Provisional Ruling Gives Cigarette Tax Case to the Philippines

16 November 2010

On Tuesday, The World Trade Organization (WTO) issued a provisional ruling favoring the Philippines in a cigarette tax dispute with Thailand. The complaint revolved around the discrepancies in Thailand’s policies involving customs valuation and domestic tax measures, which the Philippines stated served to undercut the competitiveness of imported cigarettes and favoring products produced by local companies such as the Thailand Tobacco Monopoly, a state-run company.

The WTO panel also ordered Thailand to set uniform taxes on foreign-produced and locally produced cigarettes, and to make its import valuation process more transparent.

In a 2008 complaint, the Philippines stated that customs officials in Thailand set the valuations for Philip Morris International’s Philippine-made cigarettes at a higher rate. The timeframe during which this complaint was submitted coincided with other allegations that the cigarette manufacturer had been inaccurately reporting its prices to its Thai sister firm in order to receive lower duties. Another complaint against Thailand purported that the nation instituted higher value-added taxes (VAT) on imported cigarettes.

Following the complaint from the Philippines, other similar complaints were submitted by the United States, the European Union and Chinese Taipei.

In addition to being found guilty of failing to abide by customs valuation rules, Thailand was also found guilty of treating locally made cigarettes more favorably than imported cigarettes through its VAT policies.

In the report, the WTO Panel recommended that the Dispute Settlement body request Thailand to correct the inconsistencies shown in its practices and to conform with its obligations under the WTO Agreement and the General Agreement on Tariffs and Trade 1944.

If Thailand does decide to appeal the report, another six to seven months can be added to the proceedings before the issue will be resolved.

Free Trade Pact Discussed by US and Eight Pacific Nations at APEC Forum

15 November 2010

Before the next APEC summit is hosted by President Obama in Hawaii next year, the United States and eight other nations on the Pacific Rim plan to institute a free trade pact.

The Trans-Pacific Partnership (TPP) would require that members cancel tariffs and other barriers to free trade. The leaders of the nine nations involved in TPP discussions met for the first time at the most recent Asia-Pacific Economic Cooperation (APEC) forum. The countries that have thus far signed up to participate in the TPP include Chile, Singapore, New Zealand and Brunei, but five other countries have expressed interest in participation: the United States, Malaysia, Australia, Vietnam and Peru.

So far the group does not include China, which prefers to negotiate trade reforms in other forums that include only Asian economies.

The renewed discussions on free trade negotiations were initiated due to the announcement by Apec that it had failed to reach its goal of eliminating trade and investment blocks for developed member countries by this year.

Stock Exchange of Thailand Aims to Lift Profile with “Asean Stars”

15 November 2010

In an attempt to lure in more foreign investors, the Stock Exchange of Thailand has revealed plans to form a basket of “Asean Stars” from markets across the region.

This basket would include large, high profile stocks listed on stock markets in Asean countries to be pushed as an Asean asset class. The market strategy adjustment is due to an influx in capital into Asia equity markets from countries with currently weak economies, including the US and Europe.

Seven exchanges in six countries will work together to begin offering the Asean Stars basket in 2011. The countries involved are Thailand, Singapore, the Philippines, Malaysia, Indonesia and the two Vietnamese exchanges in Hanoi and Ho Chi Minh City. Each exchange will be able to choose which high profile companies to promote as part of the basket, with a total of 210 stocks to be available for investors to choose from. The stocks could also be grouped into sub-categories, such as an energy index, to attract more global investors.

The new strategy would allow investors to choose from more risk management options and have a larger number of choices of products in the regional market. Asean Stars will also be part of the Asean Linkage Scheme, allowing investors in a given market to purchase shares in neighboring markets through their locally based brokerages.

If brokers charge too high a price, the investors will be allowed to make their transactions through the SET directly.

A three-market link between Thailand, Malaysia and Singapore should be available by the fourth quarter of 2011, as a pilot project.