‘Philippines should demand Thailand’s compliance with WTO cigarette ruling’
The Philippines should compel Thailand to abide by the World Trade Organization’s (WTO) ruling on the cigarette-tax case, after Bangkok slapped tax-evasion charges against Philip Morris Thailand (PMT), a legal expert said over the weekend.
Lawyer Anthony Abad, who was part of the Philip Morris Philippines legal team that won the case, said the time is ripe for Manila to demand Thailand’s compliance with the WTO ruling.
“It’s not just the Department of Trade and Industry [which should initiate proceedings at the WTO]. It’s the whole Philippine government. [Demanding compliance] is an important signal that countries should not be allowed to disregard the decision of the WTO,” Abad said.
“The basis of [Thailand’s] prosecution is undervaluation, and the undervaluation is based on an old system, which was already deemed a violation of the WTO’s Customs Valuation Agreement,” he added.
He noted that under Article 21.5 of the WTO’s Dispute Settlement Understanding, a complainant-country can initiate a formal demand for compliance if it deems that the losing party in a dispute settlement case is not observing the WTO ruling.
Article 21.5 of the WTO’s Dispute Settlement Understanding also provides for the formation of a compliance panel should the Philippines file a complaint against Thailand.
In 2008 the Philippines questioned before the WTO’s dispute settlement body Thailand’s fiscal and customs measures, which affect local cigarette exports.
Manila claimed that Philippine-made cigarettes are being excessively taxed compared to those manufactured in Thailand and manufacturers had to contend with burdensome administrative requirements. Bangkok subjected resellers of imported cigarettes to value-added tax-related administrative requirements but exempted resellers of Thailand-made cigarettes.
The Philippines also claimed Thailand’s customs valuation measures are inconsistent with the WTO’s Customs Valuation Agreement. The WTO ruled in favor of the Philippines, affirmed that Philip Morris’s declared import value was correct, and ordered Thailand to comply with the recommendations and ruling of its dispute settlement body.
Last week Thailand’s Office of the Attorney General charged Philip Morris with tax evasion for supposedly underdeclaring import prices for batches of cigarettes imported from the Philippines between 2003 and 2006.
Philip Morris Thailand faces a $2.2-billion fine if the tobacco giant is found guilty.
However, Abad said the earlier WTO ruling, which was issued with finality, should negate the basis of Thailand’s filing of a criminal complaint against Philip Morris.
Also, Abad added that Manila’s demand for compliance to the WTO ruling could force Bangkok to throw away the tax-evasion charges it filed against PMT.
Experts said the Philippine government cannot afford to just shrug off Bangkok’s latest move, as this could weaken the integrity of the WTO, which serves as a nonpartisan venue where any country can file trade-related disputes against its trading partners. Since the WTO serves as a “depoliticized platform” for dispute settlement, Abad said the possibility of straining diplomatic relations between Manila and Bangkok is remote.
“All sophisticated countries use the dispute settlement system [DSS] rather than allow countries to ignore WTO decisions, including the US and Australia. These are friendly countries that let the DSS settle the case so it doesn’t become arbitrary or discretionary on politics,” he said.