(written in 2004)
In the aftermath of Cancun’s outcome last year, this column, responding to energetic calls from the both the government and the private sector to enter into bilateral and regional free trade agreements, had this to say:
“Re-engineering trade policy to actively seek bilateral deals with richer countries could also perhaps be a mistake. x x x [If] the developing countries have decried the complexity of the subjects involved in multilateral negotiations, these subjects (such as the Singapore issues, agriculture, non-agricultural market access, etc.) will be no less complex in bilateral and regional discussions. If the developing countries lamented the muscular negotiating tactics of developed countries at Cancun, these tactics will be no less demanding and aggressive in bilateral or regional talks. It must be emphasized that the safety mechanisms that multilateralism brings (i.e., the comfort of numbers, transparency, and an established dispute settlement system) are not present to the same degree in bilateral or regional negotiations.”
The past several months then saw the Philippines negotiate or enter into talks with a slew of such agreements, from the Philippines-Japan Economic Prosperity Agreement and the ASEAN-China Free Trade Agreement, to probabilities of agreements with South Korea, India, Australia, and New Zealand (via ASEAN) or exploring a one-on-one FTA with the United States. All of this while the Doha Development Round of multilateral talks at the WTO are still ongoing.
Now The Economist, a staunch advocate of liberalized trade, (in its 18 November 2004 issue; Trade Policy: Not All Trade Agreements Are Good) has the following interesting things to say:
“Alas, the passion for such agreements may be misguided. Economists have long pointed out that the gains from multilateral trade liberalisation are far greater than those from bilateral or regional deals. At best, regional deals offer smaller benefits. At worst, they do damage, artificially diverting trade away from excluded countries or clogging up commerce with fiendishly complicated ‘rules of origin’. These are needed to define whether imported goods, which may consist of inputs from many different countries, qualify for favoured treatment.
x x x
Most bilateral agreements are far from ideal. Those between poor countries often exist more on paper than in practice. Bilateral deals between rich and poor tend to be better implemented, but are marred by restrictive rules of origin and by the routine exclusion of important agricultural products.
In fact, the [World] Bank's boffins point out that most poor countries would be worse off in a world of rampant bilateral deals than they are today. x x x If developing countries all had bilateral agreements with big rich trading partners (the European Union, the United States, Canada and Japan), global income would rise by much less: $112 billion. The rich would scoop all this, and more: $133 billion. Although a handful of developing countries, such as Brazil and China, would gain a bit, poor nations as a group would be worse off than they are today.
While the Bank's exact numbers should be taken with a pinch of salt, the broad lesson is clear. Bilateralism may be a route to freer global trade, but it is, at best, a risky one.”
FTA’s, for all their supposed benefits, are simply tricky propositions. As The Economist would say, “foreign policy, more than economics, drives some of these deals.” Getting concrete interpretations alone of Article XXIV of GATT 1994 (which provides for the creation of FTAs and customs unions) is quite difficult. Furthermore, their very number provides an increasingly complex international trading system. Considering that there have been concerns raised regarding the capacity of the Philippines to keep up with its multilateral trading commitments, this obviously would be multiplied in view of the proliferation of FTAs because not only would the country have to keep track of its own membership commitments but also, for purposes of keeping Philippine competitiveness, keep track of the arrangements of which the Philippines is not a part of but has been entered into by other countries.
Also, by relying on the benefits of FTAs, certain rules would be needed to protect the existence of such benefits. Most significant among these rules would be that pertaining to the rules of origin. Rules of origin, to put it summarily, are those rules that distinguish the product of a non-FTA member from an FTA member. These rules are not only quite complex but also has an immediate and substantial effect on the bottomline of companies that deal in international trade. Consequently, the greater the number of FTAs that a country is a part of, the greater the number of rules of origin that has to be monitored.
Other complex issues that need to be addressed would be the overlapping jurisdictions by the different dispute settlement systems in place between the multilateral trading system and the different FTAs. Another would be the non-tariff subjects of an FTA (considering that tariffs are low enough already) such as market access, the possibility of problems turning up due to inadequate or faulty trade facilitation (such as complicated or ambiguous customs procedures), sanitary and phytosanitary measures, technical barriers to trade, and – perhaps - the issue of smuggling.
This is not to say that FTAs are bad or destructive, as some benefits had been stated (even by this column) to being perhaps achievable if such are entered into. The point simply is that with regard to formulating a policy or view with regard to FTA’s, there is always the need for greater information regarding the environment that surrounds it. For the moment, a certain degree of caution would perhaps be justifiable under the circumstances when even exploring the idea of possible bilateral or regional trading arrangements precisely because there are no categorical indications regarding the direction, benefits, and risks that are concomitant with FTAs. Consequentially, in confronting the reservations raised with regard to FTA’s, we find ourselves again reiterating the very same issue that pervades overall Philippine trade policy and that is the seeming need for a re-evaluation of the way we engage the international trading system.
18.3.08
Trade agreements, executive agreements
(written in March 2003)
There has been a recent slew of trade agreements that the Philippines has either entered into or is planning on signing up. Some are quite significant, particularly the ASEAN-China Free Trade Agreement and the ASEAN-Japan Free Trade Agreement. In addition is the possible early harvest bilateral agreement which is provided for in the ASEAN-China FTA. Could such agreements be considered executive agreements that do not need Senate concurrence? A reading of present laws and rulings relating to matter indicate as much.
A. Philippine Constitution and Treaties
Section 21, Article VII of the Constitution provides that “no treaty or international agreement shall be valid and effective unless concurred in by at least 2/3 of all the members of the Senate.
It is to be noted that under the Constitution, the power to ratify treaties is vested in the President and not, as is commonly believed, in the Legislature. The role of the Senate is confined to simply to giving or withholding its consent to the ratification. The Supreme Court has held that from the municipal law standpoint, executive agreements are different from treaties but from the standpoint of international law, they are equally binding as treaties.
B. Treaties and Executive Agreements
The Supreme Court, citing the case of Altman vs. U.S. (224 U.S. 583) in USAFFE Veterans vs. Treasurer of the Philippines (105 Phil 1030), held that an “international compact negotiated between the representatives of two sovereign nations and made in the name and or behalf of the contracting parties and dealing with important commercial relations between the two countries, is a treaty internationally, although as an executive agreement it is not technically a treaty requiring the advice and consent of the senate’.
In USAFFE, the Supreme Court stated that executive agreements generally fall under two classes: 1) agreements made purely as executive acts affecting external relations with or without legislative authorization which may be called presidential agreements, and 2) agreements entered into in pursuance of acts of congress which have been designated as congressional executive agreements. Thus, it was declared by the Supreme Court that the Romulo-Snyder Agreement may fall under any of these two classes, for precisely on September 18, 1946, the Congress of the Philippines specifically authorized the President of the Philippines to obtain such loans or incur such indebtedness with the Government of the United States, its agencies or instrumentalities (R.A. No. 16, as amended by R.A. 213). Thus, “even granting arguendo that there was no legislative authorization, it is hereby maintained that the Romulo-Snyder Agreement was legally and validly entered into to conform with the second category, namely, ‘agreements entered into purely as executive acts without legislative authorization’. This second category usually includes money agreements relating to the settlement of pecuniary claims of citizens. It may be said that this method of settling such claims has come to be the usual way of dealing with matters of this kind”.
The Supreme Court also held in Commissioner of Customs vs. Eastern Sea Trading that treaties (which will require Senate concurrence for validity) generally refer to basic political issues, changes in national policy and permanent international arrangements; while executive agreements (which do not require such concurrence) refer to adjustments of detail carrying out well-established national policies, and temporary arrangements.
In Adolfo vs. CFI, the Supreme Court ruled that “executive agreements cover such subjects as commercial and consular relations, property relations like parent rights, trademark and copyrights, postal, navigation, settlement of private claims, tariff and trade matters”.
Under Memorandum Circular No. 89, Office of the President, it is provided that, in case there is a dispute as to whether or not an international agreement is purely an executive agreement, the matter is referred to the Secretary of Foreign Affairs who will then seek the comments of the Senate Representative and the legal adviser of the Department, and after consultation with the Senate leadership, the Secretary of Foreign Affairs shall then, on the basis of his findings, make the appropriate recommendation to the President.
C. U.S., Treaties, and Executive Agreements
It is also interesting to note that U.S. rules relating to executive agreements seemingly are in concurrence to our own. To resolve questions as to whether an agreement is a treaty or an executive agreement, the U.S. government issued Department Circular No. 175, dated 3 December 1995, whereby executive agreements are to fall into one or more categories:
1. agreements which are made pursuant to or in accordance with existing legislation or a treaty;
2. agreements which are made subject to congressional approval or implementation; or
3. agreements which are made under and in accordance with the President’s constitutional power. (Department of State Circular No. 175, 13 December 1955; 50 AJIL 785)
The Circular further provides that where there is serious question as to whether an international agreement should be made in the form of a treaty or in the form of an executive agreement made by the president alone, the matter shall be brought to the attention of the Secretary of the Department of State by a memorandum prepared by the officer responsible for the intended negotiation. This memorandum shall first be routed to the Legal Adviser of the State Department and the Assistant Secretary for Congressional Relations (similar to the Assistant Secretary for Liaison with the Department of Foreign Affairs and Congress of the Philippines) for their clearance and comment. Consultation should be made with appropriate congressional leaders and pertinent committees. In this way, even purely presidential or executive agreements can get the full support of the legislative body.
Interestingly enough, further distinctions are also made by certain authorities. Thus:
1. Congressional executive agreements previously authorized where Congress has enacted legislation delegating to the President the authority to enter into an international agreement;
2. Congressional executive agreements subsequently authorized where after an agreement is negotiated, the President seeks authority from Congress to accept the agreement as a binding international obligation of the U.S.;
3. Presidential executive agreements, sometimes termed “inherent” presidential agreements, where the President accepts an agreement as a binding obligation of the U.S. without any participation of congress on the basis of his inherent or constitutional authority; and
4. Treaty executive agreements, where a treaty approved by the Senate leaves certain details of implementation to be worked out by the various governments at a later time, and may thus explicitly or implicitly authorize the President to enter into international agreements to accomplish such legislation.
Under the foregoing, the General Agreement on Tariffs and Trade is considered an executive agreement accepted for the U.S. by its president in 1947 under the then existing Trade Agreements Act Authority. By such reckoning, the 1967 Anti-Dumping Code would also be considered an executive agreement.
D. Trade Agreements
There have been a series of opinions issued by the Department of Justice that increasingly indicate that trade agreements are generally executive agreements and thus have no need of being submitted to the Senate for their concurrence.
