Indonesia VS South Korea: Anti-Dumping Dispute on Paper Products

In an increasingly interconnected global economy, trade disputes have become a defining feature of state-to-state relations. Among developing countries, Indonesia has demonstrated a maturing capacity to engage in rule-based trade diplomacy, as evidenced by its legal battle with South Korea over anti-dumping measures on paper products in the early 2000s. While the case may not have made headlines in mainstream media, it reflects a significant episode in the practice of economic diplomacy, where a Southeast Asian country leveraged international legal frameworks to defend its export sector.

The dispute ignited in 2002 when South Korea's Korea Trade Commission (KTC) received a petition from domestic paper producers accusing Indonesian exporters, most notably PT Indah Kiat Pulp & Paper, PT Pindo Deli, and PT Pabrik Kertas Tjiwi Kimia of dumping lightweight coated and uncoated paper in the Korean market below their normal value. The allegations claimed these exports caused material injury to Korea's domestic paper industry. In response, the KTC launched its investigation on 14 November 2002 and issued questionnaires to the four Indonesian companies, although PT Pabrik Kertas Tjiwi Kimia failed to respond. On 23 April 2003, preliminary findings indicated dumping margins of 11.56% for Pindo Deli, 51.61% for Tjiwi Kimia, and a de minimis 0.52% for Indah Kiat, with no provisional duties imposed. By 24 September 2003, the KTC finalized its decision: it treated the three Sinar Mas-affiliated firms as a single exporter, applying a collective dumping margin of 8.22%. Additionally, it imposed duties of 8.22% on the Sinar Mas group and 2.80% on April Fine and other Indonesian exporters. These tariffs sharply curtailed Indonesia's paper exports to South Korea, formerly valued at around USD 150 million annually, falling to roughly USD 50 million post-duties. Jakarta swiftly condemned the measures as unjust and covert protectionism, citing deficiencies in the investigation process, specifically transparency lapses and non-adherence to crucial provisions of the WTO Anti-Dumping Agreement. Among Indonesia's core complaints was the KTC's use of "facts available" due to the refusal of participating firms to provide CMI's financial statements, leading to constructed normal values and margins based on secondary data, which Indonesia argued was unwarranted and non-transparent. On 4 June 2004, Indonesia initiated WTO dispute settlement consultations. When no resolution emerged, a WTO panel was established on 27 September 2004. Panel hearings in early 2005 culminated in a report on 28 October 2005, where the panel concluded that Korea's investigation violated key ADA obligations, particularly in due process, transparency, data verification, and injury analysis and that the adopted duties lacked proper justification.  

In June 2004, Indonesia formally initiated dispute settlement proceedings at the World Trade Organization. After preliminary consultations with South Korea yielded no resolution, the matter advanced to the establishment of a WTO dispute panel. Indonesia's legal argument centered on the inconsistency of South Korea's methodology in calculating dumping margins and determining injury. The panel scrutinized the KTC's procedures and found that Korea had indeed violated provisions of the Anti-Dumping Agreement, particularly in terms of procedural fairness and evidence-based analysis. The panel report, issued in October 2005, upheld Indonesia's claims on several counts. It concluded that Korea's determination of injury and causality was not supported by an objective examination of positive evidence. Furthermore, Korea failed to properly disclose the essential facts that formed the basis of its decision, violating the transparency requirements of WTO rules. This was a significant legal victory for Indonesia. The decision affirmed that even developing countries could leverage the WTO's dispute settlement mechanism to challenge trade measures by more industrialized economies.

Despite the favorable ruling, enforcement and compliance posed another challenge. South Korea delayed the full implementation of the panel's recommendations, raising the possibility of further escalation. Indonesia had the option to request retaliation under Article 22 of the WTO's Dispute Settlement Understanding (DSU), including the imposition of countermeasures. However, rather than resorting to confrontation, Indonesia pursued quiet diplomacy, emphasizing long-term bilateral relations over short-term trade retribution. Officials from both countries engaged in multiple rounds of consultations, aiming to resolve the dispute without undermining broader economic cooperation between the two states. Finally, in October 2010, South Korea agreed to lift the anti-dumping duties against Indonesian paper products. This resolution came after seven years of legal and diplomatic efforts, marking the end of a protracted dispute that had tested both legal and political strategies.

This case offers several lessons in contemporary trade governance. First, it highlights the relevance of multilateral institutions in offering legal recourse for developing countries. The WTO's dispute settlement body remains one of the few arenas where smaller economies can hold larger trading partners accountable based on legal merit. Second, the dispute showcases the importance of integrating legal capacity into economic diplomacy. Indonesia's success was not merely due to moral claims or diplomatic lobbying but stemmed from its ability to present a structured legal case based on WTO provisions. Third, the episode reflects the value of strategic patience in dispute resolution. Indonesia balanced firmness in defending its national interest with diplomatic tact, avoiding the escalation of tensions with an important regional partner. This approach aligns with Indonesia's broader foreign policy doctrine of "bebas aktif" (independent and active), which emphasizes peaceful resolution and constructive engagement.

The anti-dumping dispute over paper products between Indonesia and South Korea serves as a concrete example of the complexities within modern international trade dynamics and underscores the continuing importance of a rules-based trade system amid rising protectionist tendencies and unilateral trade actions globally. In dispute case DS312, South Korea was found to have violated several key provisions of the WTO Anti-Dumping Agreement (ADA), including the right to be heard, information transparency, data verification, and analysis of industry injury. The WTO Panel ruled that the investigation procedures conducted by the Korea Trade Commission (KTC) were substantively and procedurally flawed. The implementation of the ruling further revealed structural weaknesses in the WTO dispute settlement system, particularly the lack of a direct enforcement mechanism against non-compliant parties, highlighting the urgent need for reforms within the Dispute Settlement Body (DSB) to enhance post-ruling monitoring and better protect developing countries. Indonesia's legal and diplomatic handling of the case demonstrates that multilateralism can still function effectively when states engage seriously with international institutions. The experience not only reinforced Indonesia's credibility in trade diplomacy and strengthened its position in future negotiations, but also reaffirmed the WTO's enduring role as a forum where justice in trade can be pursued, regardless of a country's economic size or geopolitical status. 

REFERENCE:

World Trade Organization. (2005). Panel Report: Korea -- Anti-Dumping Duties on Imports of Certain Paper from Indonesia (DS312). Retrieved from https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds312_e.htm

Korea Trade Commission (KTC). (2003). Final Determination on Anti-Dumping Investigation of Lightweight Coated Paper from Indonesia. Seoul: KTC.

Ministry of Trade of the Republic of Indonesia. (2004). Indonesia Initiates WTO Dispute Against Korea on Anti-Dumping Measures. Retrieved from https://kemendag.go.id/

Sinar Mas Group. (2003). Corporate Reports and Statements: Responses to Anti-Dumping Allegations. Jakarta: PT Indah Kiat Pulp & Paper, PT Pindo Deli, and PT Pabrik Kertas Tjiwi Kimia.