A spirited appeal

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

The Philippines appealed its quite surprising and bizarre loss in “Philippines -- Taxes on Distilled Spirits” (docketed as DS396 and DS403) to the WTO’s Appellate Body last Sept. 23, 2011. With admirable tenacity and definitely sobriety, it is hoped that a victory can be achieved with the respected judicial body of the WTO similar to that achieved by the Philippines in its cigarette case against Thailand.

The appeal is made more interesting by the fact that, as reported by BusinessWorld, the Finance Department already came up with suggested legislation simplifying the excise tax structure on alcoholic products by adopting a so-called “unitary rate”. Thus, “Distilled spirits such as whiskey, brandy, rum, gin, and vodka will be taxed according to their alcohol content under the new bill. Those that contain 45% alcohol and below will be taxed P42 per proof liter next year, increasing to P80 in 2013 and P150 the following year. Distilled spirits that have a more than 45% alcohol content will be charged P150 per proof liter next year, P233.73 in 2013 and P317.45 in 2014.” The change was drafted with general welfare and health purposes in mind, as well as the additional income of P60 billion it was expected to generate. The foregoing is also in line with President Aquino’s categorization of the amendment as a “priority measure.”

Never mind that the WTO dispute settlement system seems to have a “tendency towards complainant success,” with one research discovering an 81.9% success rate in Panel rulings, and a 78.4% success rate in Appellate Body rulings for complainants. Not relevant as well is that our very own legislators and government officials were “‘aware’ of the WTO incompatibility of the measures as well as that some domestic legislation distinguishes between domestic (‘local’) and imported products,” a fact mentioned in the panel report (see Panel report, page 91, para. 7.172).

Thus, as seen in the Panel report, Senator Ralph Recto would be found commenting 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,” while 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).

In any event, as to the appeal process itself, it must be considered that the Appellate Body cannot determine questions of fact but merely look at issues pertaining to specific points of law. The appeal itself shall be heard by a three member grouping of the AB, all of whom are persons of “recognized authority, with demonstrated expertise in law, international trade and the subject-matter of the covered agreements generally. They are also required to be unaffiliated with any government and are to be broadly representative of the Membership of the WTO.” The Philippines has had the honor of having two of its own be members of the AB: Florentino Feliciano, who served from 1995 to 2001, and currently with Lilia Bautista, whose term ends in December of this year. The AB’s current chairman is American lawyer Jennifer Hillman. Usually, the AB takes three months to wrap up the appeal, after which the report is made to the Dispute Settlement Body which actually votes and decides on the case.

The beauty (and the power) of the WTO dispute system has to do with its speed and efficiency. It is, simply put, the most effective international dispute settlement system around today. It has great credibility as well, the AB particularly for its reputation of real integrity, with its members known to be “independent, impartial, and avoid conflicts of interest.” It is obvious why people consider the WTO dispute settlement system as the “crowning jewel” of the Uruguay Round of negotiations. However, an international trade dispute is still no place for flaky thinking or grandstanding. Particularly because international trade litigations are hugely expensive (not to mention research intensive) affairs.

All in, evidently an appeal has to -- nay, must be -- made because it will benefit the country to do so. God knows how.


Drinks with the TT: Supernatural

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

In line with my continuing obsession to coax the Financial Times to invite me for an interview involving a meal or drink, here is another TT interview: The roadhouse was deserted, except for a truck driver here or there having his dinner of steak, fries, and coffee. The “Martha Special.” The band hasn’t played yet but country music isn’t really my thing so I’m relieved. Raylan Givens would’ve felt at home here. I was sitting at the counter, opting for my usual bourbon and a bourbon when in walks my guests.

They saunter over real casual like but you can tell they’ve already memorized the layout of the place. The taller one shakes hands with me, the older one sits beside me and says: “How the hell have you been?” The typical Sam and Dean welcome. Dean doesn’t wait for an answer and calls the waitress for a cheeseburger, extra bacon, and whiskey. I order my drink. Sam looks at me and I explain the interview. He shakes his head and mutters: “They’ll print anything these days.”