Thus, the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area was considered an “agreement [that] need not be ratified by Congress”, merely embodying, as it does, “the guidelines on how trade liberalization on a preferential basis can best be achieved”. The DOJ would go on to give the same opinion with regard to the following trade agreements:
1) Framework Agreement on Services;
2) Framework Agreement on Intellectual Property Cooperation;
3) Protocol to Amend the Framework Agreement on Enhancing ASEAN Economic Cooperation;
4) Protocol to Amend the Agreement on the Common Effective Preferential Tariff (CEPT) for the ASEAN Free Trade Area (AFTA); and
5) Protocol to Amend the Agreement on ASEAN Preferential Trading Arrangements (PTA).
It must be emphasized that with regard to trade agreements, the Congress already delegated to the President its authority to enter into such. Thus, Section 402 of the Tariff and Customs Code declares:
“For the purpose of expanding foreign markets for Philippine products as a means of assistance in the economic development of the country, in overcoming domestic unemployment, in increasing the purchasing power of the Philippine peso, and in establishing and maintaining better relations between the Philippines and other countries, the President is authorized from time to time:
a) To enter into trade agreements with foreign governments or instrumentalities thereof;”
E. Free Trade Areas
As can be seen above, a number of trade agreements entered into or about to be entered into by the Philippines are in the nature of or related to the concept of free trade areas. A short discussion on this is therefore appropriate.
Free trade areas are understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories. The concept of free trade areas has been recognized in Article XXIV of the 1994 General Agreement on Tariffs and Trade. The 1994 GATT, in turn, forms part of the range of agreements informally called the WTO Agreements.
The WTO Agreements have been given concurrence by the Senate (and ratified by the President) in 1994, the validity of such concurrence being fully threshed out in the Supreme Court case of Tanada vs. Angara. It must be emphasized that as Member of the WTO, the Philippines is duty bound in ensuring that its laws, rules, and regulations are consistent with the WTO Agreements. By signing on to the WTO Agreements, the Philippines therefore “recognize[s] the desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries parties to such agreements”. Furthermore, as mentioned above, the concept of free trade areas are provided for in Article XXIV of the 1994 GATT. Said Article clearly provides that: “each contracting party shall take such reasonable measures as may be available to it to ensure observance of the provisions of this Agreement by the regional and local governments and authorities within its territories”.
F. Conclusions
From the foregoing, it would appear that trade agreements, meaning agreements dealing in matters relating to trade or tariff matters, are executive agreements that do not need Senate concurrence. Accordingly, the A S E A N -China FTA and the ASEAN-Japan FTA may be considered as merely those which refer to adjustments of detail carrying out well-established national policies and constitute relatively temporary arrangements. It must be stressed that Philippine policy, as embodied in the Medium Term Philippine Development Plan 2001-2004, has long recognized that the “increasing integration of the Philippines with the rest of the world’s economies provides net benefits to society”. Furthermore, “in the area of regional and international economic cooperation, the government will uphold its commitments under the ASEAN Free Trade Area-Comprehensive Effective Preferential Tariff (AFTA-CEPT), the Asia-Pacific Economic Cooperation (APEC), and the World Trade Organization (WTO)”. The strengthening of the ASEAN is of course a commitment undertaken by the Philippines and one of the ways to strengthen ASEAN (as agreed upon unanimously by the ASEAN members) is by entering into regional free trade arrangements such as those mentioned above.
The Supreme Court, it must be emphasized, ruled in the USAFFE case that “international compact[s] negotiated between the representatives of two sovereign nations and made in the name and or behalf of the contracting parties and dealing with important commercial relations between the two countries, is x x x an executive agreement” not requiring the advice and consent of the Senate. This ruling was further made clear in Adolfo vs. CFI, whereby the Supreme Court declared executive agreements as those which “cover such subjects as commercial and consular relations, property relations like parent rights, trademark and copyrights, postal, navigation, settlement of private claims, tariff and trade matters”.
To the foregoing must be added the fact that the WTO Agreements - of which the Philippines is a signatory and for which the Senate has already provided concurrence thereto - clearly recognizes the concept of free trade areas. Also, the DOJ has consistently opined that with regard to trade agreements, the same needs no concurrence by the Senate. It is well worth adding that United States jurisprudence seems to be in agreement with ours, as the 1947 GATT was considered an executive agreement. Finally, it must be stressed that by legislating the Tariff and Customs Code, the Congress itself delegated its authority to the President to enter into trade agreements.
The reasons stated for the ASEAN-China FTA and the ASEAN-Japan FTA apply also to agreements that are mere components of other trade agreements and a prime example of this would be the bilateral agreements pursuant to the early harvest program provided for under the ASEAN-China FTA. Being a mere component of the ASEAN-China FTA, as the latter can be considered an executive agreement, then, clearly, any early harvest agreement needed to fulfill the provisions of that FTA would necessarily be an executive agreement as well.
Having said that, the conclusions inevitably brought by the foregoing clearly invite difficulties and dangers. Trade agreements, though perhaps merely filling out details of established policy, are however quite significant, with effects definitely trickling down to the smallest Filipino business. Due to the mass of details and technical information contained in such agreements, it is important that ordinary Filipinos and their elected representatives have a say regarding the matter. As the Philippines strives to become truly globally economically competitive, trade agreements are too important and too far reaching in its effects to be left purely in hands of bureaucrats (no matter how experienced or talented they are). A process clearly needs to be established whereby there is a review of the trade agreements being entered into. It would therefore be advisable for laws to be legislated directly dealing with the matter, expressly classifying trade agreements as treaties needing Senate concurrence (or making distinctions among the different trade agreements as are appropriate). Congressional hearings (with a government official or officials clearly designated as responsible for overseeing trade agreements) should also be set up - either annually or at regular periods - for purposes of reviewing trade policy and agreements currently being negotiated into. Finally, the President’s authority to enter into trade agreements should perhaps be re-studied by Congress, with Section 402 of the Tariff and Customs Code being amended to limit the President’s authority to specific delegations subject to certain periods of time.
There has been a recent slew of trade agreements that the Philippines has either entered into or is planning on signing up. Some are quite significant, particularly the ASEAN-China Free Trade Agreement and the ASEAN-Japan Free Trade Agreement. In addition is the possible early harvest bilateral agreement which is provided for in the ASEAN-China FTA. Could such agreements be considered executive agreements that do not need Senate concurrence? A reading of present laws and rulings relating to matter indicate as much.
A. Philippine Constitution and Treaties
Section 21, Article VII of the Constitution provides that “no treaty or international agreement shall be valid and effective unless concurred in by at least 2/3 of all the members of the Senate.
It is to be noted that under the Constitution, the power to ratify treaties is vested in the President and not, as is commonly believed, in the Legislature. The role of the Senate is confined to simply to giving or withholding its consent to the ratification. The Supreme Court has held that from the municipal law standpoint, executive agreements are different from treaties but from the standpoint of international law, they are equally binding as treaties.
B. Treaties and Executive Agreements
The Supreme Court, citing the case of Altman vs. U.S. (224 U.S. 583) in USAFFE Veterans vs. Treasurer of the Philippines (105 Phil 1030), held that an “international compact negotiated between the representatives of two sovereign nations and made in the name and or behalf of the contracting parties and dealing with important commercial relations between the two countries, is a treaty internationally, although as an executive agreement it is not technically a treaty requiring the advice and consent of the senate’.
In USAFFE, the Supreme Court stated that executive agreements generally fall under two classes: 1) agreements made purely as executive acts affecting external relations with or without legislative authorization which may be called presidential agreements, and 2) agreements entered into in pursuance of acts of congress which have been designated as congressional executive agreements. Thus, it was declared by the Supreme Court that the Romulo-Snyder Agreement may fall under any of these two classes, for precisely on September 18, 1946, the Congress of the Philippines specifically authorized the President of the Philippines to obtain such loans or incur such indebtedness with the Government of the United States, its agencies or instrumentalities (R.A. No. 16, as amended by R.A. 213). Thus, “even granting arguendo that there was no legislative authorization, it is hereby maintained that the Romulo-Snyder Agreement was legally and validly entered into to conform with the second category, namely, ‘agreements entered into purely as executive acts without legislative authorization’. This second category usually includes money agreements relating to the settlement of pecuniary claims of citizens. It may be said that this method of settling such claims has come to be the usual way of dealing with matters of this kind”.
The Supreme Court also held in Commissioner of Customs vs. Eastern Sea Trading that treaties (which will require Senate concurrence for validity) generally refer to basic political issues, changes in national policy and permanent international arrangements; while executive agreements (which do not require such concurrence) refer to adjustments of detail carrying out well-established national policies, and temporary arrangements.
In Adolfo vs. CFI, the Supreme Court ruled that “executive agreements cover such subjects as commercial and consular relations, property relations like parent rights, trademark and copyrights, postal, navigation, settlement of private claims, tariff and trade matters”.
Under Memorandum Circular No. 89, Office of the President, it is provided that, in case there is a dispute as to whether or not an international agreement is purely an executive agreement, the matter is referred to the Secretary of Foreign Affairs who will then seek the comments of the Senate Representative and the legal adviser of the Department, and after consultation with the Senate leadership, the Secretary of Foreign Affairs shall then, on the basis of his findings, make the appropriate recommendation to the President.
C. U.S., Treaties, and Executive Agreements
It is also interesting to note that U.S. rules relating to executive agreements seemingly are in concurrence to our own. To resolve questions as to whether an agreement is a treaty or an executive agreement, the U.S. government issued Department Circular No. 175, dated 3 December 1995, whereby executive agreements are to fall into one or more categories:
1. agreements which are made pursuant to or in accordance with existing legislation or a treaty;
2. agreements which are made subject to congressional approval or implementation; or
3. agreements which are made under and in accordance with the President’s constitutional power. (Department of State Circular No. 175, 13 December 1955; 50 AJIL 785)
The Circular further provides that where there is serious question as to whether an international agreement should be made in the form of a treaty or in the form of an executive agreement made by the president alone, the matter shall be brought to the attention of the Secretary of the Department of State by a memorandum prepared by the officer responsible for the intended negotiation. This memorandum shall first be routed to the Legal Adviser of the State Department and the Assistant Secretary for Congressional Relations (similar to the Assistant Secretary for Liaison with the Department of Foreign Affairs and Congress of the Philippines) for their clearance and comment. Consultation should be made with appropriate congressional leaders and pertinent committees. In this way, even purely presidential or executive agreements can get the full support of the legislative body.
