INTRODUCTION

On 23 July 1998, the Dispute Settlement Body (the “DSB”) adopted the Panel Report in Indonesia – Certain Measures Affecting the Automobile Industry. With respect to the 1993 Programme, the Panel found that the local content requirements linked to certain sales tax benefits and customs duty benefits violate the provisions of Article 2 of the Agreement on Trade-Related Investment Measures (the “TRIMs Agreement”) and that the sales tax discrimination aspects violate Article III:2 of the GATT 1994. With respect to the 1996 National Car Programme, the Panel found, inter alia, that Indonesia had acted inconsistently with Article 2 of the TRIMs Agreement and Articles I and III:2 of the GATT 1994, and that the European Communities had demonstrated that Indonesia had caused serious prejudice to the interests of the European Communities within the meaning of Article 5(c) of the Agreement on Subsidies and Countervailing Measures. The Panel recommended “that the Dispute Settlement Body request Indonesia to bring its measures into conformity with its obligations under the WTO Agreement.”

In a communication dated 21 August 1998, Indonesia informed the DSB, pursuant to Article 21.3 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the “DSU”), that it would “fully comply” with the recommendations and rulings of the DSB adopted on 23 July 1998. Indonesia also stated its belief that measures taken by it on 21 January 1998 to repeal the February 1996 Programme constituted “appropriate implementation of the recommendations and rulings of the DSB” concerning the February 1996 Programme. With regard to the 1993 Programme, Indonesia stated the following:

On 21 September 1998, consultations were held pursuant to Article 21.3 of the DSU among Indonesia, the European Communities, Japan and the United States in order to reach agreement on a “reasonable period of time” for the implementation by Indonesia of the recommendations and rulings of the DSB adopted on 23 July 1998. These consultations and further written communications between the parties did not lead to an agreement.