“You mean like the Supernatural books of Carver Edlund?” I shoot back. Sam grimaces, Dean sneers at me. But I know he’s happy with his burger and half-eyeing the waitress behind the counter. “Where is Mr. Chuck Shurley?” The prophet Chuck. Dean shrugs. He’s been missing for some time. They act unconcerned, which assures me Chuck is safe. Although, then again, in their world, one can’t be sure what “safe” means. We talk about wendigos, the Hook Man, Bloody Mary, croatoan viruses, djinns, and clowns. “Don’t forget the long pig!” Dean chuckles. I laugh.

Then just to screw around with his mind, I start to read a passage about them that I found in the Internet: “... and the demons who, even now, must be approaching, the warmth of their embrace comforted them. And then Sam caressed Dean’s clavicle. ‘This is wrong,’ said Dean. ‘Then I don’t want to be right,’ replied Sam, in a husky voice.” Sam groans, Dean glares and throws a french fry. “You do know we’re brothers right!?,” his voice rising. I chuckled, “Why are you defensive? Besides, I didn’t write this ‘Wincest’. Becky Rosen did.” Sam grabs my arm and turns to Dean, “Can I kill him?” Dean looks at me angrily and whispers, “Not in public.” This interview was getting out of hand.

A waiter arrives to take further orders and the brothers loosen up. I offered another round of drinks and they accept. I order three double bourbons. “Super fantastic!” the waiter said and left. Dean finds him strange. I shrug. I ask about Bobby Singer. He’s fine, still his cranky, paranoid research, whiskey-fueled self. And Castiel? The moment I said it I knew I made a mistake in bringing it up. Castiel got power mad after wiping out his enemy angels. Nevertheless, he did utter one of my favorite lines ever: “You know that liquor store down the road? Well, I drank it.” He’s currently a sore spot for the brothers, particularly Dean, who became close friends with the nerdy angel. We’ll find him, was all Dean would say.

I decide to ask about the Impala. Dean’s eyes light up. For me, the Impala is what I find the coolest about the brothers. A black 1967 Chevrolet Impala, with a radio constantly playing Öyster Cult, AC/DC, and Bad Company. The rumbling sound alone would make good company during hours of cross-country driving. The trunk full of mean weaponry ain’t too bad either. “It is,” Dean would say, “my life and sanctuary.” I can understand why.

I ask about how they feel that their parents named (or based their names) from characters in a Jack Kerouac novel. “You mean ‘On the Road?” says Dean. “What??” says Sam, suprised that Dean even knew who Kerouac was. “Hey I read,” shrugs Dean. “No connection really to Sal and Dean, except for the fact that we travel all over,” says Sam. Not really true, I replied. The self-knowledge, the spirituality (at least for Sal) that was acquired during the travels obviously got to you guys too. “Perhaps,” Sam admits. And what of that alternate reality they encountered, where Supernatural was just a TV show? Dean spluttered, “Yeah, that was weird. I mean Jared Padalecky, Jensen Ackles, Misha Collins, what the hell kind of names is that?!”

The roadhouse was getting noisier and the band was getting ready to play. It was time to wrap up the interview. Dean insisted on hitting on the waitress. I tell him to leave her alone. Dean testily declared me as stuffy as Sam. “And you,” I tell Dean, “can go to hell. Again.” Dean chuckles. I want to finish the interview with some pie. Sam rolls his eyes, Dean sighs contentedly. “Gotta have pie,” he says.

The Roadhouse
1 x cheeseburger (extra bacon)
9 x double whiskeys
3 x pies


More on natural law

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

Natural law plays an incredibly significant part in our society. And history. Yet natural law is practically a forgotten part of our legal education. Most legal scholars here probably would rather have it conveniently ignored. Partly from a fondness for Oliver Wendell Holmes but more likely from the prevailing academic fashion of secularism, legal positivism, realism, or relativism, natural law has been pushed to the side. But to allow such would render baseless our quests for independence against foreigners, the civil disobedience movement during the Marcos years, and the subsequent People Power Revolutions. All that could only see justification through natural law.

