Punch drunk spirits

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

Last August 15, a WTO Panel finally confirmed what everybody else knew: after the country’s historic WTO Appellate Body win in our Thai Cigarettes case, the Philippines disappointingly lost in Philippines -- Taxes on Distilled Spirits (docketed as DS396 and DS403). The Panel ruled that the excise taxes on imported distilled spirits, such as Jack Daniel’s and Jim Beam, as well as Spain’s Brandy de Jerez, are discriminatorily 10 to 50 times higher than those produced in the Philippines.
United States Trade Representative Ron Kirk gleefuly announced that the "ruling demonstrates the commitment of the United States to combat trade barriers wherever they occur. [The] Panel Report confirms that the Philippines’ taxes on imported distilled spirits are discriminatory and inconsistent with WTO rules. We urge the Philippine government to comply swiftly with the Panel’s recommendations and rulings, and level the playing field for our exports immediately."

The Panel essentially found the imported spirits taxed more than domestic spirits. While the Philippines did argue that domestic distilled spirits are made from indigenous raw materials, such as cane sugar or coconut, and imported spirits are generally made from cereals or grapes, the Panel thought the difference unconvincing, and did not justify a low flat tax for the local products and higher tax rates for imported products. The products in question -- according to the panel -- are practically the same: gins, rums, and whiskies. Thus, according to the Panel, while the Philippine measure gives the appearance of neutrality, it nevertheless is discriminatory and violates the first and second sentences of GATT Article III:2.

The Distilled Spirits Association of the Philippines (DSAP) is certainly trying to put up a brave face. DSAP president Olivia Limpe-Aw has reportedly said that the Panel findings are "not yet binding" and that an appeal shall certainly be made to the WTO’s Appellate Body. For his part, House Speaker Feliciano Belmonte, Jr. was reported to have ordered all deliberations suspended on any bill seeking the amendment of the distilled spirits’ excise tax laws. This apparently upon request of the local industry and despite President Aquino categorizing the amendment of such laws as a "priority" matter.

Nevertheless, an appeal would certainly be interesting. In his 2010 paper, New York University’s Mathew Turk (Why Does The Complainant Always Win At The WTO: A Reputation-Based Theory of Litigation at the World Trade Organization) found a WTO "tendency towards complainant success." Meanwhile, John Maton and Carolyn Maton (Independence Under Fire: Extra-legal Pressures and Coalition Building in WTO Dispute Settlement) discovered an 81.9% success rate in Panel rulings, and a 78.4% success rate in Appellate Body rulings for complainants. The foregoing corroborates the findings of Andrew Guzman of the University of California (The Political Economy of Litigation and Settlement at the WTO) and Juscelino Colares of Syracuse University (A Theory of WTO Adjudication). Colares’ study reported win-rates approaching 90% for the complainants. It’s a win-rate far above that of any domestic tribunal.

More significantly, however, are the statements and admissions made by our very own legislators and government officials, which did not escape the notice of the Panel: "Philippine authorities were ‘aware’ of the WTO incompatibility of the measures as well as that some domestic legislation distinguishes between domestic (‘local’) and imported products, these constitute further evidence of the protective application of the measure" (see Panel report, page 91, para. 7.172). Thus, the Panel noted, Senator Ralph Recto [declared that it] "would be to the interest of the nation if we protect our local manufacturers". Senator Enrile [stated that the purpose of lower tax rates was] "to protect the domestic people." The Department of Finance acknowledged that the current excise tax system needed to be reformed so as "to make it consistent with the [Philippines’] commitments under the WTO." The Department of Trade and Industry declared the excise measure "inconsistent with GATT 1994 as it gives preferential treatment to domestic products produced from indigenous or locally sourced raw materials." The Panel, along with the EU in its first written submission and the US’ response to Panel questions, also noted the following admissions from the 14th Congress: HB 6079 (filed by Reps. Limkaichong. Armaiz, and Teves) -- "The bill addresses the issue of unfair competition between manufacturers of locally produced and of imported alcohol products"; SB 2980 (filed by Sen. Lacson) -- "The bill addresses the issue of unfair competition between manufacturers of locally produced and of imported alcohol products"; and SB 3190 (also by Sen. Lacson) -- "The price-based classification of these products have severely favored locally produced brands." (see Panel report, page 91, footnote 599).

