Jakarta. Indonesia said Tuesday that the World Trade Organization's dysfunctional appellate body had set a challenge in ongoing dispute settlements. And Jakarta’s appeal over a nickel dispute with the European Union (EU) is no exception.

Even so, Indonesia is still adamant about pursuing this appeal, while saying that asking for a panel ruling reconsideration is still part of the organization's procedures.

WTO’s seven-membered appellate body is in charge of reviewing any appeals at the trade body. The members serve on four-year terms. This body of judges, however, has not been able to hear any appeal since December 2019 as the members whose terms had expired have not been replaced. The US has blocked appointments of new members following Washington’s concerns over the body’s judicial overreach in their dispute handling. This situation has put dozens of appeals in a queue, including Indonesia’s ongoing dispute with the EU.

Indonesia’s decision to stop exporting unprocessed nickel ores has ruffled the EU’s feathers as the bloc fears the ban can hamper its stainless steel production. In response, the EU launched a WTO lawsuit against Jakarta. Last year, a WTO panel ruled in favor of the European bloc, prompting Indonesia to lodge an appeal. 

“Filing an appeal is part of the existing procedures at the WTO. We believe the WTO appellate body is the best forum to review the DS592 panel ruling [on the nickel ore export ban]. The Indonesian government views that there were some mistakes in the earlier panel ruling,” Dandy Iswara, a senior Indonesian diplomat assigned to the WTO, told a virtual media briefing on Tuesday.

“Although with the US blocking the appellate body, our appeal remains to be reviewed or processed to this day,” Dandy said.

According to Dandy, Indonesia’s nickel ore export ban is still in effect today as the panel ruling --that favored the EU-- is still not final. He added: “We have only entered the appeal stage. So the WTO has not made a final decision."

Febrian Ruddyard, the Indonesian Permanent Representative to Geneva, told the same presser that it might take some time before Jakarta could finally put an end to the nickel dispute. Even if an appellate body is back in business, it already has 29 pending disputes to handle. More procedures are expected to follow suit once the body makes a decision.

“So I would say there is indeed a crisis at the WTO. That is why we tried to call for a WTO revitalization at the G20 forum. Among others, by addressing the elephant in the room of reactivating the appellate body,” Febrian said.

“Since there is no appellate body, none of the decisions are final. Complainants might try to threaten us with their domestic policies … But if you wish to become a good global citizen, then just follow the rules. The WTO is established to resolve trade disputes,” Febrian said, without referring to the said complainant by name.

The recent G20 forum in India offered a glimmer of hope in the WTO appellate body crisis. G20 leaders agreed to work towards a “fully and well-functioning” dispute settlement system at the WTO by 2024, according to the summit's joint declaration.

Nickel and Industrial Downstreaming
President Joko "Jokowi" Widodo has always lauded the nickel export ban as a success. Jokowi not long ago said that Indonesia used to earn Rp 30 trillion ($1 billion) back when it was exporting raw nickel ores. After the ban came into force in 2020 and Indonesia focused on shipping out processed nickel, the annual export value of the silvery white metal rose to at least Rp 510 trillion.

The export restriction is also part of Indonesia’s grand strategy of pursuing the downstream industry to ensure that only processed mineral ores are exported. This is where Indonesia favors processing its abundant resources at home rather than exporting them unprocessed for more added value. The Indonesian government plans to develop downstream industries across 21 commodities, including palm oil and seaweed.