WTO ruling to benefit RP

(taken from the 18 August 2010 issue of BusinessWorld)

A World Trade Organization panel has ordered the European Union to eliminate tariffs on several imported electronic products, a move Philippine experts hailed as a gain for local industry.

The panel issued its decision yesterday, upholding complaints raised by the United States, Japan and Taiwan that EU duties on three products -- flat panel monitors, multi-function fax machines, and TV set top boxes -- were inconsistent with the Information Technology Agreement which requires zero tariffs on high-tech goods.

The report will become a Dispute Settlement Body ruling in 60 days unless a consensus rejects it or parties appeal the decision, based on WTO procedural rules.

"Having found that the European Communities has acted inconsistently... we recommend that the Dispute Settlement Body request the European Communities to bring the relevant measures into conformity with its obligations...," the report states.

The decision’s publication yesterday moves forward a dispute which was first raised in early 2008 when the three complainants requested talks with the EU to settle the matter.

The EU argued that the disputed products were not covered by the treaty as technological modifications made them far removed from the original definition of electronics qualified for zero tariffs.

The consultations failed and a WTO panel was later established, with the Philippines signing on along with other countries as third party participants.

The Philippines cited its strong interest in the case, claiming it was the 10th largest electronics supplier to the EU, an executive summary of the Philippines statement which was included in the panel report’s annex showed. Last year, electronic components accounted for roughly two-thirds of the Philippines total export sales to the world, official data show.

The country argued that whether or not the EU was correct to classify the disputed products into headings that were exempt from the trade treaty, the end result was still one that violated trade rules.

"With this report, hopefully there will be better opportunities for the electronics industry here. We’re looking forward to working with the EU in ensuring their new rules will be consistent with WTO [commitments]," Jeremy I. Gatdula, one of the lawyers that assisted the Philippine delegation, said in a telephone interview yesterday.

"We should take this as an indicator that the WTO does work in favor of Philippine businesses. Firms should be more comfortable working within the WTO system," Mr. Gatdula added.

The Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) likewise lauded the development.

"We supported the [complainants] in this case. It’s good for us because there are companies in the Philippines who are into those [product] lines," SEIPI President Ernesto B. Santiago said in a text message yesterday.

He was unable to quantify the added boost the ruling would lend to export sales, saying only that the decision "opens up a barrier to free trade with the EU."

The group expects industry export sales to grow by 25-30% this year after declining by more than a fifth to $22.173 billion in 2009.

The United States Trade Representative Office, for its part, tagged the development as a "victory for US technology manufacturers and workers," especially as global exports of these three products were worth a hefty $44 billion last year.

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For a copy of the panel report in European Communities and its Member States — Tariff Treatment of Certain Information Technology Products” (DS375, DS376 and DS377) , click here.