Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Philippines Raises Important WTO Point of Order - Raising Tariffs to Bound Rate is Okay

In an article entitled "Govt asked to raise taxes on imports to help local firms" (go to the following link - http://www.gmanews.tv/story/161976/Govt-asked-to-raise-taxes-on-imports-to-help-local-firms), a very important point of order is raises about WTO duty rates. Jesus L. Arranza, president of the Federation of Philippine Industries (FPI) correctly points out that:

The government now has the chance to give local manufacturers “a much-needed reprieve" by raising the Philippines’ applied rates on imports without violating provisions of the World Trade Organization (WTO) ...

Applied rates are the actual amount of taxes imposed on foreign-made goods. These rates are usually lower than bound or binding rates, the amount of taxes a nation has promised to impose on imported products, as indicated in various WTO provisions.

Under the WTO, a nation can raise tariffs as long as it does not go beyond bound rates.

These statements are correct. There are many situations where a WTO Member is applying tariff rates below their bound rates. This gives room to increase duties on imports. Increasing duties on imports will give local manufacturers an advantage and will disadvantage the importers and the foreign manufacturers.

Just because the WTO may not prohibit raising tariff rates to the WTO Member's committed bound rates, does not mean that countries should raise their tariffs at the present time. If all countries take advantage of this opportunity, then prices will increase and inflation will pose a problem. In addition, export markets might not be available for one's own goods. If a country will be shut out of an export market, their local manufacturers will only survive if their is sufficient domestic demand at the higher prices. Governments should take the time to determine whether they will be in reality pushing their manufacturers into harms way. Careful analysis would be required before tariff increases are implemented.

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