Interestingly enough, further distinctions are also made by certain authorities. Thus:
1. Congressional executive agreements previously authorized where Congress has enacted legislation delegating to the President the authority to enter into an international agreement;
2. Congressional executive agreements subsequently authorized where after an agreement is negotiated, the President seeks authority from Congress to accept the agreement as a binding international obligation of the U.S.;
3. Presidential executive agreements, sometimes termed “inherent” presidential agreements, where the President accepts an agreement as a binding obligation of the U.S. without any participation of congress on the basis of his inherent or constitutional authority; and
4. Treaty executive agreements, where a treaty approved by the Senate leaves certain details of implementation to be worked out by the various governments at a later time, and may thus explicitly or implicitly authorize the President to enter into international agreements to accomplish such legislation.
Under the foregoing, the General Agreement on Tariffs and Trade is considered an executive agreement accepted for the U.S. by its president in 1947 under the then existing Trade Agreements Act Authority. By such reckoning, the 1967 Anti-Dumping Code would also be considered an executive agreement.
D. Trade Agreements
There have been a series of opinions issued by the Department of Justice that increasingly indicate that trade agreements are generally executive agreements and thus have no need of being submitted to the Senate for their concurrence.
Thus, the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area was considered an “agreement [that] need not be ratified by Congress”, merely embodying, as it does, “the guidelines on how trade liberalization on a preferential basis can best be achieved”. The DOJ would go on to give the same opinion with regard to the following trade agreements:
1) Framework Agreement on Services;
2) Framework Agreement on Intellectual Property Cooperation;
3) Protocol to Amend the Framework Agreement on Enhancing ASEAN Economic Cooperation;
4) Protocol to Amend the Agreement on the Common Effective Preferential Tariff (CEPT) for the ASEAN Free Trade Area (AFTA); and
5) Protocol to Amend the Agreement on ASEAN Preferential Trading Arrangements (PTA).
It must be emphasized that with regard to trade agreements, the Congress already delegated to the President its authority to enter into such. Thus, Section 402 of the Tariff and Customs Code declares:
“For the purpose of expanding foreign markets for Philippine products as a means of assistance in the economic development of the country, in overcoming domestic unemployment, in increasing the purchasing power of the Philippine peso, and in establishing and maintaining better relations between the Philippines and other countries, the President is authorized from time to time:
a) To enter into trade agreements with foreign governments or instrumentalities thereof;”
E. Free Trade Areas
As can be seen above, a number of trade agreements entered into or about to be entered into by the Philippines are in the nature of or related to the concept of free trade areas. A short discussion on this is therefore appropriate.
Free trade areas are understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories. The concept of free trade areas has been recognized in Article XXIV of the 1994 General Agreement on Tariffs and Trade. The 1994 GATT, in turn, forms part of the range of agreements informally called the WTO Agreements.
The WTO Agreements have been given concurrence by the Senate (and ratified by the President) in 1994, the validity of such concurrence being fully threshed out in the Supreme Court case of Tanada vs. Angara. It must be emphasized that as Member of the WTO, the Philippines is duty bound in ensuring that its laws, rules, and regulations are consistent with the WTO Agreements. By signing on to the WTO Agreements, the Philippines therefore “recognize[s] the desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries parties to such agreements”. Furthermore, as mentioned above, the concept of free trade areas are provided for in Article XXIV of the 1994 GATT. Said Article clearly provides that: “each contracting party shall take such reasonable measures as may be available to it to ensure observance of the provisions of this Agreement by the regional and local governments and authorities within its territories”.
F. Conclusions
From the foregoing, it would appear that trade agreements, meaning agreements dealing in matters relating to trade or tariff matters, are executive agreements that do not need Senate concurrence. Accordingly, the A S E A N -China FTA and the ASEAN-Japan FTA may be considered as merely those which refer to adjustments of detail carrying out well-established national policies and constitute relatively temporary arrangements. It must be stressed that Philippine policy, as embodied in the Medium Term Philippine Development Plan 2001-2004, has long recognized that the “increasing integration of the Philippines with the rest of the world’s economies provides net benefits to society”. Furthermore, “in the area of regional and international economic cooperation, the government will uphold its commitments under the ASEAN Free Trade Area-Comprehensive Effective Preferential Tariff (AFTA-CEPT), the Asia-Pacific Economic Cooperation (APEC), and the World Trade Organization (WTO)”. The strengthening of the ASEAN is of course a commitment undertaken by the Philippines and one of the ways to strengthen ASEAN (as agreed upon unanimously by the ASEAN members) is by entering into regional free trade arrangements such as those mentioned above.
The Supreme Court, it must be emphasized, ruled in the USAFFE case that “international compact[s] negotiated between the representatives of two sovereign nations and made in the name and or behalf of the contracting parties and dealing with important commercial relations between the two countries, is x x x an executive agreement” not requiring the advice and consent of the Senate. This ruling was further made clear in Adolfo vs. CFI, whereby the Supreme Court declared executive agreements as those which “cover such subjects as commercial and consular relations, property relations like parent rights, trademark and copyrights, postal, navigation, settlement of private claims, tariff and trade matters”.
To the foregoing must be added the fact that the WTO Agreements - of which the Philippines is a signatory and for which the Senate has already provided concurrence thereto - clearly recognizes the concept of free trade areas. Also, the DOJ has consistently opined that with regard to trade agreements, the same needs no concurrence by the Senate. It is well worth adding that United States jurisprudence seems to be in agreement with ours, as the 1947 GATT was considered an executive agreement. Finally, it must be stressed that by legislating the Tariff and Customs Code, the Congress itself delegated its authority to the President to enter into trade agreements.
The reasons stated for the ASEAN-China FTA and the ASEAN-Japan FTA apply also to agreements that are mere components of other trade agreements and a prime example of this would be the bilateral agreements pursuant to the early harvest program provided for under the ASEAN-China FTA. Being a mere component of the ASEAN-China FTA, as the latter can be considered an executive agreement, then, clearly, any early harvest agreement needed to fulfill the provisions of that FTA would necessarily be an executive agreement as well.
Having said that, the conclusions inevitably brought by the foregoing clearly invite difficulties and dangers. Trade agreements, though perhaps merely filling out details of established policy, are however quite significant, with effects definitely trickling down to the smallest Filipino business. Due to the mass of details and technical information contained in such agreements, it is important that ordinary Filipinos and their elected representatives have a say regarding the matter. As the Philippines strives to become truly globally economically competitive, trade agreements are too important and too far reaching in its effects to be left purely in hands of bureaucrats (no matter how experienced or talented they are). A process clearly needs to be established whereby there is a review of the trade agreements being entered into. It would therefore be advisable for laws to be legislated directly dealing with the matter, expressly classifying trade agreements as treaties needing Senate concurrence (or making distinctions among the different trade agreements as are appropriate). Congressional hearings (with a government official or officials clearly designated as responsible for overseeing trade agreements) should also be set up - either annually or at regular periods - for purposes of reviewing trade policy and agreements currently being negotiated into. Finally, the President’s authority to enter into trade agreements should perhaps be re-studied by Congress, with Section 402 of the Tariff and Customs Code being amended to limit the President’s authority to specific delegations subject to certain periods of time.
Globalization and the end of Philippine culture
One interesting thing I saw while going through the National Museum’s Rice exhibit is its take on the “kaingin”. According to the exhibit, the kaingin was not the harmful practice that it actually was but only became so because of the demands of “the land hungry and increasingly globalized commerce”. That comment was interesting to say the least.
Never mind the fact that the Philippine population increased because of better diets, better access to better medicines, better medical attention, better access to better communications (in case of emergencies). All of which, mind you, was the result of globalization and increased trade. If ever kaingin became phased out as an agricultural method it was simply because it inefficiently dealt with the demands of a growing society and of change. And change - like death and taxes - is a constant and certain thing in life. You can’t blame globalization for that.
Changes demand innovation and creativity, which then breeds more changes, and so on. Changes in life patterns, culture, politics, science, philosophy, and even religion, are inevitable. Globalization doesn’t necessarily create those changes. It just makes the products of change a whole lot more accessible to a whole lot more people.
Indeed, by the exhibit’s logic, people should use horse drawn carriages and not cars (a foreign invention). Or people should start making their own clothes by needle and thread, instead of buying them from malls. Or write using pens instead of tapping away at computers. And write by candlelight (ala Rizal) and not through fluorescent. But the problem is that even such old fashioned alternatives are all products, one way or another, of globalization.
Ironically, with the Philippines being a mix of Christian or Muslim faiths, of a Republican government, of English speech, of Asian, American, and Spanish cuisines, of fiestas, of rock and pop, of a people of mixed descents, of Hollywood and basketball, globalization should be the last thing it should be bashing. Notably, the last two significant events whereby Filipinos were riveted as one were the death of a Polish pope in Rome and of a Filipino boxing in the US.
But doesn’t globalization lead to a destruction of cultures, leading to that dreaded Western “homogeny”? Doesn’t globalization lead to everything becoming Americanized? The answer to this question is that globalization doesn’t come about because of the dictates of any sole or singular power. The power of globalization is that it provides people with choice. Nobody has ever forced you, at the point of a gun, to eat hamburgers and french fries. Nobody forced you to buy rubber shoes and then forced you to play basketball or football with it. Nobody forced you to watch the latest Hollywood movie or buy the latest rap offering. Nobody is forcing you to buy the latest designer jeans or that affordable but cool wristwatch, or listen to an i-pod. Or buy the latest book on the adventures of Shopaholic or of Frodo.
Globalization is about choice. The world is not being Americanized or Westernized. We are free to choose. To eat curry or dinuguan. To watch Christopher de Leon or Ziyi Zhang. To drink softdrinks or gulaman. To listen to Parokya or U2. To watch Stairway to Heaven or Bubble Gang. Whatever the merits of your choice or the level of quality from which you can choose from, the point is you have a choice.
And the great thing about it is that this choice is not limited to the elite of our society. Thus, the poorer members of our country can now - compared to what was before - have their pick of cellphones, clothes, magazines, food, cd’s, books, the internet and other sources of learning. Ever since the Philippines opened its economy up, a lot of benefits normally reserved for the rich are now enjoyed by the poor. No doubt inequalities still exist and we should work harder to change that (and note, as stated in our last article, how freer trade helps the poor). The point is, far from the threat it is made out to be, globalization is about choice. It is about freedom. If you want a more egalitarian Philippines, you should be embracing globalization.
