Cigarette tax row
The Philippines has once again asked the WTO dispute settlement body (DSB) for an authority to suspend the country’s concessions to Thailand for products such as motor vehicles exported to Manila.
In a post at the WTO website, the Philippines told the DSB there are only two options left as Thailand continues to avoid compliance with the WTO ruling that it must align its unfair tax treatment on Philippine cigarette exports.
“There are only two options under the reverse-consensus rule of DSU Article 22.6: the DSB granting authorization to suspend concessions, or the DSB referring the matter to arbitration. At this meeting of the DSB, the Philippines asks once again that the DSB grant the Philippines the authority it seeks,” said the Philippines.
The Philippines told DSB that during their 3rd meeting last 24th of July, and further to our 9 March letter, the Philippines presented legal examples and a range of constructive options that could fill the void that has resulted from the AB's formal letter advice of 10 December 2019 of their cessation of operations. A copy of a non-exhaustive list of various alternative arrangements that WTO Members have utilized in the past, both recent and not so recent.
Thailand has not, as of yet, responded to the ideas contained in letter of 09 March 2020 and that Thailand is still reviewing the Philippines 24 July and 9 March letters on potential ways forward.
“While the Philippines has always been open to a constructive solution to the issue at hand, the Philippines has been consistent in asserting that it is fully within its rights to seek Recourse under Article 22.2 of the DSU,” said the Philippine letter.
In February this year, the Philippines requested the WTO for retaliation against Thailand to force it to align its tax treatment on the country’s cigarette after WTO’s first favorable ruling in 2011 and winning subsequent appeals from Thailand. Specifically, the Philippines requested the WTO a suspension of concessions covering $594 million in trade.
The Philippines has been looking at imposing additional tariffs on Thailand’s motor vehicle exports to the Philippines. 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. The country’s third biggest import from Thailand is rice. In ASEAN, car imports are at zero duty already.
“We will wait for WTO to give us that authority,” said DTI Secretary Ramon M. Lopez earlier. How long the wait is something Lopez cannot tell. It took more than a decade for the Philippines to finally flex its muscle over Thailand’s continued refusal to obey with the WTO ruling cigar tax ruling under WTO DS 371 case.
Trade and Industry Undersecretary Ceferino Rodolfo, who led an inter-agency Philippine Panel that successfully defended the country’s trade and economic policies before 164 WTO Members during the Philippines’ 5th Trade Policy Review in Geneva on Feb 26-28 said “The Philippines has and will exercise its rights and uphold the interests of Filipinos and of Philippine-based enterprises; and in the process, demonstrate that the WTO works.”
Rodolfo also chairs the country’s Technical Committee on WTO Matters.
The exercise of a legal trade measure is a unilateral right of a WTO member country.
Rodolfo noted that while the world has been witnessing countries that resort to unilateral bilateral trade measures and retaliations, the Philippines is even seeking WTO authorization to exercise its rights arising from a dispute that can already be considered a saga starting in 2007.
That having said, Rodolfo said he does not want to preempt what the WTO-DSB will or will not do. “But we are confident that the WTO and its members will uphold the exercise of substantive rights by a decent and responsible member (Philippines) which has been abiding by WTO rules,” he said.
The lead trade negotiator stressed the Philippines has been a decent and responsible Member of the WTO, abiding by its rules and even spearheading key initiatives (eg in MSME Development and in Trade Facilitation).
The Philippines won the DS WTO DS 371 case in 2011, and the two appeals (2016 and 2019) by the losing Party. The other Party has recently appealed for the 3rd time. But the WTO body that hears the appeals, the Appellate Body, has been rendered non-functioning over an impasse in the appointment of Members. The case has dragged on for a total of 12 years on Thailand’s delaying tactics, affecting the country’s cigarette exports and local tobacco industry.
“As the Philippines has already won the case as well as the two appeals on the case, it is time to say that enough is enough. We cannot let the impasse in the WTO impair our substantive rights. Hence, we have sought authorization to already retaliate,” he said.