Indonesia - dispute with U.S. over banning the use of clove in cigarettes..

May 20, 2009 - Cloves would be banned as a cigarette flavoring, along with cherry and chocolate, under tobacco legislation entitled the Family Smoking Prevention and Tobacco Control Act the Senate Health, Education, Labor and Pensions Committee is considering. Altria Group Inc., the largest U.S. tobacco company, backs the measure, which would exempt mint- flavored menthol cigarettes such as its Marlboro Smooth or Altria's latest menthol Marlboro Blend No. 54.

Sudjadnan Parnohadiningrat, Indonesia’s ambassador to the U.S., wrote last month to Senate Majority Leader Harry Reid, a Nevada Democrat: Congress would be “blatantly favoring a domestically produced product over an imported one” if it bans cloves and not menthol, Indonesia vows to take the matter to the World Trade Organization if the proposed ban becomes law.

The dispute may force lawmakers to choose between jeopardizing a $22 billion-a-year trade relationship with Indonesia or rewriting legislation that took years to negotiate among lawmakers, anti-smoking advocates such as the Campaign for Tobacco-Free Kids, and Richmond, Virginia-based Altria.

About a fifth of glove exports go to the U.S., and Indonesia says its cigarettes make up 99 percent of the U.S. market for the product. A ban would hurt Indonesian clove farmers and violate WTO rules, said Trade Minister Mari Pangestu. Menthol-flavored products account for about 28 percent of all cigarettes sold in the U.S., compared with 0.09 percent for clove cigarettes, according to the Specialty Tobacco Council Inc., a trade group in Winston-Salem, North Carolina. Among its members is PT Djarum, Indonesia’s leading clove-cigarette manufacturer.

Indonesia is the world’s largest producer of clove cigarettes, known as kreteks, exporting about $500 million worth of the product a year, according to the Indonesian ambassador. PT HM Sampoerna, Indonesia's largest cigarette producer, a unit of Philip Morris International Inc., which was spun off from Altria last year.
Kreteks, made from a mixture of cloves, tobacco and other additives, deliver more nicotine, carbon monoxide and tar than conventional cigarettes, according to the Centers for Disease Control and Prevention in Atlanta.

Clove-flavored products are known as “trainer cigarettes,” and may lead to more tobacco use, a study by the National Institute of Drug Abuse found in 2006.

A trade complaint by Indonesia would hinge on whether the U.S. can prove to the WTO that it’s banning clove cigarettes for health reasons and not to protect domestic producers.

Reference: Clove Cigarettes May Prompt U.S., Indonesia Dispute (Update1) by Mark Drajem and Lorraine Woellert, Bloomberg.com, 5/19/2009.

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