Never mind the fact that the Philippine population increased because of better diets, better access to better medicines, better medical attention, better access to better communications (in case of emergencies). All of which, mind you, was the result of globalization and increased trade. If ever kaingin became phased out as an agricultural method it was simply because it inefficiently dealt with the demands of a growing society and of change. And change - like death and taxes - is a constant and certain thing in life. You can’t blame globalization for that.
Changes demand innovation and creativity, which then breeds more changes, and so on. Changes in life patterns, culture, politics, science, philosophy, and even religion, are inevitable. Globalization doesn’t necessarily create those changes. It just makes the products of change a whole lot more accessible to a whole lot more people.
Indeed, by the exhibit’s logic, people should use horse drawn carriages and not cars (a foreign invention). Or people should start making their own clothes by needle and thread, instead of buying them from malls. Or write using pens instead of tapping away at computers. And write by candlelight (ala Rizal) and not through fluorescent. But the problem is that even such old fashioned alternatives are all products, one way or another, of globalization.
Ironically, with the Philippines being a mix of Christian or Muslim faiths, of a Republican government, of English speech, of Asian, American, and Spanish cuisines, of fiestas, of rock and pop, of a people of mixed descents, of Hollywood and basketball, globalization should be the last thing it should be bashing. Notably, the last two significant events whereby Filipinos were riveted as one were the death of a Polish pope in Rome and of a Filipino boxing in the US.
But doesn’t globalization lead to a destruction of cultures, leading to that dreaded Western “homogeny”? Doesn’t globalization lead to everything becoming Americanized? The answer to this question is that globalization doesn’t come about because of the dictates of any sole or singular power. The power of globalization is that it provides people with choice. Nobody has ever forced you, at the point of a gun, to eat hamburgers and french fries. Nobody forced you to buy rubber shoes and then forced you to play basketball or football with it. Nobody forced you to watch the latest Hollywood movie or buy the latest rap offering. Nobody is forcing you to buy the latest designer jeans or that affordable but cool wristwatch, or listen to an i-pod. Or buy the latest book on the adventures of Shopaholic or of Frodo.
Globalization is about choice. The world is not being Americanized or Westernized. We are free to choose. To eat curry or dinuguan. To watch Christopher de Leon or Ziyi Zhang. To drink softdrinks or gulaman. To listen to Parokya or U2. To watch Stairway to Heaven or Bubble Gang. Whatever the merits of your choice or the level of quality from which you can choose from, the point is you have a choice.
And the great thing about it is that this choice is not limited to the elite of our society. Thus, the poorer members of our country can now - compared to what was before - have their pick of cellphones, clothes, magazines, food, cd’s, books, the internet and other sources of learning. Ever since the Philippines opened its economy up, a lot of benefits normally reserved for the rich are now enjoyed by the poor. No doubt inequalities still exist and we should work harder to change that (and note, as stated in our last article, how freer trade helps the poor). The point is, far from the threat it is made out to be, globalization is about choice. It is about freedom. If you want a more egalitarian Philippines, you should be embracing globalization.
14.3.08
Of cigarettes and the WTO
Several interesting developments occurred in the dispute settlement front of the WTO. Rulings gave losses to the US on anti-dumping cases relating to India and Thai shrimps, while China is reported to have suffered it’s first ever defeat in a WTO dispute (on auto parts). Meanwhile, the US continues to defend its use of the zeroing methodology for anti-dumping cases. While some may interpret the same as reflecting something amiss amongst the relationships between the trading nations, I tend to view the disputes as a sign that the state of international trade and the world economy in general as relatively healthy despite all the fears about a US recession. It also confirms the much talked about efficiency of the WTO’s dispute system.
In any event, the most relevant of the dispute developments have to do with the case filed by the Philippines against Thailand at the WTO relating to Thai taxes imposed on imported cigarettes. According to reports, Philip Morris Philippines Manufacturing Inc. declared difficulty in attaining export growth targets, with total exports declining from two years ago. PMPMI’s shipments to Thailand have been described as making up to 95 percent of its total exports. The alleged cause of the export slowdown is said to be the Thai measures. Indeed, as alleged in the Philippine complaint, the Thai government does control a major tobacco company, the Thai Tobacco Monopoly, which “is the only business entity authorized by Thai law to produce cigarettes in Thailand”. The main cause of action of the Philippine complaint, therefore, is whether Thailand is violating WTO national treatment provisions.
The case is formally entitled Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines, and docketed as DS371. For purposes of full disclosure, I have to say that I had a hand in the research and analysis relating to the areas on customs valuation and excise tax, which now forms some portions of the Philippine complaint. The complaint also covers health and TV tax, VAT, and dual licensing requirements.
The complaint (actually a “request for consultations”) was dated 7 February 2008. Tellingly, analysis and commentary were already being made on the case by foreign lawyers and in websites as early as 13 February 2008, with BusinessWorld being the first to report on the matter to the Filipino public on 15 February 2008.
Some commentators point to the interesting timing of the complaint, following as it did the news regarding the Altria Group Inc.’s planned spinoff of Philip Morris International and, more substantively, the fact that the complaint came at the same time that negotiations on a protocol to the Framework Convention on Tobacco Control relating to illicit trade in tobacco products began. The effect these developments have on the case (or vice-versa), nevertheless, remains unclear.
The dispute, as a whole, involves the provisions of Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994", which is actually GATT 1947. Confused?), and Article 19 of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the "Customs Valuation Agreement").
Some commentators have referred to the Philippine complaint as Thai Cigarettes II (a landmark trade case during the GATT days relating to health measures), as well as containing elements of the Korea - Beef case. The latter case deals with the validity of dual retail requirements. Indeed, the Philippine complaint does allege that “Thailand requires that tobacco and/or cigarette retailers hold separate licenses to sell domestic and imported cigarettes, respectively. The Philippines understands that the measure in which these discriminatory requirements are contained include the Excise Department Announcement by the Director-General of Excise, dated 12 September 1991, issued pursuant to Article 4, Ministerial Regulation No. 17 B.E. 2534 (1991) under the Tobacco Act B.E. 2509 (1966), and any amendments, implementing measures or other related measures.”
The question, therefore, is how the dual licensing requirement leads to discriminatory treatment against the imported cigarettes and thus a violation of Article III.4 of the GATT, which states that "The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. "
As provided by the rules, the case is now awaiting consultation between the parties. Considering that the livelihood of hundreds, if not thousands, of Filipino farmers are at stake here, this is one trade matter that all Filipinos should be vigilantly monitoring and supporting. One thing should be remembered: of the 9 cases we’ve been a party to in the WTO, we’ve never won yet.
In any event, the most relevant of the dispute developments have to do with the case filed by the Philippines against Thailand at the WTO relating to Thai taxes imposed on imported cigarettes. According to reports, Philip Morris Philippines Manufacturing Inc. declared difficulty in attaining export growth targets, with total exports declining from two years ago. PMPMI’s shipments to Thailand have been described as making up to 95 percent of its total exports. The alleged cause of the export slowdown is said to be the Thai measures. Indeed, as alleged in the Philippine complaint, the Thai government does control a major tobacco company, the Thai Tobacco Monopoly, which “is the only business entity authorized by Thai law to produce cigarettes in Thailand”. The main cause of action of the Philippine complaint, therefore, is whether Thailand is violating WTO national treatment provisions.
The case is formally entitled Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines, and docketed as DS371. For purposes of full disclosure, I have to say that I had a hand in the research and analysis relating to the areas on customs valuation and excise tax, which now forms some portions of the Philippine complaint. The complaint also covers health and TV tax, VAT, and dual licensing requirements.
The complaint (actually a “request for consultations”) was dated 7 February 2008. Tellingly, analysis and commentary were already being made on the case by foreign lawyers and in websites as early as 13 February 2008, with BusinessWorld being the first to report on the matter to the Filipino public on 15 February 2008.
Some commentators point to the interesting timing of the complaint, following as it did the news regarding the Altria Group Inc.’s planned spinoff of Philip Morris International and, more substantively, the fact that the complaint came at the same time that negotiations on a protocol to the Framework Convention on Tobacco Control relating to illicit trade in tobacco products began. The effect these developments have on the case (or vice-versa), nevertheless, remains unclear.
The dispute, as a whole, involves the provisions of Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994", which is actually GATT 1947. Confused?), and Article 19 of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the "Customs Valuation Agreement").
Some commentators have referred to the Philippine complaint as Thai Cigarettes II (a landmark trade case during the GATT days relating to health measures), as well as containing elements of the Korea - Beef case. The latter case deals with the validity of dual retail requirements. Indeed, the Philippine complaint does allege that “Thailand requires that tobacco and/or cigarette retailers hold separate licenses to sell domestic and imported cigarettes, respectively. The Philippines understands that the measure in which these discriminatory requirements are contained include the Excise Department Announcement by the Director-General of Excise, dated 12 September 1991, issued pursuant to Article 4, Ministerial Regulation No. 17 B.E. 2534 (1991) under the Tobacco Act B.E. 2509 (1966), and any amendments, implementing measures or other related measures.”
The question, therefore, is how the dual licensing requirement leads to discriminatory treatment against the imported cigarettes and thus a violation of Article III.4 of the GATT, which states that "The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. "
As provided by the rules, the case is now awaiting consultation between the parties. Considering that the livelihood of hundreds, if not thousands, of Filipino farmers are at stake here, this is one trade matter that all Filipinos should be vigilantly monitoring and supporting. One thing should be remembered: of the 9 cases we’ve been a party to in the WTO, we’ve never won yet.
13.3.08
Thailand – Customs and fiscal measures on cigarettes from the Philippines
The following is the consultation request by the Philippines for the dispute docketed as DS371:
Request for Consultations by the Philippines
The following communication, dated 7 February 2008, from the delegation of the Philippines to the delegation of Thailand and to the Chairman of the Dispute Settlement Body, is circulated in accordance with Article 4.4 of the DSU.
_______________
My authorities have instructed me to request consultations with the Kingdom of Thailand pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"), and Article 19 of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the "Customs Valuation Agreement") with respect to the measures and claims set out below.
I. Claims under Article X:3(a) of the GATT 1994
1. The Philippines is a major exporter of cigarettes to Thailand. The Thai Tobacco Monopoly ("TTM") is the only business entity authorized by Thai law to produce cigarettes in Thailand. TTM has a market share of approximately 80 per cent. TTM's products are, therefore, the main competitor of the Philippines cigarettes in the Thai cigarette market.