Holmes was wrong about natural law and profoundly inaccurate when he asserted that “the life of the law has not been logic, it has been experience.” For experience is but a tool to uncover the principles that we seek. Holmes himself would be found inadvertently contradicting his famous dictum in his other writings. And John Austin’s definition of law, which most of us lawyers memorized by heart (“law is a rule of human conduct promulgated by competent authority ...”) is incomplete. Otherwise, everybody should have unquestionably obeyed the Marcos, Estrada, or Arroyo governments. Or even Hitler. And to the secular positivist or relativist charge that “nobody has the right to impose one’s morality on others,” the answer is simple -- every law imposes a morality. The only question is which one to impose. Any law that purports to be free of morals is still a law imposing its own kind of morals. Finally, to criticize natural law by saying that there are no absolutes is a self-defeating argument because to say there are no absolutes is itself relying on an absolutism.

There is nothing mysterious about natural law. It is, simply put, an objective standard of right and wrong that any human being can arrive at through the independent use of right reason. Murder, theft, adultery, for example, are all objectively wrong, for which no circumstance can make right (acts done in self-defense or cultures that accept polygamous marriages are to be differentiated from murder or adultery). Such acts will always be wrong regardless of whether you are Muslim, Christian, agnostic, or atheist. Or American, Arab, Polynesian, or Asian. The objective standard of natural law is distinct, however, from the so-called subjective culpability (which I’ll take up in another future article).

To take an illustration by Princeton’s Robert P. George (taken from his remarks before the American Political Science Association Convention) on the use of reason arriving at an objective norm of right and wrong: “A human being is conceived when a human sperm containing twenty-three chromosomes fuses with a human egg also containing twenty-three chromosomes (albeit of a different kind) producing a single-cell human zygote containing, in the normal case, forty-six chromosomes that are mixed differently from the forty-six chromosomes as found in the mother or father. Unlike the gametes (that is, the sperm and egg), the zygote is generically unique and distinct from its parents. Biologically, it is a separate organism.”

“Assuming that it is not conceived in vitro, the zygote is, of course, in a state of dependence on its mother. But independence should not be confused with distinctness. From the beginning, the newly conceived human being, not its mother, directs its integral organic functioning. It takes in nourishment and converts it to energy. Given an hospitable environment, it will, as Dianne Nutwell Irving says, ‘develop continuously without any biological interruptions, or gaps, throughout the embryonic, fetal, neo-natal, childhood, and adulthood stages -- until the death of the organism.’”

From the foregoing, anybody can now logically conclude, as George does, that: “The scientific evidence establishes the fact that each of us was, from conception, a human being. Science, not religion, vindicates this crucial premise of the pro-life claim. From it, there is no avoiding the conclusion that deliberate feticide is a form of homicide.”

There are numerous instances of human law (or positive law) being in conformity with natural law. One clear example is the Constitution’s Bill of Rights. Admittedly, there are instances when State interests may require the temporary modification or suspension of such rights. Nevertheless, those rights (e.g., to life, liberty and property, freedom of speech, etc.) actually exist independent of the Constitution because such are considered inalienable and inherent (“natural”) to man.

That is why we judge a law’s propriety first on the basis of its constitutionality. But what if an unjust law is ruled as within the bounds of a constitution (such as previous US racial segregation rules) or, worse, when a constitution itself contains unjust provisions (which is always possible, our previous martial law provisions come to mind)? Natural law could now be relied on to correct the situation. It is certainly the only logical basis for “civil disobedience” against a validly promulgated but unjust law. As our Supreme Court declared: “man stands accountable to an authority higher than the State.”


Panda hugger blues

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

What amazes me about the Kalayaan/Spratly islands issue is how logic and reality have completely been thrown out of the proverbial window for God knows what purpose. All of a sudden, we hear or read public commentators or politicians telling Filipinos to refrain from being too “belligerent” against China, to be more considerate and gentle in asserting our national interests, and -- in so many words -- to be suspicious of imperialist US intentions when it proffers help and trust China instead.

