US, Indonesia settle fight over clove cigarettes

The United States and Indonesia on Friday reached a final agreement that maintains a ban on clove cigarettes from the Southeast Asian nation, The Hill has learned.

The deal sets up a framework to resolve a number of trade disputes including one over clove cigarettes that started after President Obama signed a 2009 bill banning the sale and marketing of flavored cigarettes, including cloves, in an effort to discourage children from smoking.

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“The bottom line from the U.S. perspective is that the flavoring ban stays in place and Indonesia agrees the dispute is over,” said a source close to the negotiations.

"Every dispute like this one has an end, and this one ended because both sides agreed that it was creating more problems to their long-term relationship than it was worth,” the source added.  

After U.S. the law went into place, Indonesia pursued and won a World Trade Organization (WTO) dispute that determined the policy was discriminatory because the law still allowed for the sale of menthol cigarettes, which are smoked mostly by adults.

The agreement sets up an arrangement for both sides to work on improving several trade issues. 

The source said that as part of the deal, the United States would not unjustifiably discriminate against certain tobacco products from Indonesia that aren't currently banned but could fall under a new U.S. rule leading to further regulations. 

The nations also agreed that if Congress reauthorizes the Generalized System of Preferences, a trade program to help less developed countries, the U.S. would consider allowing duty-free trade benefits for insulated ignition wiring sets. 

The U.S. also said it won’t pursue dispute settlement over Indonesia’s current restrictions on the export of certain mineral and mining products because the country has issued export licenses to affected U.S. companies.

The two nations also said they would intensify ongoing negotiations to reach a plan to provide better protection and enforcement of intellectual property rights in Indonesia.

Indonesia, the world's top producer of clove cigarettes, first brought its complaint in 2010 arguing that most of its cigarettes are smoked in the United States and that the ban hampered trade between the two nations.

The WTO ruled in September 2011 that the ban was discriminatory, but the White House vowed to keep it in place.

In June, the two nations asked the WTO to suspend arbitration proceedings as they worked toward a deal.