U.S., Indonesia end clove dispute — Brussels official WTO bound — Obama boots Russia from GSP — Froman’s busy week

By ADAM BEHSUDI | 10/06/14 10:05 AM EDT

With help from Doug Palmer and Matthew Korade

STUBBING OUT CIGARETTE DISPUTE — The United States and Indonesia have struck a deal to maintain the U.S. ban on clove cigarette sales in exchange for the promise of resolving trade issues that benefit both nations, sources familiar with the agreement say.

Indonesia filed a World Trade Organization case in 2010 challenging the U.S. ban on clove cigarettes under a 2009 tobacco control law prohibiting the sale of flavored cigarettes. Jakarta won the case, arguing ban was discriminatory because it exempted menthol cigarettes, and the victory was upheld in appeal, giving Indonesia the right to retaliate until either the U.S.  changed the law to comply with the ruling or the two sides reached a settlement.

“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. Instead, both sides are focusing on areas where they can work to improve their trade relationship going forward.”

WELCOME TO MORNING TRADE: It’s Monday, Oct. 6. On this day in 1889, Thomas Edison screened his first motion picture. News? Tips? Reach me at abehsudi@politico.com and@abehsudi or Doug Palmer at dpalmer@politico.com and @tradereporter.

WHAT’S IN THE TOBACCO SETTLEMENT? The U.S. and Indonesia submitted papers with the WTO on Friday to terminate the dispute; in exchange for keeping the ban in place, the United States agreed to do the following:

-- Consider giving duty-free treatmen to imports of insulated ignition wiring sets from Indonesia under a lapsed tariff-cutting program for developing nations known as the Generalized System of Preferences.

-- Postpone a dispute against Indonesia at the WTO over the country’s restrictions on exports of certain mineral and mining products, partly because affected U.S. companies have received export licenses.

-- Refrain from arbitrary discrimination against cigars or cigarillos from Indonesia as the FDA gains new regulatory control over those products. Once the ban was enacted, Indonesian clove cigarettes were modified slightly to allow them to be sold in the U.S. as cigars.

-- Finally, the two countries agreed to intensify talks for an action plan to improve intellectual property protection and enforcement in Indonesia.

EU TRADE COMMISSIONER’S CHIEF MOVES ON — European Union Trade Commissioner Karel De Gucht has less than a month left at the helm, and, as if on queue, his cabinet chief is already planning to move on to bigger and better things.

Marc Vanheukelen tells POLITICO he’s been picked to be the next EU ambassador to the WTO, starting Sept. 1, 2015. The European Commission’s diplomatic branch handles the selection process for EU ambassadors, so Vanheukelen’s nomination doesn't require require confirmation by a legislative body.

Vanheukelen, a Belgian like De Gucht, will replace Greece’s Angelos Pangratis, who has held the position since January 2011. Vanheukelen has previously held other senior level positions within the diplomatic branch’s external relations division, including working as the unit head for relations with the U.S. and Canada. He also worked as deputy cabinet chief for De Gucht when he was Belgium’s foreign minister from 2004 to 2009.

Another Brussels staffing surprise: Trade Commissioner-designate Cecilia Malmstrom will appoint fellow Swede Maria Asenius to head her new trade cabinet, according to Brussels insiders.

Asenius is a familiar face to Malmstrom. She’s currently Malmstrom home affairs cabinet chief and also worked under Malmstrom when she was Sweden’s minister for EU affairs. Previously, Asenius worked as deputy cabinet chief for former Commissioner for Enlargement Olli Rehn and was a policy adviser to Pat Cox, president of the European Parliament from 2002-2004.

OBAMA BOOTS RUSSIA FROM GSP — President Barack Obama on Friday kicked Russia out a preferential trade program for developing countries that had eliminated tariffs on a wide range of Russian imports.

The presidential proclamation said Russia was disqualified from the Generalized System of Preferences program because it had surpassed the income threshold countries must fall under to participate.

In May, Obama first announced his intent to kick Russia out of the program, which provides duty-free entry for nearly 5,000 products from 123 developing countries. The move comes as the administration continues to apply sanctions on Russia for its intervention in Ukraine.

