In­done­sian min­ing law and WTO rules may not be enough for trade

The China Post - - COMMENTARY - BY HU­TOMO BAYU LISTYAGHI

In­done­sia is bind­ing it­self to an in­ter­na­tional or­ga­ni­za­tion that has the ul­ti­mate derog­a­tive de­ci­sion-mak­ing process, namely the World Trade Or­ga­ni­za­tion (WTO) in Geneva.

As a con­se­quence, any na­tional law with in­ter­na­tional trade im­pact should ideally com­ply with the agreed pro­vi­sions within this or­ga­ni­za­tion.

A dis­sent­ing mea­sure will pos­si­bly be chal­lenged un­der the WTO Dis­pute Set­tle­ment Body.

The In­done­sian Min­ing Law, along with its ex­port ban, is prone to vi­o­lat­ing GATT Ar­ti­cle XI: 1, which pro­hibits a mem­ber from us­ing any quan­ti­ta­tive or other non-tar­iff means to re­strict ex­ports.

While this pro­hi­bi­tion is sub­ject to var­i­ous ex­cep­tions, none of these ex­cep­tions can be used for pro­mo­tion of do­mes­tic in­dus­tries.

Prom­i­nent cases that in­volve ex­port bans of nat­u­ral re­sources are Canada’s salmon-her­ring case and the re­cent Chi­nese raw ma­te­ri­als case.

Both of them in­voked the ex­cep­tions un­der GATT Ar­ti­cle XX, yet failed to jus­tify their ex­port bans as nec­es­sary for con­ser­va­tion pur­poses rather than for pro­mo­tion of do­mes­tic in­dus­try.

As it is con­veyed within the pre­am­ble of the WTO agree­ment, the world trade regime rec­og­nizes the need for pos­i­tive ef­forts to en­sure that de­vel­op­ing coun­tries ben­e­fit from trade for their eco­nomic de­vel­op­ment.

To this end, GATT Ar­ti­cle XVIII on Gov­ern­ment As­sis­tance to Eco­nomic De­vel­op­ment al­lows a mem­ber to de­vi­ate from cer­tain GATT obli­ga­tions in or­der to pro­mote in­fant in­dus­tries by us­ing im­port re­stric­tions.

GATT Part IV on Trade and De- vel­op­ment rec­og­nizes specif­i­cally the need for de­vel­op­ing coun­tries to di­ver­sify the struc­ture of their economies and to avoid an ex­ces­sive de­pen­dence on the ex­port of pri­mary prod­ucts.

How­ever, the mea­sures of­fered un­der GATT Part IV fo­cus ex­clu­sively on the im­prove­ment of mar­ket ac­cess and con­di­tions for both pri­mary and pro­cessed prod­ucts.

On the other hand, among nu­mer­ous other pro­vi­sions grant­ing spe­cial and dif­fer­en­tial treat­ment for de­vel­op­ing coun­tries, none of them is con­cerned with the use of ex­port re­stric­tions as a means for eco­nomic de­vel­op­ment.

With the ab­sence of any spe­cific pro­vi­sion to pro­hibit the use of ex­port re­stric­tions and with re­spect to GATT Ar­ti­cle XI: 1, con­cern should shift to­ward the means and in this case tar­iffs re­main the only law­ful means to re­strict ex­ports.

The WTO mem­bers are still free to claim a larger share in the dis­tri­bu­tion of its re­sources through ex­port re­straints, as long as the re­straints take the forms of du­ties, not quan­ti­ta­tive or other non-tar­iff mea­sures so, and also not too high as to cre­ate an im­pact sim­i­lar to an ex­port ban.

Ex­port du­ties are le­git­i­mate means to ex­er­cise a mem­ber’s sovereignty over its nat­u­ral re­source dis­posal.

In­done­sia has rightly im­posed a tax on crude palm oil (CPO) ex­ports.

How­ever, when it comes to the min­ing sec­tor, quan­ti­ta­tive re­stric­tions are im­posed in­stead.

Hence, the per­ti­nent mea­sures should be ex­port du­ties rather than quan­ti­ta­tive re­stric­tions.

‘Jump­ing the tar­iff wall’

This “jump­ing the tar­iff wall” ap­proach to­ward FDI may not have tremen­dous re­sults com­pared to the co­er­cive ex­port ban, but it’s a safer mea­sure con­sid­er­ing the po­tency of the dis­pute ini­ti­ated.

As an ad­di­tion, rev­enues from the du­ties can be chan­neled to­ward in­fra­struc­ture, es­pe­cially for im­prove­ment of elec­tric­ity ser­vices, which is of­ten com­plained about by many com­pa­nies that are re­quired to build smelter fa­cil­i­ties un­der the cur­rent law.

Whereas, if for some rea­son the gov­ern­ment chooses to hold to its ex­port ban on min­ing prod­ucts, ac­cord­ing to GATT Ar­ti­cle XI: 2 (b), In­done­sia should prove that the par­tic­u­lar min­ing prod­ucts are “es­sen­tial” to the ex­ports.

If In­done­sia re­sorts to the an­a­lyt­i­cal in­dex of GATT 1994, “es­sen­tial” is also re­ferred to a prod­uct that is an “in­put” to an im­por­tant prod­uct or in­dus­try.

How­ever, the de­ter­mi­na­tion of whether a par­tic­u­lar prod­uct is es­sen­tial to a mem­ber must take into con­sid­er­a­tion the par­tic­u­lar cir­cum­stances faced by that mem­ber at the time that a mem­ber ap­plied the re­stric­tion.

One can draw the con­clu­sion that In­done­sian do­mes­tic in­dus­try pro­mo­tion strat­egy is some­how twisted.

The CPO, which con­sti­tutes a sig­nif­i­cant por­tion of our ex­ports while at the same time is an im­por­tant in­put to our in­dus­tries, can be pro­moted us­ing strin­gent mea­sures like an ex­port ban.

Mean­while for min­ing prod­ucts, we could use a more law­ful mea­sure like ex­port du­ties. The writer is pur­su­ing a grad­u­ate de­gree at the School of Public Pol­icy, Korea De­vel­op­ment In­sti­tute.

Newspapers in English

Newspapers from Taiwan

© PressReader. All rights reserved.