WORLD TRADE
ORGANIZATIONWT/TPR/M/59
15 November 1999
(99-4898)
Trade Policy Review Body
27 and 29 September 1999
TRADE POLICY REVIEW
THE PHILIPPINES
Minutes of Meeting
Chairperson:  H.E. Mr. Jean-Marie Noirefalisse (Belgium)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE PHILIPPINES 4III. STATEMENT BY THE FIRST DISCUSSANT 8IV. STATEMENT BY THE SECOND DISCUSSANT 11
V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 13
VI. REPLIES BY THE REPRESENTATIVE OF THE PHILIPPINES
AND ADDITIONAL COMMENTS 17
VII. CONCLUDING REMARKS BY THE CHAIRPERSON 24ANNEX I ADVANCE WRITTEN QUESTIONS AND RESPONSES
BY THE GOVERNMENT OF THE PHILIPPINES 26WT/TPR/M/59
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The second Trade Policy Review of the Philippines was held on 27 and 29 September 1999.
The Chairperson welcomed the delegation of the Philippines, led by Ambassador Edsel T. Custodio,
and the discussants, Ambassador Silvia Avila Seifert (Bolivia) and Mr. Yair Shiran (Israel).  As usual,
both discussants would speak in their personal capacities and not as representatives of their countries.
In accordance with the established procedures, the discussants had made available, in advance,
outlines of the main issues they intended to raise.
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures for the meeting.  The report by the Government of the Philippines was contained in
document WT/TPR/G/59 and that of the WTO Secretariat in document WT/TPR/S/59;  the main
issues to be raised by the discussants were contained in document WT/TPR/39.  Copies of written
questions, submitted by ten delegations (Australia;  Canada;  Czech Republic;  Hong Kong, China;the Republic of Korea;  New Zealand;  the European Union;  Japan;  the United States;  and India)
(Annex I) had been transmitted to the delegation of the Philippines.WT/TPR/M/59
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE PHILIPPINES
3. The representative of the Philippines, H.E. Edsel T. Custodio, welcomed the occasion of the
TPR of the Philippines, its second Review under the multilateral trading system and its first under the
World Trade Organization (WTO).
4. He briefly recapitulated the four major themes around which the Philippine Government
Report revolved:
(a) First, despite the rather mixed performance of the economy since the first Trade Policy
Review in 1993 on account of various factors, including extraneous ones, the Philippine
economy had proven to be resilient and had remained buoyant overall;
(b) Second, the Philippines' resiliency and buoyancy could largely be explained by major
economic policy reforms undertaken since 1993;
(c) Third, the WTO remained extremely important to the Philippines insofar as the multilateral
trading system provided stability, predictability to, and an impetus for its future sustained
growth and development.  Because of this, the Philippines took its commitments under the
multilateral trading system very seriously, and called on others to do the same;
(d) Finally, in anticipation of possible new undertakings in the WTO that might be agreed at the
third Session of the Ministerial Conference in Seattle, the Philippines had expectations thatany new undertakings would not only be imbued w ith balance and a mutuality of interests and
benefits, but, more importantly, would contribute positively to its sustainable growth and
development.
5. In 1993, the Philippine economy was recovering from a string of major natural calamities
including a devastating earthquake and the disastrous eruption of the long-dormant Mount Pinatubo .
Disaster rehabilitation work entailed huge financial requirements, and this had exacerbated already
unsustainable deficits in the government budget as well as in the current account of the balance ofpayments (BOP).
6. Nevertheless, the Government had pursued important financial, monetary, and economic
measures that promoted deregulation, liberalization, and economic stability.  As a result, inflation was
contained to single-digit level.  The more liberal and market-based foreign exchange regime helped
pull in foreign capital and enabled the economy to re spond to growing foreign demand.  In the light of
a deregulated atmosphere, the peso remained relatively stable, and international reserves were kept at
a comfortable level. On the whole, real gross national product (GNP) grew by 2.1% in 1993;  and by
1997, real GNP growth was at 5.3%.  However, by the second half of 1997, the incipient financial
crisis that first hit the Philippines' trading partners in Asia had crept into the Philippine economy.  In
1998, GNP growth was practically flat at a negligible 0.1%.  In terms of the gross domestic product(GDP), there was a slight decline of 0.5%.
7. In terms of trade, the Philippines’ liberalization programme and active involvement in
international and regional trading arrangements und erpinned the growth in the export sector of an
average 14.2% from 1993 to 1998.  Although exports of goods registered a marginal real growth rate
of 0.3% in 1998, in current dollar terms merchandise exports continued to grow at 16.9% that year.Import growth from 1993 to 1998 was lower at around 10% per year, with a record decline of 14.3%
in 1998, due to general weakness in the economy stemming mainly from the financial crisis and the
40% depreciation of the Philippine peso.  For the period 1993 to 1998, growth in the economy wasWT/TPR/M/59
Page 5
largely attributed to the services sector, which accounted for 43% GDP in 1993 increasing to 45.1% in
1998.  Industry accounted for the next largest share of GDP with 34.2% in 1993 and 35.5% in 1998.
8. The Philippines, however, continued to have problems in the agricultural sector whose share
declined from 22.8% in 1993 to 19.4% in 1998, for reasons that included the meteorological
phenomenon known as El Niño .  The performance of the agricultural sector was critical for the
Philippines, where over 40% of the labour force was in agriculture, a sector that was largely supported
by subsistence farming.
9. For 1999, the Philippines anticipated GDP growth in the range of 1% to 3%, with recent
developments suggesting an outcome well above the upper half of the range.  Inflation would remain
manageable at around 7.5%.  The current account, which was at a record surplus of US$1.3 billion as
of the first quarter 1999, would narrow substant ially as imports rose due to increased economic
activity.
10. Capital flows both from private and official sources were also recovering.  And gross
international reserves, which had risen to almost US$12 billion as of the first quarter 1999, would
continue to be robust.  The Philippines’ turnaround, including in the external position, had
significantly reduced vulnerability to shocks such as those that had occurred in 1997 and 1998.
11. Trade played an important role in the Philippines' economic development.  The representative
emphasized that his country's accession to the “ Marrakesh Agreement Establishing the World Trade
Organization”  in December 1994, had signalled a conscious policy decision on the part of the
Government to pursue further trade liberalization and to become more closely integrated with the
multilateral trading system.  To complement its part icipation in the multilateral trading system, the
Philippines was also a founding and active member of the ASEAN, and was contributing to the
realization of the ASEAN Free Trade Area (AFTA), which was scheduled for completion by 2002.
12. Furthermore, the Philippines actively participated in the Asia-Pacific Economic Cooperation
(APEC) forum, supporting the objective of building on the open and non-discriminatory multilateral
trading system of the WTO.
13. Despite domestic implementation problems, the Government had maintained progress under
its unilateral tariff reform programme (TRP), which was part of an overall coherent economic reform
package. The year 1993 marked the midpoint of the first TRP under Executive Order (EO) 470 whichcovered the period 1991-95.  Since then the Philippines had pursued the TRP even more boldly,
issuing subsequent comprehensive tariff adjustments under EOs 264 in 1995, and 465 and 486 in
1998.  The average tariff was roughly 10% in 1999, compared to more than 25% at the time of the
first Review.
