RP may be headed for a trade war with Singapore, Malaysia & Thailand

The Philippines may be forced to engage in a trade war with Malaysia, Singapore and Thailand over their request for compensation in exchange for the Philippines’ request to delay the lowering of protection tariffs for the local petrochemical industry.

Trade and Industry Secretary Manuel Roxas II hinted at the possibility of such a trade war since the Philippines is not inclined to grant the three countries’ request.

The three countries are not considered principal, or even substantial, suppliers of petrochemical resins.

The Asean Free Trade Area-Common Effective Preferential Tariff (AFTA-CEPT) scheme contains no provision for compensation to countries affected by a request for deferment of tariff reduction.

The compensation scheme being cited by the three countries is the one provided under World Trade Organization (WTO) rules. According to WTO rules, however, compensation is only given to countries that are considered principal or substantial suppliers of the subject product.

Malaysia, Singapore and Thailand are not considered principal or substantial suppliers of petrochemical resins. They are mere suppliers.

Singapore is considered as a trader only of petrochemical resins.

The three countries requesting compensation, as far as the Philippines is concerned, must have to prove that they are indeed principal or ever substantial suppliers of petrochemical resins to the Philippines and would be adversely affected by the Philippines move to continue protecting its local petrochemical industry.

Roxas also cited the fact that when Malaysia requested for a deferment on its own automotive industry, the Philippines did not ask for any compensation.

Thus, Roxas said, "we are studying the prospect of a trade war."

Under the AFTA-CEPT scheme which took effect this year, member nations are supposed to lower their tariff rates to zero to five percent.

However, ASEAN member countries can invoke a protocol requesting a further delay for certain industries.

The Philippines is not concerned about a trade war with the three countries since the Philippines’ major trade partners are the United States and Japan.

In fact, Malaysia and Thailand, which produce almost the same products, are considered competitors of the Philippines.

Singapore, on the other hand, which does not have any major agriculture industry, is considered a trading country.