Philippines notifies WTO; sets tariff retaliation vs Thailand

MANILA, Philippines — The Philippines has notified the World Trade Organization (WTO) of its intention to retaliate against Thailand by imposing tariffs on vehicle imports for failure to comply with a ruling issued by the organization on a cigarette tax case, but Thailand has blocked the body from discussing the matter during a meeting last week. 

Trade Secretary Ramon Lopez told reporters a notification on the country’s intention to proceed with its retaliatory measure against Thailand was issued to the WTO last week as the latter has not complied with the decision issued by the body on a cigarette tax case which favored the Philippines. 

“We are just getting at least their go-signal it’s okay. If you remember, there have been two appeals and there is another appeal being filed (by Thailand). So, we’re just saying, enough with the appeal. Allow us to implement already,” he said. 

Last December, Lopez wrote to his Thai counterpart to press for compliance to the WTO ruling and invited him to a dialogue to settle the issues, but no reply was given by Thailand. 

The Philippines has tried to reach out to Thailand to settle the dispute three times since September last year, but Thailand has declined to cooperate. 

In 2008, the government filed a case on behalf of Philip Morris Philippines against Thailand for imposition of higher duties on cigarettes from the Philippines. 

Philip Morris Philippines was exporting 30 percent of its output from its Batangas plant to Thailand per year and the latter’s move to discriminate cigarette exports from the Philippines was seen to favor state-owned Thai Tobacco Monopoly which accounted for 80 percent of the Thai market at that time.

In order to protect the Philippines’ interest in the case and as a form of compensation for non-compliance to the WTO ruling, the Department of Trade and Industry (DTI) wants to impose tariff on automobile imports from Thailand. 

The Philippines has chosen to target vehicles as such account for bulk of Thailand’s exports to the country. 

WTO rules allow cross sector retaliation or the imposition of sanctions in a different sector when the complainant sees it impracticable or ineffective to focus on the same sector. 

Following the Philippines’ notification to WTO to retaliate against Thailand,  the matter was supposed to be discussed during the WTO’s Dispute Settlement Body (DSB) meeting in Geneva, Switzerland last Friday. 

Thailand, however, blocked the adoption of such in the agenda, to prevent the DSB from granting the Philippines the right to retaliate.

The DSB chair suspended the meeting and has set it to March 5 to have time to consult with members on the procedural objections of Thailand. 

Given the latest development, Lopez said the Philippines would continue to pressure the WTO to decide soon. 

“What we are fighting for is the relevance of a responsive WTO. This is critical to show the world that countries who follow the rules are also protected by the WTO,” he said. 

Should the Philippines be given notice to proceed with its retaliation against Thailand by the WTO and the DTI decides to impose safeguard measure on vehicle imports after it concludes its investigation on a petition filed by the workers’ group Philippine Metalworkers’ Alliance (PMA), Lopez said there would be double tariffs imposed on Thai vehicles entering the country. 

The DTI launched the preliminary investigation on the petition filed by PMA last month. 

Under Republic Act 8800 or the  Safeguard Measures Act, when increased imports of a product cause serious injury to domestic players, government can impose safeguard measures or duties on imports. 

With Honda Cars Philippines Inc. closing its assembly plant in Laguna later this month, the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) said earlier  government must seriously study any initiatives that will disincentivize domestic auto assembly operation as this will further endanger employment and existing investments.

CAMPI president Rommel Gutierrez said the group understands the DTI needs to follow the WTO process with regard to retaliatory measure. 

“We hope that Thailand and the Philippines will soon come to a mutually agreeable solution to the matter,” he said.