14. In 1999, however, unable to assuage the effects of the Asian financial crisis, the Philippines
was constrained to mandating and implementing EO 63, which provided for an upward tariff
adjustment to alleviate the difficulties faced by certain domestic industries. The representative
emphasized that tariff adjustments were limited and temporary and would revert to their former rates
by the end of 1999. He noted that EO 63 also provided for  reductions in a number of other tariff lines.
15. The Philippines planned to continue with the TRP until a uniform tariff rate of 5% or a
narrow tariff range of zero to 5% had been achieved, by 2004, with the possible exception of a few
agricultural products.WT/TPR/M/59
Page 6
16. With the establishment of the new Bangko Sentral ng Pilipinas (BSP) in 1993, the Philippines
had become better equipped to pursue the objectives of maintaining price stability conducive tobalanced long-term growth.  The BSP had continued reforms of the old Central Bank to deregulate the
country’s foreign exchange, trade, and payment systems.  Among the continuing reforms undertaken
had been the lifting of foreign exchange restrictions, and, at the outbreak of the financial crisis in
1997, the monetary authorities had allowed the peso to float freely as the effectiveness of intensified
dollar sales diminished.  The BSP also permitted more liberal entry and operation of foreign banks.
17. Monetary policy had been eased gradually since late 1998 as the peso stabilized and inflation
was successfully contained.  Interest rates became lower than crisis levels, although weak demand
persisted.  Overall, the banking sector was poised for stronger expansion given the system’s strong
capital base and a decline in the threat posed by non-performing loans.  Tighter prudential and
supervisory standards would be pursued, along with the intended recapitalization of weaker banksthrough infusions or mergers with stronger banks.
18. Policy reforms in other areas were continuing with even greater confidence and
determination.  These include improvements in tax revenue generation, comprehensive reform in the
power sector, and the rationalization of fiscal incentives.  Current efforts in terms of fiscal incentives
were especially important to provide a balance among the triple challenge of maintaining fiscalsoundness, achieving better efficiency in resource allocation, and addressing the exigencies of
development through national promotion policy and strategies.  Indeed, perfect competition did not
exist; and in imperfect markets, the dogmatic theory of resource allocation and economic efficiency
needed to be blended with a good dose of pragmatism and adaptation.
19. The Philippines also passed the Agricultural and Fisheries Modernization Act to fast-track
much-needed growth in these populous sectors.  Under the Act, food production is a priority,
including through technological development, to ensure adequate food stocks at all times and pricestability for the 74 million Filipino consumers.
20. The Philippines not only participated actively in the WTO, but was a responsible Member of
the multilateral trading system, subscribing to the full and faithful implementation of its
commitments, including those undertaken in the Uruguay Round.
21. Giving examples of these commitments, the representative noted that around 63% of total
tariff lines had been bound,  with virtually 100% binding in agriculture;  all existing agricultural
quantitative restrictions had been converted into tariffs, with only rice as the exemption pursuant to
Annex 5 of the Agreement on Agriculture;  current market-access regulations in five service sectors
had been bound, with subsequent liberalization in the entry and scope of operations of banks, and the
fostering of a keenly competitive environment in  the telecommunications sector;  Article XVIII:B
restrictions had been disinvoked, with all sectors covered completely liberalized.  The import
measures that might remain were judiciously warranted for health, safety, and security reasons.
22. The Philippine Congress had passed enabling legislation that authorized, inter alia , the shift
to the transaction value method of import valuation by the year 2000, in full compliance with
Philippine obligations.  Pending further legislative and administrative work, the Philippines intendedto conform with the provisions of the TRIMs Agreement by the year 2000.  The Philippines had also
enacted an Intellectual Property Code with remaining component legislation, for example on
geographical indications, targeted for completion by the year 2000.
23. The Philippines had amended the Anti-dumping and Countervailing Duty Laws, and was also
in the process of preparing legislation for safeguards to provide relief to domestic industries that wereWT/TPR/M/59
Page 7
seriously injured by import surges.  These trade laws would be notified to the respective Committees
in due course.
24. The representative expressed concern over measures taken by some of the Philippines' major
trading partners.  In agriculture, certain developed Members continued to use high levels of export
subsidies and domestic support measures, which, although allowed by the present Agreement, were
undeniably trade-distorting. Others employed unjustifiable and discriminatory SPS measures that
stunted the growth of the Philippines' processed f ood and high-value fruit industries.  The Philippines
also remained threatened with contingency trade protection.  For example, a WTO Member had
recently launched countervail investigations against stainless steel products from the Philippines, with
little recognition of the flexibilities allowed for developing countries in the Subsidies Agreement.
Moreover, the investigation was taking place without taking into full account that the Philippine steel
industry, itself, was reeling from the diversionary effects of the actions of another WTO Member,which had recently restricted steel imports from other Members as well as and non-members.  In the
area of textiles and clothing, a major trading partner had unilaterally chosen to implement rules of
origin that effectively required the Philippines to produce its own yarns and textiles to qualify for
MFA quotas.  The Philippines considered this to be serious violation of the Agreement on Textiles
and Clothing and other related WTO Agreements.
25. In respect of rules of origin, the Philippines had actively participated in the ongoing
harmonization work, in order to advance and complete the process as mandated by the Agreement and
provided greater transparency and predictability in world trade.  The representative had an impression
that some Members were deliberately delaying the completion of the harmonization work programme
for certain reasons.
26. Like other WTO Members, the Philippines looked forward to the Ministerial Conference in
Seattle.  In this regard, the Philippines emphasized the need to have an acceptable approach inachieving a balanced agenda for Seattle, which might or might not include the launching of a
comprehensive round of multilateral trade negotiations.  It was needless to reiterate that consensus
would be supreme.
27. While the Philippines subscribed to a forward-looking agenda for the WTO, it accorded the
highest importance to the full and faithful implementation of the WTO Agreements signed inMarrakesh.  It was with a sense of urgency that  the Philippines viewed the need to push ahead with
the work that could remedy imbalances in the Agreements given the experience it had gained thus far.
28. The Philippines also accorded utmost importance to the work that had to be done under the
built-in agenda, including that of the mandated negotiations in agriculture and services.  In this
connection, the Philippines expected that Seattle would be able to effectively launch negotiations inagriculture and services in 2000.
29. Beyond the built-in agenda, the Philippines was ready to consider industrial tariff negotiations
(or non-agricultural tariffs) because it considered this  to be a traditional facet of any multilateral trade
negotiations.
30. The representative stated that Philippine views on other issues had already been elaborated in
the Government Report.
