Indonesia—Certain Measures Affecting the Automobile Industry

Indonesia (defendant) adopted two programs that were challenged as improper subsidies under the World Trade Organization (WTO) Subsidies and Countervailing Measures (SCM) Agreement by the United States and the European Communities (plaintiffs). Both sets of measures involved the Indonesia National Car Program, which granted certain exemptions from luxury tax on sales of cars and from import duties. To qualify for the programs, manufacturers were required to meet minimum local content requirements. One vehicle, the Timor, met these requirements and received the benefits under the National Car Program. The United States did not actually export any similar cars to Indonesia. The European Communities exported the Optima and 306, which were like products. After the program was adopted, the market share for those imported vehicles declined, but the absolute sales numbers either stayed flat or slightly increased. Essentially, the overall market for these vehicles grew. The list and market price of the Timor was significantly lower than the like imported products. The United States and the European Communities asserted that the National Car Program constituted actionable subsidies that were specific subsidies and met the serious-prejudice standard under the SCM Agreement. The General Agreement on Tariffs and Trade (GATT) Panel considered and ruled on these issues.