All in all, this case is finely instructive on how to conduct trade policy, legislation, and litigation. Considering the huge amount of time, effort, and definitely money that will go into this appeal, presumably there is some realistic, rational, and studied purpose for it. As I’ve said and will say again: in vino veritas.


Returning to natural law

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

Most of our legal understanding arises from the perspective of the positivist theory of law, which problematically compels one to essentially take the view that a law should still be followed even if such is unjust or immoral. This is perhaps understandable when one considers that a substantial number of our law professors were brought up appreciating the contributions of Oliver Wendell Holmes in legal thinking, particularly his quite popular essay "The Path of the Law."

But there’s another school of legal thinking, one based on natural law. However, the difficulty of the latter has been illustrated by Murray Rothbard as follows: "In the controversy over man’s nature, and over the broader and more controversial concept of ‘natural law,’ both sides have repeatedly proclaimed that natural law and theology are inextricably intertwined. As a result, many champions of natural law, in scientific or philosophic circles, have gravely weakened their case by implying that rational, philosophical methods alone cannot establish such law: that theological faith is necessary to maintain the concept. On the other hand, the opponents of natural law have gleefully agreed; since faith in the supernatural is deemed necessary to belief in natural law, the latter concept must be tossed out of scientific, secular discourse, and be consigned to the arcane sphere of the divine studies. In consequence, the idea of a natural law founded on reason and rational inquiry has been virtually lost. The believer in a rationally established natural law must, then, face the hostility of both camps: the one group sensing in this position an antagonism toward religion; and the other group suspecting that God and mysticism are being slipped in by the back door."

Nevertheless, the prevailing rejection by most local lawyers of natural law is somewhat ironic when one considers the heavy reliance that our legal tradition has on the same. Most recent significant example of which is the Supreme Court’s ruling in Estrada vs. Escritor, which tolerated non-application of the law on the basis of "sincere religious belief." The ruling recognizes the "religious nature of Filipinos" and the "elevating influence of religion in society." As the Supreme Court declared: "man stands accountable to an authority higher than the State."

Indeed, the foregoing ruling should be no surprise to Filipino lawyers considering that natural law strongly runs through the vein of the Constitution. While focus is on Articles II and III of the Constitution (i.e., the non-impairment clause, taken wrongly as separation of Church and State, for which more accurately non-discrimination against any religion was intended), it must also be remembered that the very first sentence of our Constitution actually contains a fervent appeal to our Creator: "We, the sovereign Filipino people, imploring the aid of Almighty God ..." The Constitution goes on to enumerate instances of adherence to natural law: from "truth," the proscription against aggressive war, the preservation of the family, to taking care of the environment.

The Constitution’s reliance on natural law is most strongly seen in the Bill of Rights. Contrary to popular belief, the rights contained therein are not given by the Constitution. Those rights (e.g., to life, liberty, and property, etc.) exist independent of the Constitution because such are considered inalienable and inherent ("natural") to man. There are instances perhaps when State interests may require the temporary modification or suspension of such rights. The Bill of Rights merely serves as a limitation or framework within which that modification or suspension could be made. Now one of those rights considered inalienable and inherent (including those enumerated above) is the freedom to exercise one’s religion.

The beauty of natural law lies in the fact that it proceeds from "right reason," that is, regardless of one’s religious affiliations. Even before St. Aquinas discussed the subject, Aristotle and Cicero had thought about it, then Hobbes and Kant and such other philosophers. The Maturidi, a school of Sunni theology, declares that "the human mind could know of the existence of God and the major forms of ‘good’ and ‘evil’ without the help of revelation." This is illustrated by its proscription on stealing, murder, and adultery.

The problem with the positivist legal theory (which necessarily would be advocated from a purely secular orientation) is that unanchored as it is on any fixed moral principle, even an act such as a law calling for genocide could be legal and should be complied with for the simple reason that it is the law. It is perhaps because of the huge advances in technology and globalization that natural law is attaining a form of resurgence, with legal theorists John Finnis, Germain Grisez, Joseph Boyle, and (my master on the subject, his In Defense of Natural Law should be required reading for law students, lawyers, and policy makers) Robert P. George leading the way.

That’s it for now on the subject but I shall definitely be discussing more about natural law in future articles for this column.


