The Philippines will not stop its ongoing domestic processes for the suspension of trade concessions to Thailand even if it agreed to the creation of a facilitator-led process at the World Trade Organization to come up with a comprehensive solution to Bangkok’s continuing non-compliance to the world trade body’s decision to remove its discriminatory tax treatment on Manila’s cigarette exports. 

This was stressed by Trade and Industry Undersecretary Ceferino S. Rodolfo as he reported that the Philippines has agreed to the creation of WTO facilitator-led process to find a comprehensive solution to the Dispute Settlement 371 case. 

According to Rodolfo, the facilitator-led process will last up to end this month, March, but extendable depending on the agreement of both parties. 

In agreeing to the WTO facilitator-led, Rodolfo said that the Philippines has also made clear that it should be time-bound. If no solution is arrived at and Thailand will continue to defy the WTO ruling after the agreed specific period, the Philippines will make good its threat to retaliate against Thailand. 

“We are decent country and we follow the WTO processes,” said Rodolfo. At the same time, he said “We have to make sure that Thailand understands that at anytime we can trigger the process for this suspension of our concessions.”

As such, he explained that the Philippines is continuing with its domestic processes towards the suspension of the concessions should there will be no resolution within an agreed specific timeframe. 

In fact, the Philippines Tariff Commission (TC) had already conducted a public hearing on the list of tariff lines or products from Thailand that may be subject for countermeasures  should needs arise. The Thai export products to the Philippines identified by the TC that may be subject to higher tariffs include motor vehicles, rice, corn, motor parts, chemicals, among others.

The domestic processes of the TC  along with the technical and working group and the  Committee on Tariff and Related Matters are parallel to the efforts of the Philippines WTO Mission in Geneva to find a comprehensive solution with Thailand on the DS 371 case via the WTO facilitator-led process.

“The Philippines is closely monitoring the progress in the facilitator-led process being undertaken now in Geneva to try to formulate a comprehensive solution to the DS 371 compliance issues of Thailand.

However, the Philippines remains ready, following WTO rules and procedures,  to initiate the process for suspension for concessions,” he pointed out.

Rodolfo explained though that while the TC is determining the potential products and tariff lines which maybe subject to additional tariffs, DTI Secretary Ramon C. Lopez will still have the final say. 

The tougher stance of the DTI on the DSI 371 case at the WTO and domestically had forced Thailand to come to the table and face the Philippines after dodging the issue for a decade already despite several WTO rulings in favor of the Philippines. 

“It is important that we maintain a credible and realistic threat to trigger a WTO rules compliance suspension of concession because that is important for us to be able to forge a comprehensive solution for example through a facilitator-led process,” he said. 

The Philippines though is also trying to balance the situation because a trade retaliation would definitely affect the tobacco farmers in the Philippines. 

A trade retaliation means suspending concession that a country gives to a trading partner by subjecting some of the country’s exports to higher tariffs commensurate to the lost value of the its exported products. For instance, if the Philippines’s cigarette exports lost $600 million due to the discriminatory tax imposed by Thailand, the Philippines will also withdraw tariff concessions on certain Thailand exports to the Philippines commensurate to the $600 million the industry lost because of the unfair tax treatment on its cigarette exports. 

This trade war between the two fellow-ASEAN countries will only make domestic producers, in the case of the Philippines the tobacco farmers, suffer. Thailand is the Philippines’ largest export market for cigarettes, and Philip Morris Thailand sources nearly all of its imports from Philippines’ Philip Morris.

From the Thai side, this also means that the identified products would become more expensive when exported to the Philippines. The inter-agency committee proposed list of products covers 112 tariff lines with existing tariff range of 0-3-5-7-15 and 50 percent under the ASEAN Free Trade Area agreement.

The  list covers a wide ranging product categories including rice, corn, cars, motor vehicle parts, chemicals, and cement imported from Thailand.

The Philippines first filed a DS case against Thailand in September 2008 to challenge the legality of Thailand’s imposition of higher taxes on the cigarette exports of Philip Morris Philippines to its affiliate company Philip Morris Thailand. 

Despite WTO rulings — original panel report, Appellate Body Report, and two compliance panel reports — issued in favor of the Philippines, Thailand ignored the decisions and refused all opportunities to find a constructive solution.