The World Trade Organization is to investigate a U.S. complaint that Philippines duties on distilled spirits discriminate against foreign suppliers of liquor, trade sources.
The United States says that Manila taxes alcoholic products made from domestic materials such as sugar or palm at lower rates than imported spirits made from other materials, hurting sales of U.S. brands such as Jack Daniel’s or Jim Beam whiskey.
The United States is one of the largest exporters of distilled spirits, with worldwide exports averaging more than $1 billion a year from 2006 to 2008.
But U.S officials say the Philippine tax system—imposing duties 10-40 times higher on spirits not distilled from materials produced in the Philippines—means it has failed to gain more than 5 percent of the $3 billion local spirits market.
The case could help U.S. producers like Brown-Forman Corp, which owns Jack Daniel’s, and Fortune Brands Inc, which makes Jim Beam, break into the market.
The Philippines said its policies are consistent with WTO rules, and it believed the dispute could have been settled through talks respecting the interests of each side.
“It was in this spirit that we consulted with the United States last February, with the participation of the European Union, and we clarified the non-discriminatory and impartial nature of our excise tax regime on distilled spirits,” it said in a statement to the WTO’s dispute settlement body.
A meeting of the body decided to refer the complaint to a panel of experts for a ruling, combining it with an investigation already in progress into a complaint about the same issue raised by the European Union.
The Philippines blocked a previous U.S. request for a panel on April 8, but under WTO rules was not allowed to prevent it going ahead at the second request.
The panel would be expected to rule on the complaint in six to nine months, but both sides could appeal its findings.
Three other calls for panels to investigate complaints were rejected as they were the first request, but are likely to go ahead at the dispute settlement body’s next meeting on May 18.
They all involve anti-dumping measures—duties imposed on goods that the importer says are unfairly priced below cost.
One case involves Vietnam’s first challenge at the WTO—a dispute against U.S. anti-dumping duties on shrimp imports.
Vietnam only joined the WTO three years ago and the dispute involving one of its key exports will give it valuable experience in handling international trade litigation.
In another dispute, China is challenging EU anti-dumping tariffs on imports of Chinese shoes, a case pitting some European shoe makers against consumer groups and manufacturers with production facilities in China.
And South Korea is challenging the United States over Washington’s use of the controversial “zeroing” method for calculating anti-dumping duties on imports of South Korean steel products.
All the WTO’s 153 members except the United States reject zeroing, which has been repeatedly condemned by the WTO, and which critics say unfairly inflates anti-dumping duties.
China told the meeting that it now complied with a WTO ruling condemning its regime for protecting intellectual property, after completing the necessary changes to its laws. But the United States said it was examining whether this was the case and had already raised some questions directly with China. (Reuters)