We are already studying retaliation as an option that is allowed by the WTO.

The Bangkok-Manila dispute over cigarettes threatens to spill over into car manufacturing under a planned retaliatory customs measure.

The Philippine government is mulling over exercising its retaliatory rights against Thailand for the latter’s failure to comply with the recommendations under a World Trade Organization (WTO) ruling siding with the Philippines over the decade-long cigarette trade dispute between the countries.

Department of Trade and Industry (DTI) undersecretary Ceferino Rodolfo said the trade agency is studying a cross-sector retaliation via automobile imports from Thailand.

The case stemmed from the country’s claims in 2008 that Thailand’s customs, fiscal and health measures imposed on cigarette imports go against WTO multilateral trading rules which Thailand is subscribed to, including the customs valuation agreement.

WTO ruled in favor of the Philippines in 2010. In 2013, the country raised complaints due to Thailand’s failure to comply with the WTO’s recommendations to resolve the case. The Geneva-based organization affirmed the Philippines’ position, triggering another appeal for Thailand in January this year, for which the WTO sided with the Philippines again.

The DTI said Thailand has yet to conduct reforms in its customs valuation policies in line with its WTO obligations to date.

“We are already studying retaliation as an option that is allowed by the WTO…We are seriously considering, calculating our retaliatory rights on auto(mobile),” Rodolfo told reporters in a briefing in Makati Thursday last week.

While WTO’s dispute settlement system calls for the imposition of sanctions in the same sector under which a violation has been committed, in this case cigarettes, Rodolfo said the Philippines’ importation of the product from Thailand is not as significant as its exports, hence, the resort to cross-retaliate on auto imports.

Aside from rice, vehicles for the transfer of goods and the transport of persons with headings 8703 and 8704 are among the Philippines’ top imports from Thailand.

Under the WTO rules, the trade remedy may come in the form of either quantitative restriction, which will limit the physical amount of imported cars from Thailand, or tariff.

Rodolfo said the government has relayed a request to the WTO’s dispute settlement body for a meeting with Thailand where it will lay down its retaliation plans. The DTI is looking at filing the application for retaliation by end December.

Aside from lining its regulations in accordance to its WTO obligations, the WTO ruling also calls on Thailand to withdraw the criminal case it filed against Philip Morris International Thailand, which was accused of undervaluing the prices of Philippine-made cigarettes shipped between 2003 and 2006. The company has maintained that its import valuations were consistent with the WTO agreement.