What do these guys know about China? Information gleamed from Chinese press kits distributed during cocktail parties hosted by the Chinese? With all due respect (and remember I’m not insulting anyone as I said the words “with all due respect”): “Xie xie, idjits ...” How a country as small and as yet to be wealthy as ours can actually be considered intimidating to a supposedly rich and militarily powerful China is beyond me. Belligerent for merely standing up for our rights? Combative for correctly calling the disputed areas as the West Philippine Sea? Quarrelsome for calling attention to the fact that China is parking military vessels and installations in the area, thus making any future legal or negotiated settlement either inutile or a foregone conclusion?

Some Filipinos have really been duped by China’s game of appearing to be the victim when actually it’s Asia’s resident bully. Have they forgotten the Senkaku area, where a Chinese trawler intentionally rammed itself into Japanese coast guard ships while within disputed waters? Or, as reported by the Wall Street Journal (China’s aggressive new diplomacy, Oct. 1, 2010), when: “Chinese fishing boats harassed a U.S. Navy ship in [international] waters xxx More recently, fleets of Chinese fishing ships illegally entered Indonesian waters in May and June, leading to a stand-off with Indonesian patrol craft that ended when one of the Chinese vessels aimed a large-caliber gun at the Indonesians. xxx China’s new assertiveness is more than a matter of provocation and petulance. It’s also a new state of mind. ... when Hillary Clinton took the side of Vietnam in mildly pushing back against China’s claims to th South China Sea, Foreign Minister Yang Jiechi could barely contain his anger. Calling the Secretary of State’s remarks ‘an attack on China,’ he lectured that ‘China is a big country and other countries are small countries, and that’s just a fact.’”

This is a country whose government can’t be relied on to be reasonable. At the height of the Senkaku incident, Chinese Foreign Ministry spokeswoman Jiang Yu, in an incredible display of undiplomatic speak, dismissed Japan’s statements outright by saying that “it is futile to play tricks by deceiving the world and international public opinion” and that “Japan’s sophistry is untenable.” Actually, all that Japan said was for China to remain “calm.” When ASEAN and the US issued a bland 2010 joint statement reaffirming “the importance of regional peace and stability, maritime security, unimpeded commerce, and freedom of navigation, in accordance with relevant universally agreed principles of international law, including the United Nations Convention on the Law of the Sea (UNCLOS) and other international maritime law, and the peaceful settlement of disputes,” China went hysterical and aggressively claimed “sovereignty over the entire sea and all the island groups within it.”

Actually, this is a country whose government can’t be relied upon. Period. As George Weigel of the Ethics and Public Policy Center recently wrote: “For some time, a modus vivendi was in place between the Vatican and Beijing on the appointment of bishops. It was never codified, but everyone knew the basic rules of the road: No bishops are to be ordained without the tacit approval of the Holy See. The regime brazenly broke that working agreement late last year, going so far as to drag one elderly Chinese bishop by his hair to an illicit episcopal ordination.”

Let us not also forget that this is a country whose government recently executed three of our nationals. That bullied other countries into boycotting the Nobel Peace Prize award to Liu Xiaobo. Whose military has resorted to repeatedly harassing the Philippines in asserting its dubious claims.

So, while indeed we should strive for diplomatic means in resolving the Spratly issue, it should be done without forgetting who we’re dealing with and always with the thought that we’re legally in the right. Because we are. Filipinos who do not understand public international law should shut their yakkity pie-hole and stop peddling wrong information. There’s one public international law and that law is in our favor. Period. Let no Filipino be dumb enough to say China has a legal point. If China thinks they’re right then let’s invite them to settle the issue in court. But, curiously, China does not want to go to court. Which tells you something.

Our country should not be ashamed of standing up for its interests, as well as its (alleged) democratic and human rights values.


