The Philippines is planning to impose tariffs on imported vehicles from Thailand in retaliation to Bangkok’s noncompliance to a World Trade Organization (WTO) ruling invalidating its customs and fiscal measures on cigarettes from Manila.
Trade Secretary Ramon M. Lopez said he is asking the Thai government to implement the WTO ruling declaring Bangkok’s tax treatment on Philippine tobacco exports violative of multilateral trading rules. Otherwise, the Philippines will be compelled to impose retaliatory measures, and it will target Thailand where it will hurt the most: vehicle imports.
“I talked to the minister a long time ago to implement it because there was that ruling already,” Lopez said on the sidelines of the 11th World Rice Conference on Wednesday.
“We try to convince first Thailand, but that is our next move. If Thailand will not take any action, we will be forced do the retaliatory move already,” he added.
Lopez disclosed the Philippines would most likely retaliate through the application of duty on Thai vehicle imports, shunning the option of controlling the volume of entry of such product under a quantitative restriction (QR) system.
“To me, tariff is preferred always than QR. Under a QR system, there are rent seekers. It will be difficult since the QR is subject to corruption—the regulatory part of it—and there’s no revenue. There’s an impact on the price in the end, but it will not capture what we call economic rent,” the trade chief explained.
“Whereas if that’s a tariff, there’s a clear bit of protection. There’s revenue [because of] the tariff rate. Tariff will usually be preferred over QR,” Lopez said.
Imported vehicles from Southeast Asian economies, including Thailand, are enjoying duty-free entry to the Philippine market under the region’s trade deal. Combining 2014 to 2018 imports, automobile shipments from Thailand reached roughly 428,000 units.
Lopez is hoping Bangkok will just comply with the WTO ruling to prevent any retaliation on the part of Manila, which may just complicate the trade dispute further.
“We want to pressure Thailand that they have to implement it. Definitely, of this measure, we will have to study it. Preference wise, [I would want to use] tariff. As to what percent, we have to study that,” Lopez said.
In 2008 the Philippines requested consultations with Thailand on a number of Thai fiscal and customs measures affecting cigarettes from the Philippines.
Such measures include Thailand’s customs valuation practices, excise tax, health tax, TV tax, VAT regime, retail licensing requirements and import guarantees applied on cigarette importers. Manila argued that Bangkok administers in a partial and unreasonable manner that it breaches multilateral trading rules.
In 2011 the WTO’s Dispute Settlement Body ruled in favor of the Philippines, ordering Thailand to align its fiscal and customs measures with WTO regulations.
Aside from retaliating, the government is evaluating the imposition of a safeguard measure on imported vehicles, targeting mostly units coming from Thailand and Indonesia, the country’s largest overseas sources of automobiles. The move was triggered by the petition filed by trade union Philippine Metalworkers’ Alliance, which lamented the declining employment in the automotive industry, particularly in manufacturing.
Workers in the automotive industry lodged the petition to impose a safeguard on automobile to stop the alleged import surge of the product, as car makers are reportedly choosing Thailand and Indonesia as their investment destinations in Southeast Asia.