2. There are numerous personal and institutional links between the Thai government and TTM that create serious conflicts of interests in the administration of Thai fiscal and customs legislation pertaining to cigarettes, and lead to biased, partial, and unreasonable administration of Thai law. By way of example, TTM is a business unit of the Thai Ministry of Finance, which is responsible for the administration of the value added, excise, health and "television" or "TV" taxes, as well as of customs charges. Furthermore, the Minister of Finance has authority to appoint and remove directors on the TTM Board of Directors, and the TTM Board of Directors includes or has included senior Ministry officials, such as the Director General for Excise and the Director General for Customs, who are engaged in the administration of duties and charges on cigarettes.
3. These pervasive institutional and personal links between TTM and the Thai government lead to conflicts of interest and partial and unreasonable administration of Thai fiscal and customs measures. In particular, Thailand administers in a partial and unreasonable manner:
· the customs valuation measures in paragraph 7;
· the excise tax measures in paragraph 13;
· the health tax measures in paragraph 14;
· the TV tax measures in paragraph 15; and
· the value added tax ("VAT") measures in paragraph 20.
4. In addition, in determining the guarantee or cash amount that importers of cigarettes may be required to deposit upon entry, Thailand administers its legal provisions pertaining to guarantees in a partial and unreasonable manner. In particular, Thailand administers in a partial and unreasonable manner:
· the provisions of the Customs Act B.E. 2469[1] (1926) (as amended) in respect of guarantees (specifically, Sections 112, 112 bis, 112 ter, and 112 quater);
· Customs Regulation No. 2/2550 (2007) Guideline to determine customs price valuation; and,
· any amendments, implementing measures, or measures related to the measures listed in this paragraph.
5. Thailand thereby violates Article X:3(a) of the GATT 1994.
II. Claims Pertaining to Customs Valuation
6. Between 2003 and August 2006, the Customs Department of the Kingdom of Thailand ("Thai Customs") routinely accepted as the basis for customs valuation the transaction value declared by importers on entries of imported cigarettes. However, since August 2006, Thai Customs has rejected the transaction value declared by importers on such entries as the basis for valuation, both for purposes of determining the amount of monies that importers are required to deposit as guarantees for the duties that may be payable on such entries, as well as for purposes of the final assessment of duties. Instead, on a general and prospective basis, Thai Customs arbitrarily pre-determines values that are higher than the declared transaction values and applies these values to all entries of imported cigarettes, in place of the declared transaction values. Thai Customs allows the importer to withdraw the subject goods from customs only if the importer makes a payment on the basis of the declared transaction value and deposits a guarantee of customs duties covering the difference between the declared transaction value and the applicable pre-determined value. Subsequently, Thai Customs issues a final assessment of customs value that is higher than the declared transaction value and that reflects the applicable pre-determined value, which is changed from time to time.
7. The measures at issue include:
· the general rule and/or methodology providing for the systematic rejection of transaction value, and the imposition of a higher pre-determined value, including any calculation methodology underpinning the pre-determined value. This measure (or measures) applies at the time of entry as well as at the time of final assessment;
· individual determinations made by Thai Customs for entries of cigarettes exported from the Philippines and landed between 4 August 2006 and today, including:
(a) the Notices of Assessment for the entries listed in Annex I to this request; and,
(b) the assessments of value for purposes of setting the guarantee or cash deposit at the time of entry for the entries listed in Annex II to this request;
· Customs Act, B.E. 2469 (1926) , including all amendments;
· Ministerial Regulation No. 132 B.E. 2543 (1990) issued under authority of the Customs Act B.E. 2469 (1926) and the amending Ministerial Regulation No. 145 B.E. 2547 (2004) and Ministerial Regulation No. 146 B.E. 2550 (2007):
· Notification No. 23/2549 (2006) of Thai Customs, containing guidelines on customs valuation;
· Customs Regulation No. 2/2550 (2007) Re: amendment of the Customs Formalities and Guidelines Code B.E. 2544 (2001) re: Customs formalities to prevent Customs value duty evasion, and amendment of Customs Department Regulation No. 14/2549 (2006) re: Guideline for Fixing of Customs Value;
· Customs Regulation No. 14/2549 (2006), re Guideline for Fixing of Customs Value, as amended by Customs Regulation No. 2/2550 (2007);
· Customs Notification No. 29/2549 (2006) Procedure in requesting duty fee assessment; and
· any amendments, implementing measures, or measures related to the measures listed in this paragraph.
8. As a result of these measures, Thailand fails to use transaction value as the basis for customs value, contrary to Articles 1.1, 1.2(a), and 1.2(b) of the Customs Valuation Agreement and the interpretative Notes to these provisions, as well as paragraphs 1 and 2 of the General Introductory Commentary. In so doing, Thailand fails to communicate the grounds for considering that the relationship between the parties influenced the declared price, as required by Article 1.2(a). Thailand also fails to conform to the sequence of valuation methods mandated by the Customs Valuation Agreement, and uses a valuation method that has no basis in the Customs Valuation Agreement. These actions are inconsistent with Articles 2, 3, 4, 5, 6, and 7, as well as the relevant interpretative Notes. These measures are also inconsistent with Article 13 of the Customs Valuation Agreement, as well as Article II:1(b) and II:3 of the GATT 1994.
9. Thailand has failed to provide an explanation for the determination of the pre-determined values applied to entries at the time of importation and at the time of final assessment, breaching its obligations under Article 16 of the Customs Valuation Agreement.
10. The Philippines considers that, for all these reasons, Thailand acts inconsistently with Articles VII:1, VII:2(a), VII:2(b), and VII:2(c) of the GATT 1994. Moreover, Thailand fails to publish the bases and methods for determining the value of cigarettes imported from the Philippines. This is in violation of Article VII:5 of the GATT 1994.
11. Further, Thai government officials appear to have publicly disclosed CIF values of imported cigarettes in the Thai media. The public disclosure of such business-confidential information is in violation of Article 10 of the Customs Valuation Agreement.
III. Claims pertaining to the Excise Tax, Health Tax and TV Tax regimes
12. Thailand imposes an ad valorem excise tax, health tax, and "television" or "TV" tax, on both imported and domestic cigarettes. For imported cigarettes, the basis for all these taxes is the CIF customs value as determined by the Thai customs authorities, whereas for domestic cigarettes, it is an ex-factory price determined by the Director-General for Excise.
13. The Philippines understands that Thailand operates the excise tax regime through measures including:
· the Tobacco Act B.E. 2509 (1966), Section 5 ter;
· Notices of Director-General for Excise, setting out the ex-factory prices. The currently applicable ex-factory prices are set out in the Notice B.E. 2550 (2007) of 29 August 2007; and,
· any amendments, implementing measures, or measures related to the measures listed in this paragraph.
14. The Philippines further understands that Thailand operates the health tax regime through measures including the Health Promotion and Foundation Act, B.E. 2544 (2001), in particular Sections 11, 12, and 13 thereof, and any amendments, implementing measures or other related measures.
15. The Philippines further understands that Thailand operates the TV tax regime through measures including the Thai Public Broadcasting Service Act 2551 (2008), in particular Sections 12, 13, and 14 thereof, and any amendments, implementing measures or other related measures.
16. As developed in Section II, Thailand determines excessive customs values for Philippine exports of cigarettes inconsistently with the Customs Valuation Agreement, and because these customs values serve as the tax basis for imposing the excise tax, the health tax and the TV tax, Thailand imposes a higher tax burden on imported products than on like and/or directly competitive or substitutable domestic products.
17. By so doing, Thailand acts inconsistently with Article III:2, first and second sentence. This discrimination against imported cigarettes is compounded by the fact that Thai law contains no procedure for cigarette importers to claim a refund of the portion of the excise tax, health tax and TV tax paid as a result of the excessive customs valuation. The failure of Thailand to provide for such a refund procedure results in a violation of Article III:2, first and second sentence. It also constitutes partial and unreasonable administration of the measures referred to in paragraphs 13, 14, and 15, contrary to Article X:3(a) of the GATT 1994.
18. Thailand also has not published the regulations pertaining to the determination of the ex-factory prices, which constitute the tax basis for Thailand's imposition of the excise, health and TV taxes on domestic cigarettes. As a result, Thailand is in violation of Article X:1 of the GATT 1994, which requires governments to publish trade laws and regulations of general application.
IV. Claims Pertaining to Thailand's Value-Added Tax ("VAT") Regime
A. Thailand's VAT regime
19. Under Thailand's fiscal regime, VAT on cigarettes is calculated by reference to brand-specific maximum retail selling prices ("MRSPs"). These MRSPs are determined by the Thai Government through executive acts applying solely to domestic cigarettes on one hand, and separate executive acts applying solely to imported cigarettes on the other hand. The MRSPs are modified from time to time. In the last two and a half years, the MRSPs for imported cigarettes have been changed more frequently than those for domestic cigarettes.
20. The Philippines understands that Thailand operates the VAT regime for cigarettes through measures including:
· Sections 79/5 and 81 of the Revenue Code of Thailand;
· Section 23 of the Tobacco Act B.E. 2509 (1966);
· Royal Decree, issued under the Revenue Code, Governing the Reduction of the Value Added Tax Rates (No. 465), B.E. 2550 (2007);
· Royal Decree issued under the Revenue Code Governing Exemption from Value Added Tax (No. 239) B.E. 2534 (1991);
· Order of the Revenue Department No. Por 85/2542 (1999);
· Notification of the Director-General of the Revenue Department on VAT (No. 10);
· MRSP Notices issued by the Director-General for Excise. The currently applicable MRSPs are set out in the Notice B.E. 2550 (2007) of 29 August 2007 (for domestic products) and in the Notice B.E. 2550 (2007) of 29 August 2007 together with Notice B.E. 2550 (2007) of 18 December 2007 (for imported products); and
· any amendments, implementing measures or other measures related to the measures listed in this paragraph.
21. The MRSPs for imported brands of cigarette, including those exported by the Philippines, are set at significantly higher levels than the MRSPs for like and/or directly competitive or substitutable domestic brands. Moreover, the MRSPs for imported cigarettes are set significantly above the actual retail selling price of those cigarettes, whereas the MRSPs for domestic cigarettes are set at the level of the actual retail selling price of those cigarettes. The higher MRSPs for imported products result in a higher fiscal burden for these products than for like and/or directly competitive or substitutable domestic products, and thereby afford protection to the domestic products. Therefore, the Philippines considers that the VAT imposed on imported products as a result of these measures is inconsistent with Article III:2, first and second sentence, of the GATT 1994.
22. Thailand also has not published the regulations pertaining to the determination of the MRSPs, which constitutes the tax base for Thailand's imposition of VAT on domestic and imported cigarettes. This failure is a violation of Article X:1 of the GATT 1994.