Snappy responses to condomics 3

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

Through a widely publicized speech given by a senator, the Senate launched its own deliberations on the RH Bill. While seemingly coherent, the points raised again fail to persuade. Old arguments were simply rehashed and faulty assumptions employed that in the end only again reveal the paucity of logic of the contraceptive movement. Here, then, are some short simple responses to the main points raised at the Senate.

Contraception is supported by most Catholic theologians. No. The reverse is true. First of all, the doctrines of the Church are not to be taken from the personal opinions of a few theologians. This is the same as thinking that what the law really is can be gleamed by reading one textbook. Secondly, the theologians resorted to by the senator need to have their positions better examined. For example, McBrien has been called "inaccurate" and "misleading" by the U.S. National Council of Catholic Bishops, Bokentotter’s book was said to be "tendentious Modernist ideology masquerading as history" by Professor James Toner, Wilhelm’s book was called a "theological deception" by Catholic Culture, and Dwyer’s writings were critiqued as having "strong roots in a Marxist sociology of knowledge." On the other hand, Giovanni Montini, Karol Wojtyla, Joseph Ratzinger, Steve Ray, John Murray, John Hardon, William Most, Jimmy Akin, Scott Hahn, Janet Smith, Mike Aquilina, Roberto Latorre, Mark Shea, Charles Chaput - one cannot get a better set of philosophers, theologians, and apologists than that and all uphold the doctrine against contraception as an ordinary "universal" Magisterium of the Church.

Liberation Theology is a progressive movement within the Church. Only if you call resorting to discredited Marxist views as "progressive." Liberation Theology, while it makes a good subject for movies and produces nice sound bites, has itself been discredited by the Church for teachings that constitute "deviations... damaging to the faith." The problem with Liberation Theology is its disordered priorities, putting primacy of material needs over the need to have a closer relationship to God. As Benedict XVI so cogently puts it: "the first poverty among people is not to know Christ." Having said that, let us also remember that the Catholic Church is the largest, most efficient, and most effective charitable, pro-poor organization in the world.

Vatican II made the Church "democratic." The Church has always been democratic, in a manner more inclusive in fact than others. St. Thomas More referred to this in his trial, GK Chesterton wrote about it, Pope Benedict XVI keeps referring to such. It’s the Church’s "democracy of the dead," which means that all the Apostles, saints, and the faithful "that have gone ahead of us" have a say. You get a glimpse of this fact if you go to Mass and listen closely to the priest. That is why when somebody refers to surveys or the fact that other countries or religions believe so and so, the same still do not matter when taken in the context of the Church’s tradition mentioned above. The problem with Vatican II (if you can call it that) is not that it instituted "radical" changes in Church teachings (because it didn’t) but that too many people, indulging their modernist or Marxist proclivities, misinterpret the actual documents of Vatican II.

The Pope’s authority has been diminished by Vatican II. Absolutely not true. As for the primacy of the Petrine Office, simply put: if you don’t believe in it you are not Catholic. And if you don’t like that setup, complain to the guy who made it: Jesus Christ (Mt 16:18-19). This has been affirmed actually in Vatican II’s main document, Lumen Gentium. Hence, with regard to the supposed "improper" rejection of the advisory 1963 Pontifical Birth Control Commission’s report, Pope Pius XI simply decided, with the Holy Spirit’s guidance, that nothing in the Commission’s findings justified deviating from Church doctrine and tradition.

We should trust our conscience more than what the priests say. True. But with one important caveat: our conscience should be guided by the Bible, Holy Tradition, and the Church. Why? Because of man’s capacity for self-deception. Anybody who tried to diet or quit smoking knows this. If we do otherwise, we are making ourselves vulnerable to acting on the basis of imperfect information and the transient emotions and desires of the time. As Pope Paul VI says: "[Catholics] must follow the demands of their own conscience enlightened by God’s law authentically interpreted, and sustained by confidence in Him."

The Church’s teachings are far more intellectually precise and nuanced than some people believe. The Church won’t force anyone to follow. Whatever one does ultimately becomes a matter between him and God. But considering the incredibly smart people who’ve defended the Church and the fact that the Church has always been proven right, you might want to take this piece of advice from Archbishop Charles Chaput: "If you’re Catholic and you disagree with your Church, what do you do? You change your mind."



