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WASHINGTON, D.C. - The Office of the United States Trade Representative announced today that the United States has requested that the World Trade Organization (WTO) establish a dispute settlement panel regarding discriminatory taxes applied by the Philippines to distilled spirits. The Philippines applies tax rates to distilled spirits that differ depending on the product from which the spirit is distilled. The Philippines taxes distilled spirits made from certain materials that are typically produced in the Philippines, such as sugar and palm, at a low rate (e.g. 13.59 pesos per proof liter in 2009). Imported distilled spirits are taxed at significantly higher rates (from approximately ten to forty times higher) than the low rate applied to domestic products.
"It is critical that American exports are treated fairly in the Philippine market in accordance with WTO rules," USTR spokeswoman Carol Guthrie said. "Despite U.S. efforts to resolve this issue through consultations, the Philippines continues to maintain its discriminatory tax regime on distilled spirits. To ensure that Americans' rights in the global trading system are respected, it is important to move forward with the next step in the WTO dispute settlement process and request the establishment of a panel, which USTR is doing today. Of course, the United States always remains open to working with the Philippines to find a mutually agreeable solution to our concerns."
As part of its WTO obligations, the Philippines committed not to discriminate against imported products compared to domestic products in the application of its tax regime. The United States has raised its concerns with Philippine officials on repeated occasions over several years in both bilateral and multilateral settings, including in formal WTO dispute settlement consultations earlier this year.
Between 2006 and 2009, U.S. distilled spirits exports worldwide averaged more than $1 billion per year, making the United States one of the world's largest exporters of spirits. However, since 2003, imports-including U.S. products-never exceeded 5 percent of total sales of spirits in the Philippine market. According to industry figures, the U.S. distilled spirits industry contributed more than $113 billion dollars of economic activity and over 1.2 million jobs in 2007.
Requesting a panel is the next step in the WTO dispute settlement process after requesting consultations. The United States requested consultations on the Philippine excise tax on January 14, 2010. Consultations were held in Geneva on February 23, 2010. The United States has requested that the WTO Dispute Settlement Body consider the U.S. panel request at a meeting to be held on April 8.