B. Other VAT-related requirements
23. Thailand imposes different VAT-related requirements on wholesale and retail sellers of cigarettes, depending on whether they sell domestic or imported products. In particular, these sellers are subject to VAT when they sell imported products but are exempt when they sell like and/or directly competitive or substitutable domestic products. Moreover, because wholesale and retail sellers of imported cigarettes are subject to VAT, whereas wholesale and retail sellers of domestic cigarettes are not, the former are also subject to VAT administrative requirements that are not imposed on sellers of the like and/or directly competitive or substitutable domestic product. The Philippines understands that the measure in which these discriminatory requirements are contained include Section 81 of the Revenue Code, Royal Decree issued under the Revenue Code Governing Exemption from Value Added Tax (No. 239) B.E. 2534 (1991), and Order of Revenue Department Por 85/2542, and any amendments, implementing measures or other related measures.
24. The Philippines considers that these measures are inconsistent with Articles III:4 and III:2, first and second sentence, of the GATT 1994.
V. Claims Pertaining to Retail Licensing Requirements
25. Thailand requires that tobacco and/or cigarette retailers hold separate licenses to sell domestic and imported cigarettes, respectively. The Philippines understands that the measure in which these discriminatory requirements are contained include the Excise Department Announcement by the Director-General of Excise, dated 12 September 1991, issued pursuant to Article 4, Ministerial Regulation No. 17 B.E. 2534 (1991) under the Tobacco Act B.E. 2509 (1966) , and any amendments, implementing measures or other related measures.
26. The Philippines considers that this dual license requirement, based purely on the origin of the products sold, is inconsistent with Article III:4 of the GATT 1994, because it provides less favourable treatment for imported products than for like domestic products.
* * * * *
The Philippines reserves its right to raise further factual claims and legal matters during the course of consultations.
We look forward to receiving your reply to the present request and to fixing a mutually convenient date for consultations.
[1] The "B.E" year number designates the year in the Buddhist calendar. The year number in parentheses designates the corresponding year A.D.
ANNEX I
LIST OF ENTRIES FOR WHICH DEFINITIVE ASSESSMENT NOTICES
HAVE ALREADY BEEN ISSUED
ANNEX II
LIST OF ENTRIES FOR WHICH VALUE HAS BEEN ASSESSED
FOR PURPOSES OF SETTING THE GUARANTEE OR CASH DEPOSIT
AT THE TIME OF ENTRY AND FOR WHICH DEFINITIVE ASSESSMENT NOTICES
HAVE NOT YET BEEN ISSUED
The case is now awaiting "consultations" in accordance with the WTO DSU procedures and the reported venue of the same is Bangkok, Thailand.
Request for Consultations by the Philippines
The following communication, dated 7 February 2008, from the delegation of the Philippines to the delegation of Thailand and to the Chairman of the Dispute Settlement Body, is circulated in accordance with Article 4.4 of the DSU.
_______________
My authorities have instructed me to request consultations with the Kingdom of Thailand pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"), and Article 19 of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the "Customs Valuation Agreement") with respect to the measures and claims set out below.
I. Claims under Article X:3(a) of the GATT 1994
1. The Philippines is a major exporter of cigarettes to Thailand. The Thai Tobacco Monopoly ("TTM") is the only business entity authorized by Thai law to produce cigarettes in Thailand. TTM has a market share of approximately 80 per cent. TTM's products are, therefore, the main competitor of the Philippines cigarettes in the Thai cigarette market.
2. There are numerous personal and institutional links between the Thai government and TTM that create serious conflicts of interests in the administration of Thai fiscal and customs legislation pertaining to cigarettes, and lead to biased, partial, and unreasonable administration of Thai law. By way of example, TTM is a business unit of the Thai Ministry of Finance, which is responsible for the administration of the value added, excise, health and "television" or "TV" taxes, as well as of customs charges. Furthermore, the Minister of Finance has authority to appoint and remove directors on the TTM Board of Directors, and the TTM Board of Directors includes or has included senior Ministry officials, such as the Director General for Excise and the Director General for Customs, who are engaged in the administration of duties and charges on cigarettes.
3. These pervasive institutional and personal links between TTM and the Thai government lead to conflicts of interest and partial and unreasonable administration of Thai fiscal and customs measures. In particular, Thailand administers in a partial and unreasonable manner:
· the customs valuation measures in paragraph 7;
· the excise tax measures in paragraph 13;
· the health tax measures in paragraph 14;
· the TV tax measures in paragraph 15; and
· the value added tax ("VAT") measures in paragraph 20.
4. In addition, in determining the guarantee or cash amount that importers of cigarettes may be required to deposit upon entry, Thailand administers its legal provisions pertaining to guarantees in a partial and unreasonable manner. In particular, Thailand administers in a partial and unreasonable manner:
· the provisions of the Customs Act B.E. 2469[1] (1926) (as amended) in respect of guarantees (specifically, Sections 112, 112 bis, 112 ter, and 112 quater);
· Customs Regulation No. 2/2550 (2007) Guideline to determine customs price valuation; and,
· any amendments, implementing measures, or measures related to the measures listed in this paragraph.
5. Thailand thereby violates Article X:3(a) of the GATT 1994.
II. Claims Pertaining to Customs Valuation
6. Between 2003 and August 2006, the Customs Department of the Kingdom of Thailand ("Thai Customs") routinely accepted as the basis for customs valuation the transaction value declared by importers on entries of imported cigarettes. However, since August 2006, Thai Customs has rejected the transaction value declared by importers on such entries as the basis for valuation, both for purposes of determining the amount of monies that importers are required to deposit as guarantees for the duties that may be payable on such entries, as well as for purposes of the final assessment of duties. Instead, on a general and prospective basis, Thai Customs arbitrarily pre-determines values that are higher than the declared transaction values and applies these values to all entries of imported cigarettes, in place of the declared transaction values. Thai Customs allows the importer to withdraw the subject goods from customs only if the importer makes a payment on the basis of the declared transaction value and deposits a guarantee of customs duties covering the difference between the declared transaction value and the applicable pre-determined value. Subsequently, Thai Customs issues a final assessment of customs value that is higher than the declared transaction value and that reflects the applicable pre-determined value, which is changed from time to time.
7. The measures at issue include:
· the general rule and/or methodology providing for the systematic rejection of transaction value, and the imposition of a higher pre-determined value, including any calculation methodology underpinning the pre-determined value. This measure (or measures) applies at the time of entry as well as at the time of final assessment;
· individual determinations made by Thai Customs for entries of cigarettes exported from the Philippines and landed between 4 August 2006 and today, including:
(a) the Notices of Assessment for the entries listed in Annex I to this request; and,
(b) the assessments of value for purposes of setting the guarantee or cash deposit at the time of entry for the entries listed in Annex II to this request;
· Customs Act, B.E. 2469 (1926) , including all amendments;
· Ministerial Regulation No. 132 B.E. 2543 (1990) issued under authority of the Customs Act B.E. 2469 (1926) and the amending Ministerial Regulation No. 145 B.E. 2547 (2004) and Ministerial Regulation No. 146 B.E. 2550 (2007):
· Notification No. 23/2549 (2006) of Thai Customs, containing guidelines on customs valuation;
· Customs Regulation No. 2/2550 (2007) Re: amendment of the Customs Formalities and Guidelines Code B.E. 2544 (2001) re: Customs formalities to prevent Customs value duty evasion, and amendment of Customs Department Regulation No. 14/2549 (2006) re: Guideline for Fixing of Customs Value;
· Customs Regulation No. 14/2549 (2006), re Guideline for Fixing of Customs Value, as amended by Customs Regulation No. 2/2550 (2007);
· Customs Notification No. 29/2549 (2006) Procedure in requesting duty fee assessment; and
· any amendments, implementing measures, or measures related to the measures listed in this paragraph.
8. As a result of these measures, Thailand fails to use transaction value as the basis for customs value, contrary to Articles 1.1, 1.2(a), and 1.2(b) of the Customs Valuation Agreement and the interpretative Notes to these provisions, as well as paragraphs 1 and 2 of the General Introductory Commentary. In so doing, Thailand fails to communicate the grounds for considering that the relationship between the parties influenced the declared price, as required by Article 1.2(a). Thailand also fails to conform to the sequence of valuation methods mandated by the Customs Valuation Agreement, and uses a valuation method that has no basis in the Customs Valuation Agreement. These actions are inconsistent with Articles 2, 3, 4, 5, 6, and 7, as well as the relevant interpretative Notes. These measures are also inconsistent with Article 13 of the Customs Valuation Agreement, as well as Article II:1(b) and II:3 of the GATT 1994.
9. Thailand has failed to provide an explanation for the determination of the pre-determined values applied to entries at the time of importation and at the time of final assessment, breaching its obligations under Article 16 of the Customs Valuation Agreement.
10. The Philippines considers that, for all these reasons, Thailand acts inconsistently with Articles VII:1, VII:2(a), VII:2(b), and VII:2(c) of the GATT 1994. Moreover, Thailand fails to publish the bases and methods for determining the value of cigarettes imported from the Philippines. This is in violation of Article VII:5 of the GATT 1994.
11. Further, Thai government officials appear to have publicly disclosed CIF values of imported cigarettes in the Thai media. The public disclosure of such business-confidential information is in violation of Article 10 of the Customs Valuation Agreement.
III. Claims pertaining to the Excise Tax, Health Tax and TV Tax regimes
12. Thailand imposes an ad valorem excise tax, health tax, and "television" or "TV" tax, on both imported and domestic cigarettes. For imported cigarettes, the basis for all these taxes is the CIF customs value as determined by the Thai customs authorities, whereas for domestic cigarettes, it is an ex-factory price determined by the Director-General for Excise.
13. The Philippines understands that Thailand operates the excise tax regime through measures including:
· the Tobacco Act B.E. 2509 (1966), Section 5 ter;
· Notices of Director-General for Excise, setting out the ex-factory prices. The currently applicable ex-factory prices are set out in the Notice B.E. 2550 (2007) of 29 August 2007; and,
· any amendments, implementing measures, or measures related to the measures listed in this paragraph.
14. The Philippines further understands that Thailand operates the health tax regime through measures including the Health Promotion and Foundation Act, B.E. 2544 (2001), in particular Sections 11, 12, and 13 thereof, and any amendments, implementing measures or other related measures.
15. The Philippines further understands that Thailand operates the TV tax regime through measures including the Thai Public Broadcasting Service Act 2551 (2008), in particular Sections 12, 13, and 14 thereof, and any amendments, implementing measures or other related measures.
