A little bit of good news

is the subject of my Trade Tripper column this Friday-Saturday issue of BusinessWorld:

Lost in the midst of all the bad news was a significant event in Philippine legal history. Except for BusinessWorld, nobody reported that a WTO panel issued its report last Aug. 16, 2010, with regard to the case formally entitled "European Communities and its Member States -- Tariff Treatment of Certain Information Technology Products."

Considering that the Philippines has been taking a beating the past few weeks, what with botoxed singers, a bus that killed 41 passengers, a hostage taking that resulted in the unnecessary deaths of seven, and an embarrassing loss at the Ms. Universe pageant, the country can perhaps take small consolation in the fact that it finally won in a state-to-state dispute, albeit as third-party complainants.

The case involved complaints by the US, Japan, and Chinese Taipei (docketed as DS375, DS376 and DS377) against the EC, essentially claiming that the latter had not been respecting their commitments under the Information Technology Agreement (ITA). The EC was supposed to provide duty-free treatment to the products covered under the ITA imported from the complainant countries. The Philippines felt the same way and (as far as DS375 and DS376 are concerned) requested to join in the dispute at the consultation stage.

According to its position, the Philippines has a strong interest in the proper imposition of the ITA commitments by the EC in view of the fact that the Philippines ranks as the 10th highest information technology product supplier to the European Union. In 2005, total EU imports of such products from the Philippines reached $5.4 billion.

The Philippines submitted that it "agrees with the claims of the United States, Japan and Chinese Taipei that the measures of the European Communities and its Member States concerning flat panel displays, set top boxes with a communication function, and multifunctional machines are inconsistent with Articles II:1(a) and II:1(b) of GATT 1994. Furthermore, [the Philippines agrees] that the EC measures concerning set top boxes with a communication function are also inconsistent with Articles X:1 and X:2 of GATT 1994."

On specific points, the Philippines asserted that "the EC [imposed] customs duties on certain FPDs, STBs and MFMs instead of applying duty-free treatment on these as provided for in the EC Schedule." It was also argued that "pursuant to Article 31(1) of the Vienna Convention on the Law on Treaties, a treaty must be interpreted in the light of its object and purpose. Furthermore, as underlined by the panel in EC -- Chicken Cuts (Brazil), the relevant aspects of the WTO Agreement and the GATT 1994 provide that concessions made by WTO Members should be interpreted so as to further the general objective of the expansion of trade in goods and the substantial reduction of tariffs."

The Philippines did note that the EC suspended from Jan.1, 2005, to Dec. 31, 2008, duties on FPDs "with a diagonal measurement of the screen of 48.5 cm or less and with an aspect ratio of 4:3 or 5:4. Duties were suspended for FPDs classifiable under CN subheading 8528.21.90 (or CN subheading 8528.59.90 as of 1 January 2008)." However, "the duty suspension has now expired and has not been renewed. This implies that, as of 1 January 2009, the FPDs that benefited from the above-mentioned duty suspension are now again subject to customs duties." Nevertheless, even "if the duties were suspended again for certain types of FPDs, the Philippines is of the view that the EC would still violate Articles II:1(a) and (b) of the GATT 1994. The violation would exist because the benefit of the zero tariff is made dependent on a number of conditions and terms not set forth in the EC Schedule."

In the end, the WTO panel noted that the EC "indicated that the Commission Regulation Nos. 634/2005 and 2171/2005 would be repealed. In addition, the European Communities has indicated that Commission Regulation Nos. 517/1999 and 400/2006 would be repealed as of October 2009. However, there is no evidence properly before the Panel confirming such repeal. Therefore, the Panel has proceeded on the basis that the said measures are in force."

The panel then declared that "under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment of benefits under that agreement." Accordingly, the panel finds that "to the extent that the European Communities has acted inconsistently with Articles II:1(a), II:1(b), X:1 and X:2 of the GATT 1994, it has nullified or impaired benefits accruing to the [complaining countries] under that agreement." Consequently, it recommended that "the Dispute Settlement Body request the European Communities to bring the relevant measures into conformity with its obligations under the GATT 1994."

An appeal by the EC is expected. And there are still the cigarette and whiskey cases. But for the moment, the country should savor this rare bit of good news.