The Philippines told Thailand it will assert its right for retaliation over a decade-long cigarette taxation dispute to ensure that the rules based trading system of the World Trade Organization is respected and enforced as it deliberates on the list of 146 tariff lines such as rice, motor vehicles, auto motive parts, which zero duty privilege may potentially be suspended.
The Tariff Commission conducted a virtual public hearing Tuesday, August 24, on the additional list of 34 tariff lines for inclusion in the original list of 112 under AHTN 2017, which includes rice and automobile imports from Thailand being proposed for suspension of tariff concessions.
If the Philippines made good its threat, these tariff lines, which accounts for Thailand’s biggest export to the Philippines, could lose its zero-duty privilege and will be slapped with higher tariff rates.
At the hearing, representatives from the Thailand government, the Thailand Automotive Industry Association, and the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) took turns in urging the Philippines to terminate the process to avoid adverse economic implications from both sides, not to jeopardize the smooth bilateral relations of the two countries, to protect the economies, the value chains and consumers.
Trade and Industry Assistant Secretary Allan B. Gepty assured the Thai officials, the private stakeholders that all concerns and points raised, including the WTO facilitator-assisted mediation process, as well as adverse consequences of such move are being considered in the ongoing study and evaluation.
Gepty highlighted the fact that the Philippines has impressed all available amicable settlement modalities for the past 12 years to settle the cigarette tax issue with Thailand. It has observed and mindful of all the WTO rules even as the country won all three cases, including appeals over the Dispute Settlement 371 or the cigarette tax dispute against Thailand.
“We don’t want a scenario that Philippines will be constrained or forced to exercise this measure because if that happens let’s say Thailand still not withstanding the processes observed does not make good its obligations under WTO particularly the Customs Valuation agreement not to mention respect and observance to WTO rulings, what will happen if the Philippines will not take a concrete measure to assert its right? That is a big question and our concern there is what will happen to the international trading system, what will happen to the rules based trading system? We have won many cases before the WTO and here we are we could not see a scenario where these rulings can be enforced,” said Gepty.
Because of Thailand’s refusal to follow the WTO rulings, Gepty sad, the Philippines is constrained to do this ultimate remedy: request WTO for retaliation. Such request has led to the preparation of a list of Thai exports whose zero tariff privilege under the ASEAN Trade in Goods Agreement maybe suspended.
“This is an ultimate remedy, we have heard all concerns, we will keep that in mind,” he said noting that the Philippine government is mindful and will ensure to minimize the consequences on industries and consumers for higher prices and impact on supply chains.
“If there is one thing I can assure stakeholders is that in the process of study and consultations all your points and concerns will be seriously factored in because the Philippine government itself if there are other options available we will not offer this ultimate measure but what we do not want to happen also is that the rules based system will just be ignored or ruling of WTO will just be disregarded. We want also to assert our rights under the international trade system,” he said.
Even as the government has tabled the request for retaliation before the Dispute Settlement Body of the WTO, Gepty said the Philippines has continued to engage Thailand via the WTO facilitator-led process.“We are hopeful that Thailand will make good its obligations and I hope Thailand will do the same because if there is one thing to prevent the retaliation or suspension of concessions that is rightfully available to the Philippines, that belongs to Thailand,” he stressed.
Ferdinand Raquelsantos, president of the Philippine Parts Makers Association (PMMA), said the 34 additional tariff lines under AH2012 they proposed for inclusion were also the subject of Executive Order 262 issued in 2004, which provided support to local items produced in the Philippines. “It is right time these to be included in the suspension of concessions and would definitely support local production of these items,” he said.
The cigarette tariff dispute stemmed from Thailand’s imposition of higher tariffs on Philippine cigarette exports. The Philippines won in the first round and in the subsequent two compliance cases before the WTO, but Thailand refused to implement the WTO ruling to align its taxation and to discriminate the Philippine cigarettes. Instead, it sued the local Philip Morris Thailand Ltd. and employees over tax valuation issue.
Data showed that in 2019, the tobacco industry provides direct and primary source of livelihood to an estimated 2.17 million Filipinos.
As one fo the high value crops, the tobacco industry has been generating an annual average revenue of P126.6 billion for the government during the past three years 2017-2019. In 2017, the local tobacco manufacturing industry share in Philippine GDP was approximately 0.1 percent.