31. In conclusion, the representative emphasized that any future undertaking in the WTO must
not only be cognizant of, but also give full effect to, an embodiment of the trade, financial, and
development needs of its developing Members.  Therefore, a balanced approach to all issues was
necessary, and all issues must be clearly related to trade and within the competence of the WTO.Most importantly, there must be a mutuality of interests and benefits across all Members for this had
been the fundamental basis for the credibility, success, and longevity of the multilateral trading
system.WT/TPR/M/59
Page 8
III. STATEMENT BY THE FIRST DISCUSSANT
32. The first discussant (Ambassador Silvia Avila Seifert) stated that between 1992 and 1997 in
the Philippines, the policy of attracting investments that led to roughly 10% annual growth in
investments, and the stepped-up programme to privatize the main state enterprises, had induced steady
average annual GDP growth of 5%.  That growth ha d been driven mainly by the expansion of the
manufacturing and the export sectors.  There had also been a stable political and institutional
framework as well as macroeconomic discipline based on fiscal balance and low inflation.
33. 1998 brought a slowdown in the rate of growth as a result of the crisis that had affected the
region.  In addition, the agricultural sector was affected by natural phenomena, such as El Niño .  The
crisis had caused macroeconomic dislocations that made it necessary to float the currency, which
depreciated by 50% in nominal terms.  Another effect of the crisis was increased unemployment,
though by 1999 the economy already looked set to grow at around 2%.
34. Nevertheless, the current account again posted a surplus in 1998 thanks to the buoyancy of
the country's export sector.  That buoyancy was reflected by the growth of merchandise exports as a
percentage of GDP from 18% in 1992 to almost 30% in 1997.  The structure of exports also changed
from one based on commodities to one driven by manufactures, which in 1997 accounted for 87% of
overall exports.  The country's main export market s were the United States, Japan, and the European
Union.
35. Despite the impact of the Asian crisis on the Philippine economy, it was hoped that over the
medium term the competitiveness of the external s ector would be maintained thanks to the relaxation
of the exchange rate, the lowering of interest rates and prices, and the gradual return of foreign
investment.  It was also envisaged that growth would be revitalized, and the structural reforms leading
to the propagation of the free market model and greater economic openness would continue.
36. The public sector would be reformed, as a matter of priority, to improve the efficiency of
government and a tax reform programme would be in stituted, involving a review of fiscal incentives
and a simplification of the tax system.  A Bankruptcy Law was also to be enacted to ensure greater
transparency of trade practices, and reforms woul d be carried out to regulate and strengthen the
banking and financial sector.
37. These measures would enhance the efficiency, competitiveness and openness of the
Philippine economy and help to boost growth and reduce its vulnerability to external shocks.  Efforts
had been redoubled to reduce and alleviate poverty.
38. The liberalization of trade and investment policies had led to greater openness, the average
tariff having been lowered from 26% in 1992 to 10% in 1999.  Yet an import substitution policy
persisted in export-oriented sectors and activities, and in the automotive industry.  Quantitativerestrictions and pre-import licensing were still in place for rice and other agricultural products,
together with relatively high tariffs on imports of textiles, clothing, and steel.
39. There had also been some relaxation of customs valuation criteria with the switch from the
concept of "home consumption value" to that of "export value" and the Government was committed to
adopting the "transaction value" method by the year 2000, in line with the WTO commitments.Customs and preshipment inspection had also been reviewed.
40. In the government procurement sector, the Government generally favoured purchases of
locally produced goods and services and applied certain restrictions to foreign suppliers whileWT/TPR/M/59
Page 9
granting preferential margins to purchases from member States of the Agreement on Preferential
Trading Arrangements of the Association of Sout h-East Asian Nations (ASEAN).  The Philippines
had not signed the WTO Government Procurement Agreement.
41. Investment policy had been based on attracting capital by means of a package of incentives,
including tax holidays.  Between 1993 and 1997, foreign direct investment (FDI) was double the
amount of investments made during the preceding 17 years and was directed mainly towards the
export, industrial, and services sectors.
42. One of the main policy instruments for attract ing foreign investment to the Philippines and
developing its export sector was the programme of investment incentives.  These could be defined as
objectively determined economic advantages accorded directly or indirectly by the Government either
to specific enterprises or specific categories of enterprises in order to elicit a particular response.
43. The system of investment incentives being applied in the Philippines had been comprised
principally of fiscal incentives designed to reduce the tax burden on foreign investors and had proved
both complicated and very costly in fiscal terms.
44. Export growth had been closely bound up with FDI, which derived a considerable boost from
the privatization of government enterprises, the favorable macroeconomic climate, and a highly
skilled labour force.  Yet the policy of investment incentives and export development gave rise to highfiscal costs and market interventions.
45. In a situation of competition, the irrational use of incentives not only entailed a considerable
drain on resources but could also impact negatively on income distribution for countries receiving
investment.  When most countries were competing to attract foreign investment by means of
incentives, the latter tended to cancel each other out and created a situation that favoured the transfer
of wealth from the countries receiving investment to foreign investors.
46. There were still significant levels of protection in the agricultural sector, although pursuant to
WTO commitments, quantitative import restrictions had been removed except in the case of rice.
Higher tariffs were applied for instance to agricultural products including coffee, maize, meat,
potatoes, and sugar, which were considered sensitive products.  There was also a degree of state
intervention in the form of the setting of minimum prices far higher than international prices,
measures at the border, and production assistance programmes.
47. There had been a greater degree of liberalization in the services sector both in regard to
supply and trade, with the privatization of financial and telecommunication services.  Thanks to these
policies, the competitiveness of local enterprises had been enhanced.  Nevertheless, the Government
continued to participate in some services sectors considered strategic, such as banking and air
transport, where restrictions on foreign investment remained in place.
48. The production and marketing of services were an important element of the external sector of
the Philippine economy.  The trade balance for factor and non-factor services showed a
US$6,000 million surplus in 1997.  That surplus was in part the result of remittances by Filipino
workers abroad (albeit a very small percentage in relation to the overall labour force).  The tourist
industry also generated revenues of US$2,000 million during that year.
49. The Trade Policy Review of the Philippines would seem to demonstrate that the apparent
tangle of standards and rules was in fact a series of well-conceived measures based on a detailed
analysis of the economy.  The success of the measures taken by the Philippine Government to dealWT/TPR/M/59
Page 10
with the crisis had not been a matter of mere chance, they were taken at the right time and had headed
off economic disaster.  In this age of global financial markets when thousands of transactions werepossible per minute, thanks to technology and time zones, it was difficult to attenuate loss of
confidence and halt chain reactions.
50. An example of these measures was the monetary and fiscal discipline aimed at encouraging
consumption.  The accompanying increase in the purchasing power of remittances had borne out the
wisdom of the fiscal policy of stimulating domes tic consumption.  Likewise, the Philippines seemed
also to have devalued its currency at the right time in order to safeguard its reserves.  This package of
measures had helped avert a potentially damaging run on reserves as a result of the crisis and had
improved the climate of confidence while avoiding a significant downturn in production.
51. Yet another illustration of the competent management of the economy was the Government's
decision to sterilize the massive capital inflows oc curring from late 1996 to early 1997, partly to avoid
an appreciation of the peso and any inordinate increase in the money supply.  The combined effects of
all these measures was to rapidly turn the crisis around and generate current account balance almost
immediately.
