* WTO to rule in U.S.-Indonesia cigarette dispute-sources
* Indonesia says U.S. clove cigarette ban is unfair
GENEVA, July 20 The World Trade Organisation is
to rule on a dispute between Indonesia and the United States
over a U.S. ban on clove-flavoured cigarettes, trade sources
said on Tuesday.
Indonesia says the United States is abusing health
regulations to shut out clove cigarettes, known as kretek and
very popular in the southeast Asian country, while allowing U.S.
manufacturers to continue to market menthol cigarettes.
U.S. officials say that flavoured tobaccos risk attracting
young people to smoking, and that the ban applies to clove
cigarettes from all countries and so is not discriminatory.
A meeting of the WTO's dispute settlement body agreed to set
up a panel to rule on the dispute, the sources said.
The U.S. had blocked a previous request for a dispute panel
by Indonesia but under WTO rules could not stop it a second
Indonesia told the meeting its clove cigarettes had been
shut out of the market since September last year. It said it had
been trying to resolve the issue with the United States for
several years, and could not wait for U.S. health officials to
complete a review of menthol cigarettes, expected by March 2011.
The United States imported $15.2 million of kretek
cigarettes, almost all from Indonesia, in 2008, and the clove
sticks accounted for less than 0.1 percent of consumption before
the ban, according to Indonesian data, which show menthol
cigarettes making up 28 percent of U.S. consumption.
Foreign tobacco producers have been buying up Indonesian
manufacturers to acquire kretek brands and build on the
potential for normal or "white stick" sales in the world's fifth
biggest tobacco market.
In June last year, the world's No.2 cigarette maker, British
American Tobacco (BATS.L), bought an 85 percent stake in
Indonesia's fourth largest cigarette maker by volume, PT Bentoel
Internasional Investama (RMBA.JK).
Philip Morris International (PM.N) acquired the majority of
Hanjaya Mandala Sampoerna (HMSP.JK) in 2005. Other Indonesian
manufacturers include Gudang Garam (GGRM.JK) and unlisted
(Reporting by Jonathan Lynn; Editing by Jon Loades-Carter)