More on distilled spirits

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

In an IEL site, I came across a discussion on an 1872 report of the US Senate finance committee on the necessity of imposing higher duties for Russian hemp over Manila hemp. Claiming violation of MFN privileges arising from bilateral relations, the Russians demanded a refund on the “excess” duties paid. The Senate noted that “Russia hemp and Manila hemp are quite unlike in appearance, Russia hemp being of a dull yellowish-green color, while Manila hemp is much brighter and lighter, or almost a cream color. The latter is rather sharp and stiff to the touch, and the former comparatively soft and more yielding. Botanically they are distinct, and differ totally.”

Thus, the US Senate claimed, considering there was no “likeness” between the two hemps, the higher duties were justified. 140 years later, this same issue of “likeness” would play a crucial part in our WTO panel loss in Philippines -- Taxes on Distilled Spirits (docketed as DS396 and DS403). WTO members are prohibited from applying internal taxes on an imported product at rates higher than that applied to domestic “like products.” Clearly, “like products” is a complex term and was actually the focal point of the deliberations in the three previous WTO alcoholic beverage cases involving respondents Japan, Korea, and Chile, respectively. Philippine courts essentially recognize almost the same type of reasoning when dealing with cases that involve the “equal protection clause” of the Constitution.

The panel ruled in our case (see page 57 of the report) that relevant factors to be considered in determining “likeness” include “the product’s properties, nature and quality”; “the product’s end-uses in a given market”; “consumers’ tastes and habits, which change from country to country”; tariff classification, which, if sufficiently detailed, “can be a helpful sign of product similarity”; and “other internal regulations.” The panel also declared that its “analysis will focus on the relevant market in the present case; namely, the Philippines’ market” and kept “in mind the Appellate Body’s statement that the definition of ‘like products’ under Article III:2, first sentence, must be construed narrowly.” Finally, the panel stated that “likeness under the first sentence of Article III:2 is not limited to products that are identical. Indeed, had this sentence intended to cover only identical products, the agreement would have used the word ‘identical’, instead of using the expression ‘like products’.”

In the end, the panel was quite dismissive of Philippine arguments, finding (see page 67) that “with respect to the physical qualities and characteristics of the products, as well as with regard to their end uses, there is similarity between all the relevant imported and domestic distilled spirits, irrespective of whether they are made from the designated raw materials or from other raw materials. With respect to consumers’ tastes and habits, some elements, such as the manufacturers’ marketing campaigns, suggest similarity between all distilled spirits relevant in the present dispute.” Furthermore, “the labels of domestic distilled spirits made from designated raw materials do not suggest to the consumer that these products are different from imported spirits made from other raw materials. With respect to tariff classification, the fact that all distilled spirits at issue in this dispute, irrespective of the raw materials from which they are made, fall within the HS heading 2208 is a further indication of their similarity. Finally, domestic regulations on distilled spirits in the Philippines do not distinguish between imported and domestic spirits, nor between spirits made from the designated raw materials and those made from other raw materials.”

The panel also waived away Philippine arguments regarding “impact on competitive conditions” (page 95), saying such “are misplaced at this stage of the analysis and do not cast doubt on the Panel’s finding that the contested measures afford protection to domestic production.”

Interestingly enough, the Finance Department recently came up with suggested legislation that simplifies the excise tax structure on alcoholic products, adopting a so-called “unitary rate.” Thus, according to BusinessWorld, “Distilled spirits such as whiskey, brandy, rum, gin and vodka will be taxed according to their alcohol content under the new bill. Those that contain 45% alcohol and below will be taxed P42 per proof liter next year, increasing to P80 in 2013 and P150 the following year. Distilled spirits that have a more than 45% alcohol content will be charged P150 per proof liter next year, P233.73 in 2013 and P317.45 in 2014.” Although one wonders why, considering also the general welfare and health purposes of the amendatory draft law, as well as the P60 billion in additional income it was expected to generate, that it wasn’t effected sooner. It certainly could have helped the Philippines stave off a humiliating WTO loss. In any event, President Aquino already categorized the amendment of said taxes to be a “priority measure.”

Taking it all in, an appeal to the WTO’s Appellate Body will be a rather intriguing exercise indeed, for which a rational purpose is to be presumed.