52. Nonetheless, it was necessary to inject a note of caution into this relatively promising scenario
with regard to the rate of borrowing recorded by  the Philippines since 1993 to fill the gap between the
level of domestic savings and investment needs.  The question had to be raised as to the economic
sustainability of this rate of borrowing.WT/TPR/M/59
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IV. STATEMENT BY THE SECOND DISCUSSANT
53. The second discussant (Mr. Yair Shiran) congratulated the sound macroeconomic policies and
liberalization efforts made by the Government, and pr aised the Philippines' ability to soften the impact
of the Asian financial crisis on its economy.  The Philippines had ratified the Uruguay Round
Agreement on 14 December 1994, and became a founding member of the WTO on 1 January 1995;  it
committed to bind nearly 100% of tariff lines in agriculture, except for rice; bind 60% of tariff lines in
industrial products;  and replace quantitative restrictions on agricultural products by boundad valorem  tariffs and/or tariff quotas.
54. The Philippines had invoked developing country status regarding TRIPS, TRIMs and customs
valuation, however, it had already taken steps to amend its legislation in order to meet its obligations
and to bring its legislation into conformity with the relevant WTO Agreements.  The Philippines had
made extensive commitments under the GATS and the negotiations in basic telecommunicationservices and financial services;  it had not, however, signed the Fourth and the Fifth Protocols of the
GATS.  The Philippines was a party to the WTO Information Technology Agreement, and was
involved in five dispute settlement cases, twice as a complainant, once as a respondent, and twice as a
third party.
55. The Philippines was also an active member in WTO meetings and debates, both on its own
behalf and as a member of ASEAN.  Like many other WTO Members, the Philippines participated in
a number of regional trade initiatives including th e Asia Pacific Economic Cooperation (APEC) and
the AFTA.  While APEC initiatives were to be im plemented on an MFN basis, AFTA provided for
preferential treatment for intra-regional trade in goods, services, investments, and government
procurement.
56. The relations between regional trading agreements (RTAs) and multilateral trading
agreements was a subject of ongoing debate in the WTO.  The reduction of AFTA tariff rates wasaccompanied by unilateral reduction of MFN tariff rates, and about 72% of the Philippines' AFTA and
MFN tariff lines carried similar rates.  This might also support the idea that RTAs could serve as a
catalyst to trade liberalization on a multilateral level.
57. Since AFTA had been notified under the Enabling Clause, it had never been subject to review
under Article XXIV of GATT or Article V of GATS.  The tariffs for intra-ASEAN trade had beenreduced, though in many cases not been eliminated.  In addition, over the years, the share of trade
between the Philippines and its AFTA partners had only slightly increased and had remained
relatively modest (around 26% in 1997).
58. He was interested in hearing the Philippines' view regarding the advisability of the AFTA,
considering the extensive resources invested in main taining the agreement compared to the benefits to
all trading partners of trade liberalization on a multilateral basis.
59. As part of the trade liberalization process the Philippines had undergone since the last
Review, the average MFN tariff rates had decreased sharply from 25.6% in 1992 to 10.1% in 1999.
Applied tariff rates on industrial as well as agricultural products were, in most cases, far below the
bound rates.  In light of the Asian financial crisis, the Government had made what seemed to be a shiftin this trend of continued tariff duty reduction by modifying tariff rates for more than 700 lines
including an increase in some items.  The Government had explained the recent increase in a number
of tariff lines as primarily intended to provide temporary import relief to industries adversely affected
by the crisis.WT/TPR/M/59
Page 12
60. He was interested in hearing the view of the Ph ilippines on this apparent shift, especially in
light of the fact that the recent depreciation of the peso had made imports more expensive.
61. As in many other countries, the size of the government sector and its involvement in full or
partial ownership of enterprises implied that public expenditure was a significant part of the
Philippine economy.  He praised the step taken by the President in November 1998, under which all
government contracts above P50 million needed to be reviewed.  This step might secure a higher level
of supervision and monitoring of public expenditure.
62. While the legitimate goal of governments to utilize policies and instruments to achieve social
and development goals was recognized, the absence of transparent purchasing practices as well as
preferences for local suppliers and certain trading partners, raised the question whether best value for
money would be secured.
63. The call for support for an agreement on transparency in government procurement, contained
in the Statement of APEC ministers, to which the Philippines was a party, seemed to be a positive
sign.  He invited the delegation to express the Philippines' view on these issues.
64. The manufacturing sector in the Philippines had been diversified and had increased its share
in exports.  The electronics and electrical equipment branches had achieved particularly impressive
rates of growth, demonstrated in their growing share of exports.  These developments had been
supported by a liberalized trade regime, more neutral sectoral policies, and an increased inward flow
of foreign investments.  The almost six-fold increase in volume between the years 1993 and 1997 was
especially impressive.
65. This would imply a positive trend in the Philippines' economy, as the rate of productivity in
the manufacturing sector, like in many other countries, was higher than in most other sectors of the
Philippine economy.
66. A closer look at the Philippines' manufacturing structure might reveal that while the less-
protected electronics branch, which also operated in a more competitive environment, managed to
achieve high levels of performance, some manufacturing branches that enjoyed a certain degree of
protection, and selective support measures, or were subject to TRIMs, were less impressive in terms
of performance.  He was interested to learn the view of the Philippines on this matter.WT/TPR/M/59
Page 13
V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
67. Members appreciated the Philippines' commitment to the WTO, and the progress made since
the previous Review in trade-related liberaliza tion, including the reduction of tariff rates, the
elimination of non-tariff barriers, deregulation initiatives, and the liberalization of the investment
regime, as well as sound macroeconomic policies.   Members thanked the Philippine Government and
the Secretariat for their Reports.  Members also l ooked forward to receiving replies to their advance
written questions.
68. Members were generally impressed that the Philippines had come through the Asian financial
crisis in a relatively good shape, due at least partly to the reform measures taken by the Philippines.
69. The representative of Australia was concerned over the mixed picture on the tariff reduction
programme since the onset of the Asian financial crisis;  though the Government removed tariffs in
1998 and 1999 on imports of agricultural inputs, etc., in January 1999, it raised tariffs on a range ofitems to provide more protection for some industries.  He noted that recourse to such measures risked
impeding the pace of recovery and slowing growth in  real incomes.  High tariff rates, import quotas,
internal protection measures, complex sanitary and phytosanitary regulations, and some high tariffs
impeded imports of Australian food.  Coal imports  remained subject to government review and
approval.  He encouraged the Philippines to maintain the pace of reform, including in tariffs, SPSmeasures, and the power sector, and called for the reduction of high tariff rates on some agricultural
products and the elimination of tariff-rate quotas.
70. The representative of Canada noted that the Philippines and Canada had established a number
of economic and trade agreements, including a Fo reign Investment Protection Agreement, an Air
Services Agreement, and a Double Taxation Agreement.  He was encouraged to note that the policy
of President Estrada seemed to share the commitment to liberalization that characterized the previous
Administration.  He was concerned, however, with the increased tariff levels for certain products,which had been implemented since the previous year.