16. As developed in Section II, Thailand determines excessive customs values for Philippine exports of cigarettes inconsistently with the Customs Valuation Agreement, and because these customs values serve as the tax basis for imposing the excise tax, the health tax and the TV tax, Thailand imposes a higher tax burden on imported products than on like and/or directly competitive or substitutable domestic products.
17. By so doing, Thailand acts inconsistently with Article III:2, first and second sentence. This discrimination against imported cigarettes is compounded by the fact that Thai law contains no procedure for cigarette importers to claim a refund of the portion of the excise tax, health tax and TV tax paid as a result of the excessive customs valuation. The failure of Thailand to provide for such a refund procedure results in a violation of Article III:2, first and second sentence. It also constitutes partial and unreasonable administration of the measures referred to in paragraphs 13, 14, and 15, contrary to Article X:3(a) of the GATT 1994.
18. Thailand also has not published the regulations pertaining to the determination of the ex-factory prices, which constitute the tax basis for Thailand's imposition of the excise, health and TV taxes on domestic cigarettes. As a result, Thailand is in violation of Article X:1 of the GATT 1994, which requires governments to publish trade laws and regulations of general application.
IV. Claims Pertaining to Thailand's Value-Added Tax ("VAT") Regime
A. Thailand's VAT regime
19. Under Thailand's fiscal regime, VAT on cigarettes is calculated by reference to brand-specific maximum retail selling prices ("MRSPs"). These MRSPs are determined by the Thai Government through executive acts applying solely to domestic cigarettes on one hand, and separate executive acts applying solely to imported cigarettes on the other hand. The MRSPs are modified from time to time. In the last two and a half years, the MRSPs for imported cigarettes have been changed more frequently than those for domestic cigarettes.
20. The Philippines understands that Thailand operates the VAT regime for cigarettes through measures including:
· Sections 79/5 and 81 of the Revenue Code of Thailand;
· Section 23 of the Tobacco Act B.E. 2509 (1966);
· Royal Decree, issued under the Revenue Code, Governing the Reduction of the Value Added Tax Rates (No. 465), B.E. 2550 (2007);
· Royal Decree issued under the Revenue Code Governing Exemption from Value Added Tax (No. 239) B.E. 2534 (1991);
· Order of the Revenue Department No. Por 85/2542 (1999);
· Notification of the Director-General of the Revenue Department on VAT (No. 10);
· MRSP Notices issued by the Director-General for Excise. The currently applicable MRSPs are set out in the Notice B.E. 2550 (2007) of 29 August 2007 (for domestic products) and in the Notice B.E. 2550 (2007) of 29 August 2007 together with Notice B.E. 2550 (2007) of 18 December 2007 (for imported products); and
· any amendments, implementing measures or other measures related to the measures listed in this paragraph.
21. The MRSPs for imported brands of cigarette, including those exported by the Philippines, are set at significantly higher levels than the MRSPs for like and/or directly competitive or substitutable domestic brands. Moreover, the MRSPs for imported cigarettes are set significantly above the actual retail selling price of those cigarettes, whereas the MRSPs for domestic cigarettes are set at the level of the actual retail selling price of those cigarettes. The higher MRSPs for imported products result in a higher fiscal burden for these products than for like and/or directly competitive or substitutable domestic products, and thereby afford protection to the domestic products. Therefore, the Philippines considers that the VAT imposed on imported products as a result of these measures is inconsistent with Article III:2, first and second sentence, of the GATT 1994.
22. Thailand also has not published the regulations pertaining to the determination of the MRSPs, which constitutes the tax base for Thailand's imposition of VAT on domestic and imported cigarettes. This failure is a violation of Article X:1 of the GATT 1994.
B. Other VAT-related requirements
23. Thailand imposes different VAT-related requirements on wholesale and retail sellers of cigarettes, depending on whether they sell domestic or imported products. In particular, these sellers are subject to VAT when they sell imported products but are exempt when they sell like and/or directly competitive or substitutable domestic products. Moreover, because wholesale and retail sellers of imported cigarettes are subject to VAT, whereas wholesale and retail sellers of domestic cigarettes are not, the former are also subject to VAT administrative requirements that are not imposed on sellers of the like and/or directly competitive or substitutable domestic product. The Philippines understands that the measure in which these discriminatory requirements are contained include Section 81 of the Revenue Code, Royal Decree issued under the Revenue Code Governing Exemption from Value Added Tax (No. 239) B.E. 2534 (1991), and Order of Revenue Department Por 85/2542, and any amendments, implementing measures or other related measures.
24. The Philippines considers that these measures are inconsistent with Articles III:4 and III:2, first and second sentence, of the GATT 1994.
V. Claims Pertaining to Retail Licensing Requirements
25. Thailand requires that tobacco and/or cigarette retailers hold separate licenses to sell domestic and imported cigarettes, respectively. The Philippines understands that the measure in which these discriminatory requirements are contained include the Excise Department Announcement by the Director-General of Excise, dated 12 September 1991, issued pursuant to Article 4, Ministerial Regulation No. 17 B.E. 2534 (1991) under the Tobacco Act B.E. 2509 (1966) , and any amendments, implementing measures or other related measures.
26. The Philippines considers that this dual license requirement, based purely on the origin of the products sold, is inconsistent with Article III:4 of the GATT 1994, because it provides less favourable treatment for imported products than for like domestic products.
* * * * *
The Philippines reserves its right to raise further factual claims and legal matters during the course of consultations.
We look forward to receiving your reply to the present request and to fixing a mutually convenient date for consultations.
[1] The "B.E" year number designates the year in the Buddhist calendar. The year number in parentheses designates the corresponding year A.D.
ANNEX I
LIST OF ENTRIES FOR WHICH DEFINITIVE ASSESSMENT NOTICES
HAVE ALREADY BEEN ISSUED
ANNEX II
LIST OF ENTRIES FOR WHICH VALUE HAS BEEN ASSESSED
FOR PURPOSES OF SETTING THE GUARANTEE OR CASH DEPOSIT
AT THE TIME OF ENTRY AND FOR WHICH DEFINITIVE ASSESSMENT NOTICES
HAVE NOT YET BEEN ISSUED
The case is now awaiting "consultations" in accordance with the WTO DSU procedures and the reported venue of the same is Bangkok, Thailand.
13.2.08
Freer trade, freer Philippines
“The man who has control over another man’s subsistence
also exercises control over his will.” (Alexander Hamilton)
By the foregoing definition by Hamilton, the Philippines is not a democracy. A democracy exists whereby authority is “in the hands not of the few but of the many”. However, in a country where a man cannot truly voice out his fears for the fact that he may not be able to have his family fed the next day is not truly free. One policy maker made a declaration that “we cannot live with 5 percent of the people enjoying the luxuries in this country of ours, and 75 to 80 percent living in [despondency and misery]”. That observation may be common enough for many but what is truly poignant is the fact that such observation was made thirty years ago and the numbers cited therein have not much changed.
As cited through the years by so many commentators, the problem with the Philippines is not corruption, not security risks, and not lack of abilities. The problem is and has always been the oligarchic system prevailing in this country. A system whereby a select few are allowed to selfishly exploit this country’s resources and opportunities, all the while corrupting the political process and the media, heaping poverty on the greater majority, and ignoring national interest. As one observer once put it: “The oligarchic elite manipulate the political authority and intimidate political leaders”, with the people in turn seduced into a populist type of politics. Note that not all rich are oligarchs. It is however that portion of that “5 percent” that selfishly promote their interests at the expense of the Filipino ever since (and even before) this country declared independence.
Symptom of the oligarchic system is most depressingly (but admirably) described in the book The Rulemakers. Its introductory words say it all: “Philippine legislators constitute a select and exclusive segment of society. x x x The great majority of them are also part of families whose members have been in public office for two or more generations. Those who make laws for the country are therefore hardly representative of its citizens. This book also shows how lawmakers have employed their powers to further enrich themselves and entrench their families in power.”
The foregoing brings us to the value of freer trade. If there is one thing that the oligarchs do not want it is that. Freer and fairer trade brings democratization of wealth, leading to a democratic ideal of self-reliant individuals and of a meritocratic society that the Philippines should provide its young. As the book Naked Economics put it: “trade paves the way for poor countries to get richer. x x x Is there an example in modern history of a single country successfully developing without trading and integrating with the global economy? No, there is not. Which is why Tom Friedman has suggested that the antiglobalization coalition ought to be known as ‘The Coalition to Keep the World’s Poor People Poor.”
Also, the benefits of freer trade are enjoyed not only on a macroeconomic level but directly by the poor (and not merely through the trickle down effect). Thus, in one study by experts from the World Bank poring over data from 80 countries over a span of forty years, it was found that the income of the poor generally rise as fast as overall growth. To this must be added the benefits of greater choice, better quality, transparency, and freedom.
If anyone needs a local example of how liberalization policies result in profound beneficial effect for Filipinos, one need only look back at President Ramos’ liberalization of telecommunications and banking. What we need now are similar policies for that agricultural product and that manufactured good. As Open World would put it, such “do not deserve our sympathy at all. They are … the fat cats that have gorged themselves at our expense … hopeless nationalized industries, favored companies run by cronies that have politicians’ ears (and pad out their bank accounts). By all means, help the people who work for these companies.” But not the oligarchs. We have to say enough sometime and now is as good a time as any.
also exercises control over his will.” (Alexander Hamilton)
By the foregoing definition by Hamilton, the Philippines is not a democracy. A democracy exists whereby authority is “in the hands not of the few but of the many”. However, in a country where a man cannot truly voice out his fears for the fact that he may not be able to have his family fed the next day is not truly free. One policy maker made a declaration that “we cannot live with 5 percent of the people enjoying the luxuries in this country of ours, and 75 to 80 percent living in [despondency and misery]”. That observation may be common enough for many but what is truly poignant is the fact that such observation was made thirty years ago and the numbers cited therein have not much changed.
As cited through the years by so many commentators, the problem with the Philippines is not corruption, not security risks, and not lack of abilities. The problem is and has always been the oligarchic system prevailing in this country. A system whereby a select few are allowed to selfishly exploit this country’s resources and opportunities, all the while corrupting the political process and the media, heaping poverty on the greater majority, and ignoring national interest. As one observer once put it: “The oligarchic elite manipulate the political authority and intimidate political leaders”, with the people in turn seduced into a populist type of politics. Note that not all rich are oligarchs. It is however that portion of that “5 percent” that selfishly promote their interests at the expense of the Filipino ever since (and even before) this country declared independence.