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

We do not wish to increase tensions with anyone, but we must let the world know that we are ready to protect what is ours. We are also studying the possibility of elevating the case on the West Philippine Sea to the International Tribunal for the Law of the Sea, to make certain that all involved nations approach the dispute with calm and forbearance. -- President Benigno Simeon C. Aquino III, 2011 State of the Nation Address

The International Tribunal for the Law of the Sea (ITLOS) was created under the provisions of the Third United Nations Conference on the Law of the Sea, the latter taking effect on Nov. 16, 1994. The ITLOS, based in Hamburg, is entrusted with settling disputes among its 161 parties, with the Philippines being a party on May 8, 1984 and China on June 7, 1996.

So far, 19 cases have been submitted to the ITLOS, the first being the 1997 M/V "SAIGA" Case (Saint Vincent and the Grenadines v. Guinea) case. ITLOS’ most famous case, however, is the Southern Bluefin Tuna Case. It involved the request of Australia and New Zealand for provisional measures against Japan to preserve the population of Southern Bluefin Tuna. In the end, provisional measures were granted, the ITLOS noting that "there is no disagreement between the parties that the stock of Southern Bluefin Tuna is severely depleted."

There is no question, therefore, about the respect which the ITLOS holds in the world of international dispute settlement. The problem here is the complexity of its dispute settlement system and the State sovereignty aspects of ITLOS’ jurisdiction. The ITLOS potentially has jurisdiction over "all disputes and all applications submitted to it in accordance with the Convention. It also includes all matters specifically provided for in any other agreement which confers jurisdiction on the Tribunal (Statute, article 21). The Tribunal has jurisdiction to deal with disputes (contentious jurisdiction) and legal questions (advisory jurisdiction) submitted to it." "Contentious jurisdiction" refers to "disputes concerning the interpretation or application of the Convention, subject to the provisions of article 297 and to the declarations made in accordance with article 298 of the Convention."

Specifically, this refers to "jurisdiction over any dispute which is submitted to it in accordance with Part XV of the Convention concerning the interpretation or application of the Convention (Convention, article 288, paragraph 1; Statute, article 21) and the Agreement relating to the Implementation of Part XI of the Convention." Parties may, however, refer by agreement a dispute that falls under Articles 297 and 298 of the UNCLOS. Under Article 288, paragraph 2, of the UNCLOS, the ITLOS has jurisdiction over any dispute concerning the interpretation or application of an international agreement related to the UNCLOS.

Furthermore, as I wrote a couple of weeks ago, China has to accept the proposal to elevate the case to the ITLOS. The reason is that, unlike domestic tribunals which can acquire jurisdiction by mere service of summons for example, international tribunals operate within the constraints of State sovereignty. In other words, the only way an international tribunal can have jurisdiction over the case is if the States parties to the dispute actually give their consent to be subjected to such jurisdiction. And China has pointedly rejected the jurisdiction of the ITLOS when it made the following declaration upon joining the UNCLOS: "The Government of the People’s Republic of China does not accept any of the procedures provided for in Section 2 of Part XV of the Convention with respect to all the categories of disputes referred to in paragraph 1 (a) (b) and (c) of Article 298 of the Convention."

China’s reference to Article 298 means that "it does not accept any one or more of the procedures provided for in section 2 with respect to one or more of the following categories of disputes": disputes concerning the interpretation or application of articles 15, 74, and 83 relating to sea boundary delimitations, or those involving historic bays or titles; disputes concerning military activities, including military activities by government vessels and aircraft engaged in non-commercial service, and disputes concerning law enforcement activities in regard to the exercise of sovereign rights or jurisdiction excluded from the jurisdiction of a court or tribunal under article 297; and disputes in respect of which the Security Council of the United Nations is exercising its authorized functions, unless the Security Council decides to remove the matter from its agenda or calls upon the parties to settle it by the means provided for in the UNCLOS.

All the foregoing becomes more interesting when we consider the fact that China has a sitting member in the ITLOS: Zhiguo Gao, and we don’t (although we would be entitled to appoint an ad hoc judge should the case indeed reach the ITLOS). So, regardless of Philippine good intentions, the bottom line still is China’s sincerity to have the Spratlys issue resolved in peaceful and just manner.