a 2008 government regulation, provides eligible companies with income tax cuts of up to 30 percent for six years.

The Finance Ministry and the Forestry Ministry took part in including these business activities within the scope of the regulation’s list of business priorities.

The allegations were brought about by US coated paper producers Appleton Coated LLC., New Page Corporation, SD Warren Company and Sappi Fine Paper North America, as well as the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union.

The companies filed their petition on September 23 with the US Department of Commerce and US International Trade Commission against Indonesian paper producers PT Pabrik Kertas Tjiwi Kimia and PT Pindo Deli Pulp and Paper Mills — both subsidiaries of the Sinar Mas Group — complaining in respect of alleged subsidies and dumping practices.

The petition was also filed against Chinese companies.

Dumping occurs when a manufacturer exports their products to another country at prices below those charged in their home market or below their production costs.

This is the second time the US government has made such allegations  since 2006, when the US Department of Commerce initiated an investigation on dumping and subsidy allegations against Indonesia’s coated-free sheet paper, but then dropped the complaint on November 30 in that year after finding no evidence of negative effects on US producers.

Gusmardi said the US government was also “making things up this time”.

Sharing similar sentiments, Sinar Mas Group executive director Gandhi Sulistianto alleged that the US government was trying “to protect its domestic manufacturers because they are unable to compete with Indonesian and Chinese products”.

“Indonesia’s market share [on the product] is less than 3 percent [a minimum requirement for a country to impose punitive tariffs upon unfair trade] in the US,” he said.

“But if both Indonesia’s and China’s market shares are combined, then that can be quite significant for the US market. If that’s the case, we will be at disadvantage.”

If the investigation can substantiate the allegations, then the US has the right to impose trade barriers on the products from entering its market, usually in the form of higher import duties which would eventually push up the prices of the products, making them less competitive.

Businesses here have long said that in some cases, government supports in helping them against dumping allegations has been minimal.

Indonesian Chamber of Commerce and Industry (Kadin) chairman MS Hidayat has said the government had been giving minimal legal assistance for local companies fighting dumping accusations.


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