71. The representative of Czech Republic underlined the positive impact of a stable political and
institutional environment based on democratic reforms, which started after the People's Power
Revolution in 1986.  He appreciated the Government's resistance to protectionist pressures in most
areas, despite the Asian financial crisis, and that it had not had recourse to actions that could havecompromized its structural reform efforts.
72. The representative of Hong Kong, China, while commending the Philippines' liberalization
efforts, noted that several sectors of the economy were still not as efficient and productive as they
could be if barriers or other measures were lifted.  Limitations on foreign ownership still prevailed
particularly in services sectors.  He endorsed the Philippines' statement against the trade-inhibitingregime by some importing Members.
73. The representative of the Republic of Korea strongly believed that, by maintaining reforms
and implementing outward-looking policies, the Philippines would overcome the Asian financial
crisis.
74. The representative of New Zealand welcomed the programme of economic reform and
liberalization pursued by the Philippine Government since 1993. He agreed with the Secretariat
Report that the Philippines had provided a positive example of the advantages of liberalization in
overcoming economic shocks, demonstrated by the relative resilience of the Philippines in weathering
the Asian economic crisis.  Despite the overall exemplary trade policy performance of the Philippines,WT/TPR/M/59
Page 14
he was concerned with some recent events, including the changes in over 700 tariff lines, and in
particular, the increases in seven specific tariff lines, which had occurred in early 1999.  Heencouraged the Philippines to continue domestic reforms including the adoption of more transparent,
efficient and effective customs procedures.  He shared the concern of the Philippine Government that
more attention needed to be paid to export subsidies and trade-distorting domestic support in the
scheduled negotiations on agriculture and services, which that would commence in 2000.
75. The representative of the European Union was impressed by the Philippine economy's sharp
recovery from the recession around the time of the previous Review. He noted with pleasure the
present Administration's pronouncement of its commitment to continue the reform process, maintain a
liberal trade policy, and adhere to the principle of free trade.  He also mentioned the Philippines'
commitment to the Asia Europe Meeting (ASEM) process.  The ASEM Trade and Investment Pledge
made at the ASEM II Summit, in April 1998, committed all ASEM partners to resist protectionistpressures, maintain current levels of market acce ss, and pursue further multilateral liberalization
efforts.  Under the ASEM Trade Facilitation Action Plan, partners were working together to reduce
non-tariff barriers and transaction costs.  Un der the ASEM Investment Promotion Action Plan,
partners aimed to enhance the investment envi ronment to promote two-way investment flows.
76. The Philippines' goal of attaining a uniform 5% tariff regime by the year 2004 was especially
commendable.  He welcomed confirmation by the Philippines that the recent increase in tariffs
prompted by the Asian crisis would lapse by the end of 1999.  While significant progress was made in
the removal of non-tariff barriers, poor utilization rates for some commodities in the Minimum Access
Volume (MAV) administration remained.  He stated that the European Union would continue to
monitor the situation to determine the effectiveness of the revised MAV rules in spurring better
utilization.
77.  He noted recent efforts to amend anti-dumping and anti-subsidy regulations and introduce
specific safeguard legislation to ensure conformity with the relevant WTO Agreements, and hoped
that the Philippines would continue to show re straint in the use of trade defence instruments.
78. The introduction of the Intellectual Property Code in 1998 was an important step in
improving the legal framework for the protection of intellectual property rights (IPRs).  However,
there remained substantial room for improvement in  the area of enforcement to combat, for instance,
counterfeiting of trade marks. Significant improvements in the level of alignment of local to
international standards were commendable, although more than half of Philippine standards remained
unaligned and were not scheduled to be fully aligned for another 20 years.
79. He urged the Philippine authorities to concentrate efforts on making greater progress with
pending legislation aimed at further reforming and liberalizing the economy.
80. Drawing attention to weaknesses identified in the Secretariat's Report regarding the
Philippines' competition policy, which might reduce the full benefits to industrial and domestic
consumers of the Philippines' liberalization effort, he requested confirmation of the strategy of the
Philippines' competition policy.
81. He was concerned with the appearance of some protective reflexes in specific sectors, such as
pharmaceuticals, distilled spirits, and cast-iron hubless tubes.  These cases underlined the need for the
Philippines to ensure that legislation was fully co mpatible with the WTO and to further improve the
implementation of existing regulations.WT/TPR/M/59
Page 15
82. The representative of Japan was concerned that the Philippines bound only 53% of all tariff
lines.  Tariff lines on goods of interest to Japan, such as tyres, steel, motor-vehicles, and precision
instruments remain unbound.  He hoped that the Philippines would improve its binding ratio,
including the binding of the tariff lines of the aforementioned products.
83. Although anti-dumping actions were taken by the Philippine authorities, as stated in the
Secretariat Report, the Philippine authorities were preparing anti-dumping legislation which should
conform to the WTO Agreement.  He had serious concerns whether the current anti-dumpingprocedures were taken in conformity with the WTO Agreement.  He requested the Philippines to
ensure prompt establishment of anti-dumping legislation.
84. It would be interesting to observe whether the Philippines would eliminate the trade-related
investment measures, notified to the WTO, by January 2000.    The elimination of the minimum price
scheme for customs valuation and the implementation of the TRIPS were of interest to Japan.
85. He appreciated generally the Philippines' effort to liberalize its services regime.  However, the
Philippines still limited national treatment on access to domestic credit and a restriction remained on
the acquisition of land.  Moreover, sector-specific commitments were made only in transport,
financial, communications, and tourism services.  Although a reduction of the MFN exemptions in the
commercial banking services, as a result of the Financial Services Negotiations, was appreciated, thePhilippines maintained MFN exemptions regarding the entry and temporary stay of natural persons
supplying services, as well as in the maritime transport and financial services sectors.
86. He urged the Philippines to complete its domestic legislation relating to acceptance of the
Fourth and the Fifth Protocols to the GATS and to take appropriate measures to modify its Schedule.
87. The representative of the United States commended the Estrada Administration's course on
economic reform and for working towards the elimination of remaining investment restrictions,
despite growing protectionist pressures.  However, in the previous two years, there had been somebacksliding from the course of liberalization, such as the decision in January 1999 to raise tariffs on
textiles, garments, and certain paper and steel products.  The Philippines had also implemented
procedures that expanded the ability of local firms to influence customs clearance procedures and
effectively block imports.
88. She was also concerned about remaining restrictions on services and investment.  She hoped
that the Philippines would use this Review to describe its progress towards implementing the TRIPS,
TRIMs, and Customs Valuation Agreements by 1 January 2000.
