Settling outside the WTO: the case of the Indonesia-US kretek cigarette trade dispute, 2010–2014

ABSTRACT

In 2010, Indonesia officially filled a complaint to the World Trade Organization (WTO) over a dispute regarding the US import ban on clove cigarettes. Despite the fierce exchange of arguments in the WTO Dispute Settlement Body (DSB), in 2014, Indonesia and the US agreed to cease the formal pursuit and resolve trade disputes through signing of a Memorandum of Understanding (MoU) encompassing a more comprehensive trade partnership. This paper examines the reasons behind Indonesia’s preference for settling the clove cigarette dispute by signing the MoU with the US, stemming from the Indonesian Government’s perception of the shared benefits generated and WTO DSB’s institutional weaknesses. The MoU also allows the Indonesian Government to advance its foreign policy agenda and its trade diplomacy objectives, offering broader sets of advantages.

KEYWORDS:

• WTO
• shared benefits
• trade diplomacy
• dispute settlement

Acknowledgements

We would like to thank the editor and reviewers for the constructive feedback that improved the article. This work is supported by the Research and Technology Transfer Office, Bina Nusantara University as a part of Bina Nusantara University’s International Research Grant with contract number: No.026/VR.RTT/IV/2020.

Disclosure statement

No potential conflict of interest was reported by the author(s).