Symptom of the oligarchic system is most depressingly (but admirably) described in the book The Rulemakers. Its introductory words say it all: “Philippine legislators constitute a select and exclusive segment of society. x x x The great majority of them are also part of families whose members have been in public office for two or more generations. Those who make laws for the country are therefore hardly representative of its citizens. This book also shows how lawmakers have employed their powers to further enrich themselves and entrench their families in power.”
The foregoing brings us to the value of freer trade. If there is one thing that the oligarchs do not want it is that. Freer and fairer trade brings democratization of wealth, leading to a democratic ideal of self-reliant individuals and of a meritocratic society that the Philippines should provide its young. As the book Naked Economics put it: “trade paves the way for poor countries to get richer. x x x Is there an example in modern history of a single country successfully developing without trading and integrating with the global economy? No, there is not. Which is why Tom Friedman has suggested that the antiglobalization coalition ought to be known as ‘The Coalition to Keep the World’s Poor People Poor.”
Also, the benefits of freer trade are enjoyed not only on a macroeconomic level but directly by the poor (and not merely through the trickle down effect). Thus, in one study by experts from the World Bank poring over data from 80 countries over a span of forty years, it was found that the income of the poor generally rise as fast as overall growth. To this must be added the benefits of greater choice, better quality, transparency, and freedom.
If anyone needs a local example of how liberalization policies result in profound beneficial effect for Filipinos, one need only look back at President Ramos’ liberalization of telecommunications and banking. What we need now are similar policies for that agricultural product and that manufactured good. As Open World would put it, such “do not deserve our sympathy at all. They are … the fat cats that have gorged themselves at our expense … hopeless nationalized industries, favored companies run by cronies that have politicians’ ears (and pad out their bank accounts). By all means, help the people who work for these companies.” But not the oligarchs. We have to say enough sometime and now is as good a time as any.
4.1.08
Damaged and small Filipinos
... is the first article for the year in my Trade Tripper column appearing in this Friday-Saturday issue of BusinessWorld. Just this once, an article posted in its entirety (for the rest of the year, please buy BusinessWorld!):
"As a lot of you know, it’s been almost two decades since James Fallows wrote A Damaged Culture: A New Philippines? Some pundits have recently dissected this essay, with all the usual sound and fury signifying nothing. Many Filipinos - in one form or another - nevertheless still believe in this damaged culture theory, with differences essentially arising on whom to blame for the damage (i.e., inherent damage or foreign influenced?).
Another essay that a number of Filipinos love referring to is Nick Joaquin’s A Heritage of Smallness, where the respected writer has been found to say that “society for the Filipino is a small rowboat”. This has sent a lot of Filipinos happily shaking their heads at the mediocrity of their countrymen. In fact, googling this essay would find a horde accepting our so-called “smallness” as a people. One person actually referred to it as his “favorite”.
This is nonsense. I agree when one academic once said that there are no “damaged cultures but only damaged individuals”. For me, these damaged individuals are “Filipinos who believe and encourage others to believe that Americans, Japanese, Europeans, or Chinese are better than us.” Worse are those who reject their being Filipinos and imagine themselves as American or Chinese.
As for the “heritage of smallness”, many people seem to forget (or want to ignore) the fact that Joaquin wrote another article entitled “Junking the Heritage”, where the national artist pointed out that Filipinos are moving away from their peasant attitudes, discarding timidity, and becoming more and more worldly in outlook.
We should therefore stop putting ourselves down. We should stop apologizing for who we are. We should stop thinking that other cultures and countries are superior to ours.
We should stop doing all that for the simple reason that they have no rational, factual, historical, actual basis whatsoever.
We have a great history, a beautiful culture, an enviable set of values, and a truly admirable character. As much as I can illustrate into this 800 word article: we pioneered republicanism in Asia, we wrote the Noli, we have the happiest Christmas celebrations, our family relationships are the healthiest, our ability to laugh in the face of adversity is unsurpassed [our suicide rate is among the lowest in the world and we've always ranked among the highest in happiness indexes], our food and entertainment are an amalgamation of the world’s best, our effortless creativity and stylishness miles away from most. We produced Flash Elorde, Eugene Torre, HV Dela Costa, Florentino Feliciano, and Bata Reyes.
Sure we have our downside but which country doesn’t? For every accusation of crimes here, other countries would have crackpots shooting up malls or serial killers collecting victims. We have human rights violations? Watch In The Name of the Father or Schindler's List or remember the My Lai Massacre, then ponder the fact that post-colonial Manila never suffered a race riot. We have corruption? Watch Serpico or American Gangster. Our vegetables and fruits no good? Then why the billions on farm subsidies or SPS measures applied by those you know who just to keep their farmers above water. Our politics stupid? Watch The Daily Show. Or Leno. Our politics violent? We’ve never had a presidential candidate or president assassinated, or ethnic cleansing or genocide. [Gender equality is not as big an issue here as in other countries. Women relatively have always had prominent public roles in our society. Unlike some countries, we have no qualms or make a big deal of having a woman as lead news anchor or president] And you have to be deranged to think we’re the only country that has smog, traffic jams, and rude waiters. I can think of one rich country that is actually proud of their rude waiters.
Here’s an interesting Wiki fact that Filipinos need to know:
“The first Austronesian speakers are believed to have originated on the island of Taiwan x x x [From there] settlers landed in northern Luzon in the Philippines. x x x their descendants started to spread south to the rest of the Philippine islands, Celebes (modern-day Sulawesi), northern Borneo, Moluccas (modern-day Maluku), and Java.
The settlers in Moluccas sailed eastward and began to spread to the islands of Melanesia and Micronesia between 1200 B.C. and 500 B.C. respectively. Those that spread westward reached Sumatra, the Malay peninsula and southern Vietnam by 500 B.C.
The oceanic Austronesians had reached Remote Polynesia by 1000 B.C and spread to its three extremities Hawaii by 400 A.D. New Zealand by 1300 A.D. and Easter Island between 300 A.D. In the Indian Ocean they reached Madagascar.”
From the above one can see that it was the Philippines that gave a number of countries the basis for their language and perhaps culture. We gave. From there, to being among the first democracies, Christians, people power advocates, to our overseas managers, workers and nurses, we keep giving to the world and the world keeps on becoming the better for it.
So, be proud of being a Filipino and be proud of your fellow Filipinos. Remember, people get the leaders they deserve. If you want to finally have a leader that will love and work hard for this country, we have to love and work hard for this country first."
"As a lot of you know, it’s been almost two decades since James Fallows wrote A Damaged Culture: A New Philippines? Some pundits have recently dissected this essay, with all the usual sound and fury signifying nothing. Many Filipinos - in one form or another - nevertheless still believe in this damaged culture theory, with differences essentially arising on whom to blame for the damage (i.e., inherent damage or foreign influenced?).
Another essay that a number of Filipinos love referring to is Nick Joaquin’s A Heritage of Smallness, where the respected writer has been found to say that “society for the Filipino is a small rowboat”. This has sent a lot of Filipinos happily shaking their heads at the mediocrity of their countrymen. In fact, googling this essay would find a horde accepting our so-called “smallness” as a people. One person actually referred to it as his “favorite”.
This is nonsense. I agree when one academic once said that there are no “damaged cultures but only damaged individuals”. For me, these damaged individuals are “Filipinos who believe and encourage others to believe that Americans, Japanese, Europeans, or Chinese are better than us.” Worse are those who reject their being Filipinos and imagine themselves as American or Chinese.
As for the “heritage of smallness”, many people seem to forget (or want to ignore) the fact that Joaquin wrote another article entitled “Junking the Heritage”, where the national artist pointed out that Filipinos are moving away from their peasant attitudes, discarding timidity, and becoming more and more worldly in outlook.
We should therefore stop putting ourselves down. We should stop apologizing for who we are. We should stop thinking that other cultures and countries are superior to ours.
We should stop doing all that for the simple reason that they have no rational, factual, historical, actual basis whatsoever.
We have a great history, a beautiful culture, an enviable set of values, and a truly admirable character. As much as I can illustrate into this 800 word article: we pioneered republicanism in Asia, we wrote the Noli, we have the happiest Christmas celebrations, our family relationships are the healthiest, our ability to laugh in the face of adversity is unsurpassed [our suicide rate is among the lowest in the world and we've always ranked among the highest in happiness indexes], our food and entertainment are an amalgamation of the world’s best, our effortless creativity and stylishness miles away from most. We produced Flash Elorde, Eugene Torre, HV Dela Costa, Florentino Feliciano, and Bata Reyes.
Sure we have our downside but which country doesn’t? For every accusation of crimes here, other countries would have crackpots shooting up malls or serial killers collecting victims. We have human rights violations? Watch In The Name of the Father or Schindler's List or remember the My Lai Massacre, then ponder the fact that post-colonial Manila never suffered a race riot. We have corruption? Watch Serpico or American Gangster. Our vegetables and fruits no good? Then why the billions on farm subsidies or SPS measures applied by those you know who just to keep their farmers above water. Our politics stupid? Watch The Daily Show. Or Leno. Our politics violent? We’ve never had a presidential candidate or president assassinated, or ethnic cleansing or genocide. [Gender equality is not as big an issue here as in other countries. Women relatively have always had prominent public roles in our society. Unlike some countries, we have no qualms or make a big deal of having a woman as lead news anchor or president] And you have to be deranged to think we’re the only country that has smog, traffic jams, and rude waiters. I can think of one rich country that is actually proud of their rude waiters.
Here’s an interesting Wiki fact that Filipinos need to know:
“The first Austronesian speakers are believed to have originated on the island of Taiwan x x x [From there] settlers landed in northern Luzon in the Philippines. x x x their descendants started to spread south to the rest of the Philippine islands, Celebes (modern-day Sulawesi), northern Borneo, Moluccas (modern-day Maluku), and Java.
The settlers in Moluccas sailed eastward and began to spread to the islands of Melanesia and Micronesia between 1200 B.C. and 500 B.C. respectively. Those that spread westward reached Sumatra, the Malay peninsula and southern Vietnam by 500 B.C.
The oceanic Austronesians had reached Remote Polynesia by 1000 B.C and spread to its three extremities Hawaii by 400 A.D. New Zealand by 1300 A.D. and Easter Island between 300 A.D. In the Indian Ocean they reached Madagascar.”
From the above one can see that it was the Philippines that gave a number of countries the basis for their language and perhaps culture. We gave. From there, to being among the first democracies, Christians, people power advocates, to our overseas managers, workers and nurses, we keep giving to the world and the world keeps on becoming the better for it.
So, be proud of being a Filipino and be proud of your fellow Filipinos. Remember, people get the leaders they deserve. If you want to finally have a leader that will love and work hard for this country, we have to love and work hard for this country first."
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