Under the program, which lapsed in July, participants can be removed if they become a “high income” country as defined by the World Bank. Last year, Russia exceeded the high income threshold of just over $12,600 per capita that was set in 2012, according to World Bank statistics. Read Obama’s proclamation here: http://1.usa.gov/1vIaJhV

OBAMA, ABE TO MEET IN BEIJING — Obama and Japanese Prime Minister Shinzo Abe will get together on the sidelines of the Asia Pacific Economic Cooperation leader’s summit in Beijing next month, Japan’s Kyodo News reported over the weekend.

The bilateral talks will largely focus on Japan’s tense relationship with China. But, as expected, the Trans-Pacific Partnership will be part of the discussion, as Abe “plans to urge Obama to work toward an early conclusion of negotiations,” the newswire reports.

A deadlock between the two countries over agricultural market access threatens to block a conclusion to the overall talks as Japan seeks to protect its sensitive items. Abe is also reportedly expected to explain to Obama why Tokyo is reluctant to go as far as the U.S. when it comes to sanctions against Russia. Read  the story: http://bit.ly/1s11TN7

BUSINESSES LOOK FOR INDIA FOLLOW THROUGH — U.S. business groups are expressing cautious optimism about the chances for improved trade relations with India after Prime Minister Narendra Modi’s visit to Washington last week.

POLITICO Pro’s Doug Palmer reports that Modi and Obama agreed during their meetings on Monday and Tuesday to set a goal of increasing bilateral trade to nearly $500 billion, from about $100 billion now.  They also established a bilateral working group on intellectual property, an area where U.S. drug manufacturers and others feel they have been mistreated by India in recent years.

Now, the business community would like U.S. trade officials to quickly follow through by nailing down dates for a meeting of the Trade Policy Forum, led by U.S. Trade Representative Michael Froman and Indian Commerce and Industry Minister Nirmala Sitharaman, to deliver more concrete results. Read the full story: http://politico.pro/1xU1LBf

USTR: U.S., VIETNAM PROGRESSING ON TPP LABOR — The United States and Vietnam are making “good progress” in negotiations on the labor provisions of the proposed Trans-Pacific Partnership agreement, U.S. Trade Representative Michael Froman said Friday, highlighting a big area of concern for American unions and many Democrats in Congress.

“This will be the strongest labor chapter of any trade agreement anywhere in the world,” Froman told POLITICO in an emailed response to questions about his meeting with Vietnam’s Deputy Prime Minister and Foreign Minister Pham Binh Minh late Thursday afternoon. Pro’s Palmer has the full story: http://politico.pro/1pZRzhC

FROMAN’S BUSY WEEK — America’s top trade official will be in the Lone Star State today to talk about the U.S. trade agenda. First, he’ll hold a press conference with Rep. Henry Cuellar (D-Texas) at the San Antonio Chamber of Commerce and then he’ll tour Concord Supply Group with Rep. Pete Gallego (D-Texas).

On Tuesday, Froman is back in Washington to meet with Chile’s official in charge of the TPP talks, Andres Rebolledo.

On Wednesday, Froman will meeting with the Trade and Environment Policy Advisory Committee, including Environmental Protection Agency Administrator Gina McCarthy and Department of Interior Secretary Sally Jewell. Froman also has scheduled separate meetings with AFL-CIO President Richard Trumka and Bangladesh’s ambassador to the U.S., Mohammad Ziauddin.

On Friday, Froman has a spate of meetings with senior trade and finance officials, which coincides with the annual meetings of the International Monetary Fund and World Bank. Froman will hold separate meetings with Netherlands Trade Minister Lilianne Ploumen, Norwegian Foreign Minister Borge Brende, Lithuanian Prime Minister Algirdas Butkevicius, Pakistan Finance Minister Mohammad Ishaq Dar and Bank of England Deputy Governor of Financial Stability Sir Jon Cunliffe. He also has meetings with International Labor Organization Deputy Director General Sandra Polaski and WTO Director General Roberto Azevedo.

INTERNATIONAL OVERNIGHT:

-- Chile’s TPP trade official, Andres Rebolledo, said he hopes to learn more about the U.S.-Japan bilateral talks, the secrecy of which he says is hindering TPP progress, Reuters reports:http://bit.ly/ZlGdi7

— A European Union nominee for health chief has pledged to oppose ‘chlorine chicken’ imports, also from Reuters: http://reut.rs/1rZ1c75

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