Thailand given ultimatum to align cigar tax

Published November 27, 2019, 12:00 AM

by manilabulletin_admin

By Bernie Cahiles-Magkilat

The Philippines is giving Thailand up to the first quarter next year to comply with the WTO ruling to remove the discriminatory tax treatment on its tobacco exports in a last ditch effort before the country exercises its trade retaliatory right against the fellow ASEAN country.

Trade and Industry Secretary Ramon M. Lopez told reporters the Philippine Mission to WTO in Geneva has been notified of the country’s plan to impose safeguard measure against Thailand.

He, however, said that the Philippines will have yet to notify the WTO by the first quarter next year.

“We’ll be done ‘til next year or by January or early next year we should have something already,” he said noting that will be the last ditch effort to make Thailand comply.

“We’ll communicate again. We’ll write them directly,” he said.

Lopez was hoping to bring up the matter directly to the Thai Trade Minister at the recent ASEAN-Korea Commemorative Summit in Busan, but his counterpart was not in the event.

“I will talk to them. We will work on that, our move is for them to follow,” he said.

The government is seriously studying a possible trade remedy, most possibly a safeguard duty, on Thailand’s car exports to the Philippines in retaliation to its fellow ASEAN country’s continued refusal to comply with the WTO ruling on cigarette taxes.

Earlier, Trade and Industry Undersecretary Ceferino S. Rodolfo said the DTI has already instructed the Philippine Mission to WTO in Geneva to request the dispute settlement body secretariat to a meeting with Thailand to lay the Philippine position.

Rodolfo said the process can be fast saying the Philippine government may exercise its “retaliatory rights by December or before end of this year.”

But Lopez would like to wait it out. “If they would not still comply, then we will be forced to move for the retaliatory,” Lopez said.

While Lopez supports the review towards the exercise of a retaliatory trade remedy, he stressed, “We have to study well,” noting there will still be negotiation and hopefully Thailand would compensate for the injury caused on cigarette exports.

If Thailand still refuses, Lopez, said he would prefer the use of tariffs over quantitative restrictions (QR) noting that QR would be subject to regulations with no revenue impact but at the end there will be higher prices on the affected products.

“But with tariff, there is a clear protection and revenue from the imposition of the tariff rate that is why tariff is usually preferred over QR as a trade remedy,” he said.

Rodolfo further said that the Philippine government has followed all the sequencing agreement with Thailand signed in 2012 over the cigarette dispute settlement or DS 371 before the WTO. The Philippines won in all of its cases against Thailand with favorable WTO ruling, but Thailand remained uncompliant.

Under the WTO rules, the Philippines has the right to retaliate. Generally, the complainant may seek suspension of concession or obligation in the same sector in which the violation or impairment was found. However, if the complainant considers it impracticable or ineffective to remain within the same sector, the sanctions can be in a different sector or the so-called sector retaliation.

Rodolfo explained that since the Philippines does not import much tobacco from Thailand, a retaliation on that same product would not do justice to the economic injury caused by Thailand’s illegal imposition of sanctions on the Philippine export.

“That is why we are looking at automobiles because that is our biggest import from Thailand,” he said.

Thailand is Philippines number one source of automobile imports. From 2014 to 2018, the Philippines imported 428,000 units from Thailand. These are products covered under HS Codes 8703 and 8704 or the tariff lines for automobiles used for the transport of persons and goods.