89. The representative of India noted that Philippine exports were dominated by semiconductors
and other products of the electronic industry, accounting for nearly 67% of total exports in 1998, and
urged the Philippine authorities to consider the need for a more diversified export basket.  Heappreciated the importance attached by the Philippines to the WTO's rule-based multilateral trading
system, underscored both in the Secretariat and Government Reports.  The two Reports clearly
showed the Philippines' commitment to maintain the thrust of the tariff reform programme even when
the economy had been affected by natural calamities and faced the creeping impact of the financial
crisis.  He also appreciated the Philippine Government's statement in its Report that while it was fullycommitted to liberalization of trade, the flexibility allowed by safeguard measures for industries
seriously affected by such a process should always be made available, and in the event of use of such
measures, the government assistance would be in the form of WTO-consistent import relief measures.WT/TPR/M/59
Page 16
90. While India's share in exports of bovine meat into the Philippines had increased in recent
years, he was concerned that this trend might be adversely affected by the change in the scientificapproach to risk assessment envisaged in the bill s.  The other issue of concern related to the
Philippine restrictions on import of antibiotics like ampicillin, amoxycillin,  and croxycillin under
E.O. 776 of 1982, which allowed the imports of these antibiotics provided that the landed cost of the
imports was 20% lower than the local cost.  The ban of imports of 6 APA derivatives from India had
been effective under this Order for 16 years.  He understood that the Philippines' Board of Investmenthad recommended repeal of this Order, but no action had been taken.  He strongly requested the
Philippines Government to look into these two i ssues and to resolve them favourably as soon as
possible.
91. The representative of Brunei Darussalem, on behalf of ASEAN, noted that the Trade Policy
Review of the Philippines was well-timed as th e economy of countries in South-East Asia were
beginning to show positive improvements.  The experience of the financial crisis had provided an
opportunity for those in the region to redefine their policy framework.
92. He commended the Philippines' achievements since the previous Review, including the
complete removal of balance-of-payment restrictions.  These measures had shown that in spite of the
economic constraints due to natural calamities and the financial crisis in the ASEAN region, thePhilippines had shown the global trading community that it could enhance competition by institutional
reforms and policy changes.
93. The representative of Norway, noting that the Secretariat Report recommended a more
outward-looking rather than export-oriented economy, requested the Philippines' comments on the
recommendation.  He also asked what further steps the Philippines considered necessary to make
trade policies contribute to further economic development.
94. President Estrada had recently proposed amendments to the Constitution pertaining to
economic reforms, in particular improved ownership conditions for foreign investors.  He asked
whether the Philippines could elaborate on what particular revisions the Government was
contemplating.  He also asked if the temporary tariff increase would remain limited or whether other
industries would be allowed additional protection through increases in tariffs.
95. Regarding tax-free zones, he asked whether the Philippines was considering new zones or
plans to generalize free-zone incentives to include any investment in the whole of the country.  He
also asked whether the investment incentives had become burdensome, as described in the Secretariat
Report, and were a problem that preoccupied the Government.WT/TPR/M/59
Page 17
VI. REPLIES BY THE REPRESENTATIVE OF THE PHILIPPINES AND ADDITIONAL
COMMENTS
96. The representative of the Philippines stated that, instead of running through each question, he
would draw on the broad implications fr om the exchanges made on the first day.
97. A number of Members had asked whether the Philippines would be able to implement its
commitments in TRIMs, customs valuation, and TRIPS in time.  The Philippines' response was that it
was firmly committed to what those agreements requir ed, just as it was fully cognizant of what those
agreements would also allow the Philippines as a developing country to do.
98. With respect to how the Philippines would be implementing its commitments.  The short
answer was:  "we are doing the best we can".  Implementation was not an easy matter;  it exacted a
heavy demand on the limited resources of a densely populated economy like the Philippines.  It also
required intensive coordination among the various executive and legislative agencies which, whenjuxtaposed with the culture and system of governance of the Philippines, would pose a formidable
challenge even to the most competent and well-intentioned civil servant.
99. Notwithstanding these limitations, he wished to  inform the Body that the Philippines had
recently elevated and further strengthened the status of WTO and trade policy by consolidating these
areas within the general ambit of the Cabinet Committee on Trade Related Matters, with theDepartment of Trade and Industry as lead agency and principal focal point.  This should provide
better coordination and policy coherence among the executive agencies, and consistency in the
Government's relationship with the legislative and judicial branches.
100. The review invigorated the need for the Philippines itself to discover whether commitments to
which it was bound would actually translate positiv ely into sustainable long-term growth and
development.  He did not wish to belittle the importance of any of the WTO Agreements but noted
that not all that was legal might be appropriate.  In the same way, not all that worked well for a fewwould work equally for all.  Balance was thus important, and he believed such balance could be
achieved within the parameters of the Philippines' rights and obligations in WTO.
101. The point had also been made that protection levels would need to be reduced further, as
evidenced by the stark comparison between the performance of the high-growth electronics sector and
industries subjected to, for example, TRIMs.  The Philippines had demonstrated that its protectionlevels had indeed gone down significantly since the first Review, and that liberalization, deregulation,
and reforms had been of benefit and would be pursued with even more confidence and determination.
Nonetheless, it was important to consider that the example chosen, the electronics sector, was
inherently an outward-oriented sector;  a TRIMs industry such as motor vehicles, in the Philippines'
case, simply was not.
102. Questions were raised and comments made on fiscal incentives.  The Philippines was
reminded that for every fiscal benefit, there was a fiscal cost and probably a high one.  This was why
the Philippines was continuously reviewing its schemes in order that none of the triple challenges
mentioned on the first day was irreparably compromized.  He noted that incentives would always
provide a partial counterweight to less-than-ideal economic fundamentals.  They were not intended tosupport non-viable enterprises; rather they were geared towards attracting growth, income, and
employment-creating investment.  The transfer of income through incentives would not have been
politically feasible if not for the wealth-creating im pact of investments.  Furthermore, the rent-seeking
problem cited was not unique to incentives, as rent-seeking and directly unproductive activities were
possible outcomes of any market intervention by any government.  The arguments put forward againstWT/TPR/M/59
Page 18
the use of incentives did not detract from their usefulness as a developmental policy instrument.
Through incentives, developing economies like the Philippines were able to achieve theirdevelopment aspirations.
103. There were also questions raised about agriculture, mostly in respect of the administration of
tariff rate quotas.  He believed he had been able  to answer these;  however, the Philippines would
remain available to provide additional information to its trading partners.
104. He could not help but become introspective as to how the Philippines' commitments in the
WTO would eventually lift the standard of living of the masses of Filipinos who depended solely on
subsistence farming;  the coming mandated negotiations would  indeed test the credibility of the
WTO.
105. Regarding the continuing AFTA preferences raised by one of the discussants, he wished to
clarify that the Philippines had in fact benefited tremendously, if not the most, from AFTA.Moreover, a larger and integrated ASEAN market en ticed investments, which propelled further trade
and income growth.  AFTA was only an economic component of the broader nature of ASEAN,
which had brought peace, security, and prosperity to the region for more than 30 years.
106. Nonetheless, regionalism was a second-best approach to liberalization, which had and would
continue to yield positive results.  In forming free-trade agreements, developing countries had greaterflexibility in setting the negotiating process and outcome.  They opted not to enter, at least
immediately, into agreements which in their view would not be in their interest or would not even
represent a mutuality of interests and benefits.  The challenge would be to ensure that the road of
regionalism would always run in parallel along the broader avenue of multilateralism.  In this, he
believed, AFTA had been successful.
107. The future of the Philippines in the WTO was largely touched upon in many questions that
dealt with further liberalization in services and the so-called Singapore issues (i.e., investment,
competition policy, and government transparency).  The Philippines' views on these were quite well
made known on the first day and through the preparatory process of the General Council.
108. However, he wished to emphasize that the Philippines would always approach any future
activity in the WTO with, on one hand, an open mind, but, on the other, with the same depth of
introspection mentioned earlier, determining itself what would inevitably rebound to the good of thePhilippines.
109. The Philippines had recently been asked about its attitude towards an agreement on
transparency in government procurement against the backdrop of APEC Ministers declaration of
support for such an outcome at Seattle.  His response to that question would probably capsulize the
Philippines' attitude towards any future activity in the WTO:  it had always participated constructivelyin the discussion on this issue and would continue to do so;  as far as the Philippines was concerned,
"agreement on transparency on government procurement at Seattle" meant, consent to such an
agreement both freely and intelligently given;  such consent could be intelligently given only if every
relevant issue that to date remained elusive was clarified to the satisfaction of all Members.
110. The first discussant noted that liberalization dynamics by the Philippines and its adherence to
the WTO commitments enhanced the economic growth of the country.  For a small country,
implementing the agreements might be difficult, as mentioned by the Philippine representative.
However, the Philippines had already made progress and was taking measures for further review of
institutional matters.  She thought it would be extremely appropriate to use the word "super-national"WT/TPR/M/59
Page 19
because rules adopted in the WTO were to be implemented directly in different economies;  the Trade
Policy Review was an illustration of the super-national binding nature of the WTO and its agreementsin the Member countries where they were not fully aware of super-national nature of the WTO.  The
use of the phrases "as much as one can" and "the best one can" was understandable.  Through
implementation, it was possible to realise that the problems encountered stemmed from the
agreements;  the Philippine representative was correct in saying that results spoke for themselves.
111. Investment measures could attract profit-seeking or rent-seeking companies.  Despite the
open policy with no investment incentives that Bolivia had chosen, it was necessary to modulate
because this policy did not guarantee that the companies that were seeking profit were the first to
invest.  Although investment measures could entail costs, such costs were unavoidable particularly in
weak economies, because among countries competing to offer benefits and advantages, those who
offer the greatest benefits would attract investments.
112. The possibility that WTO commitments could enhance growth and improve the living
standard of the  population was an important point and related to the image of the WTO.  At least in
the case of small countries, the WTO still had a promising image, which should be looked after.  The
WTO Agreements, however, had not been translated into tangible benefits and advantages.  There
were problems of implementation;  for example, the  TRIPS Agreement was extremely difficult tounderstand.
113. The second discussant thanked the Philippines for reiterating its full commitment to the
requirements of the WTO Agreement.  On competition policy, the efforts made by the Philippines to
liberalize its economies, and to implement privatization programmes in order to reduce government
involvement in the market were encouraging and promising.  However, at the same time, the
Philippine economy appeared to be characterized by a certain degree of concentration.  In order to
secure the positive results of privatization and to ensure that the benefits were shared by all, it mightbe advisable to take action in the area of competition.  On the issue of regional trade agreements,
AFTA was a good example of the notion that RTAs could serve as a catalyst to trade liberalization on
the multilateral level.
114. The representative of the Philippines stated that although the Government was not in the
position to verify the numbers quoted in the Secretariat Report, it was concerned about the possibility
of over-concentration.  The Philippines had no comprehensive anti-trust legislation, however, the
recent initiative to amend constitutional limitations on business was intended to improve the
competition environment.  The Government would opt  for contestability of the market in a broader
manner, but would also need to look at consumer interest and restrictive business practices at the same
time.  There were  plans to enact such laws, including institutional framework to administer the laws,but it might be an expensive proposition and the Philippines needed mature professionals to handle
institutions such as a fair trade commission.  Therefore the Government was seriously engaged in
discussions, seminars, and training regarding competition policy.
115. The representative of the European Union welcomed the confirmation by the Philippine
Government that the use of pre-shipment inspec tion would be discontinued by the year 2000;  a
measure directly related to the Philippines' effort to modernize its customs administration and
procedure.  He was interested to know the Philippines' approach to  trade facilitation discussed in the
WTO.  He sought confirmation that the Philippi nes would move to the transaction value method by
1 January 2000 and would eliminate minimum import prices, and requested to some questions that
were still unanswered.  On the announcement made by the Philippines that the matter of rationalizingtaxation on wines and spirits was under review, he stressed that EU operators were complaining about
straightforward discrimination in taxation between im ported and national spirits.  He sought assuranceWT/TPR/M/59
Page 20
that "rationalization" would actually mean eliminating any kind of discrimination.  He noted that,
although the Philippines did not see any tangible benefit in joining the GPA, elimination ofpreferences in government procurement would be an obvious advantage, for example, in securing
value for money for public entities, whether joining GPA or not.  The Philippine Government was
keenly aware of enforcement problems in the field of counterfeited wines and spirits, and he
welcomed the fight against counterfeiting.
116. The representative of the Philippines stated that under Republic Act 8181 a shift to
transaction value method by 2000 had been decided, and the "published value" would be terminated
once transaction value was introduced.  Customs was undergoing modernization and streamlining and
the Philippines benefited from technical assistance on this. The developing  members of APEC
subscribed to a blueprint for customs modernization, which covered a broad area of customs' work,
including facilitation and TRIPS enforcement, and other matters.  Pressure on customs authorities tostreamline and modernize was very strong, because they received continuing support from various
sources.
117. The law regarding wines and spirits was an old provision, which had become inconsistent
with the WTO.  The Government had been trying to separate and rationalize this provision and had
tried to introduce legislation to restructure all internal revenue measures, but this had not beensuccessful.  The Government had given a strong mandate to a WTO committee, under the Department
of Trade and Industry, and had pressured the Financ e Ministry to produce stand-alone legislation.  On
government procurement, he shared views reflected in the decisions of ministers in Auckland, and
would consider transparency in government procurement.
118. The Philippines continued to participate actively in the work of trade facilitation in the WTO.
The Philippines had made the point that all the aspects of the WTO Agreements were trade
facilitation, and that before moving to rule-making activities in trade facilitation, perhaps the WTOshould complete outstanding programmes, for example, rules of origin.   He welcomed the movement
in the harmonization work programme, and hoped that this would continue.  The Philippines had also
made a point that before discussing facilitation, the issues of infrastructure and capacity building
needed to be looked at.  The Philippines would put special emphasis on implementation, in tandem
with issues related to infrastructure and capacity building
119. The representative of the United States welcomed responses provided on preshipment
inspection and on trade facilitation;  he shared the EU opinion that rules on trade facilitation did pose
advantages to all members, and that the Philippines, because of its participation in the APEC and its
experience in trade facilitation, was in a position to shed some light on its own experiences.  He
believed that further consideration should be given to new rules with respect to trade facilitation.  Heappreciated the commitment made by the Philippines to implement the Agreements on TRIPS, TRIMs
and customs valuation by 1 January 2000.
120. He noted that Philippine Parliament was considering revisions to the Intellectual Property
Code, in particular with respect to copyright, and asked the Government to make efforts to ensure that
the TRIPS Agreement was properly reflected in the legislation.  He also had concerns on someamendments, such as fair use copyright provisions, to allow educational institutions to copy materials.
The U.S. view was that colleges should not avail themselves of fair use educational exemptions for
profit.  He also raised a concern on draft legislation on community intellectual property rights for
indigenous people, and compulsory licensing of mu sical works; the move showed a need for the
Government to participate actively in the legislative process to ensure that the legislation was enactedin conformity with the Philippines' WTO obligations.WT/TPR/M/59
Page 21
121. With respect to the Government Procurement Agreement, he expressed some disappointment
with the answer provided by the Philippines.  He  appreciated the response regarding the Information
Technology Agreement, that an Executive Order would be forthcoming, and noted that the Philippine
Government was working to ratify the harmonized system.
122. He noted that the ASEAN services agreement would be notified under the Enabling Clause in
due course, however, he asked the Philippines, within ASEAN, to review whether the Enabling
Clause was applicable to the Services Agreement.
123. The representative of the Philippines stated that his country was committed to its WTO
obligations, including TRIPS.  It was the firm inte ntion of the Government to comply with all of its
obligations under the TRIPS agreement.
124. The "fair use" provisions for software did refer to teaching but one of the criteria determining
fair use was whether the activity was for commercial purposes or non-profit purposes.  The questionon community rights or rights of indigenous people would be more relevant to the protection of plant
varieties.  However, he noted that nothing woul d prevent the Philippines from establishing its own
sui generis  protection in a manner also suitable to  its national needs.   The thrust of the TRIPS
Agreement was not necessarily to establish uniform rules, but to establish minimum standards;  it was
up to individual Members to determine what kind of  protection would be suited to them.  In this
regard, effective sui generis  protection provided leeway in protecting legitimate rights of the
community of indigenous people.
125. In the debate of the WTO Working Group on Transparency in Government Procurement, the
Philippines had not disputed that adherence to multilateral principles on government procurement was
good for obtaining the best value for money.  However, the Philippines had raised the fact that per se
good should not mean it ought to be.  For example, the Philippines looked at government procurement
not merely as procurement of goods and services but as an instrument of national development, asrecognized by the Singapore Declaration.   The Philippines had raised a basic question in the Working
Group, whose Member governments were primarily regulators but also consumers:  a multilateral
agreement delving into the discussion of, for example, General Motors, whose purchases would
probably be bigger than those of many developing  countries, would be unthinkable because it was a
private buyer;  therefore, why should Members have a multilateral agreement delving into thediscussion of a government essentially in the same position as a private buyer?  The question had
never been answered in the Working Group and rema ined an elusive issue, which might prevent the
Philippines agreeing, even to an agreement on transparency.
126. The services agreement within ASEAN was still in the process of negotiation on a sector-by-
sector basis, which was why the Philippines had stated that it would notify this to the WTO in duecourse.   However, this might not be possible unde r the Enabling Clause and he stated that he would
look at it more closely.
127. Trade facilitation in APEC was a broad subject including customs procedures, standards and
conformance, TRIPS, competition policy, and other regulations including mobility of natural persons.
In the space of three years, even in the areas of customs procedures and standards and conformance agreat deal had been achieved on the basis of voluntary, unilateral, and collective actions.  The
underlying spirit was cooperation, and perhaps more significant trade facilitation was possible through
cooperation rather than through rules.
128. The representative of the Republic of Korea encouraged the Philippines to take note of the
points raised by several delegates regarding government procurement, and, in the course of the APECWT/TPR/M/59
Page 22
process or for the sake of transparency, to take positive action in the near future.  On import
prohibitions, he reminded the Philippines of the Agreement on Import Licensing Procedures, forinstance, paragraph 2 of Article 3 on non-automatic import licensing.  Regarding the answers on
TRIMs, particularly local-content in the automobi le sector, he was reassured that the Philippines
remained committed to the provisions of TRIMs Agreement.
129. The representative of Japan noted the explanations by the Philippines that they were trying
hard to implement customs valuation, TRIPS and TRIMs provisions.  He would observe with interest
the Philippines compliance with the relevant WTO Agreements by the beginning of 2000.  He noted
that the Philippine Government had concerns regarding concentration in the market and asked
whether there were signs of acceleration or deceleration of concentration.  He asked for any
estimation of trends even without concrete figures.
130. He appreciated the Philippines' positive answer regarding simplification of the "complicated
incentive system", and asked whether the Philippines intended to simplify its investment scheme.
131. On enforcement of TRIPS, the Philippines indicated that there were two levels of
enforcement, by the Intellectual Property Office and at the judicial level.  He wondered whether the
Philippines could explain whether some strengthening of IPR enforcement had been conducted
recently or would be conducted in the near future.
132. Regarding services, the Philippines maintained MFN exemptions, whose conditions were
described in its MFN exemptions list.  He wondered if such conditions remained.
133. The representative of the Philippines stated that, under Article 65.2 in relation to Article 65.1
of the TRIPS Agreement, its general obligation to comply with the TRIPS Agreement was as of
1 January 2000.  On the other hand, as early as 1997, the Philippines had promulgated an Intellectual
Property Code, which came into force on 1 January 1998, a full two years before the deadline.  Even
before the intellectual property laws, the Philippines had patent laws, copyright laws, etc.  At theadministrative level, the IPO was the central registry for IPR and also administratively adjudicated
conflicts;  it also had the authority to impose certain administrative penalties. Under the IP code, any
violation of the TRIPS Agreement was cognizable to the courts of the Philippines.  IPR regime was
relatively new to the Philippines, which was still in  the process of re-training not only policemen and
law enforcement agencies, but also judges on how to conduct investigations. This would take time andthe Philippines was doing the best it could, focusing on enforcement:  the situation was much better
than would have been the case had the Philippine Government enacted the law on 1 January 2000, and
spent this time trying to enhance enforcement capacities.
134. The Philippines was sensitive to market concentration, but the representative had no figures to
show market concentration that might lead to control and predominance.
135. He reiterated that incentive schemes for investment were subjected to continuous review.
Considering the Asian financial crisis and fiscal soundness, the fiscal implication of the full structure
of incentives was important.  Thus, there was a strong need to examine the basis for granting
particular incentives, due to budgetary constraints.
136. The representative of Czech Republic was pleased to note that PSI would be terminated in the
year 2000, in connection with the implementation of the transaction value method.
137. The representative of India appreciated the Philippines' response that it would consider India's
concerns regarding certain SPS measures and that these measures would be consistent with the SPSWT/TPR/M/59
Page 23
Agreement.  While no written response had been provided, he had been told informally that repeal of
the executive order concerning export of antibiotics was under consideration.  He requested that thePhilippine Government consider this issue favourab ly in order to remove any impediment remaining
for Indian exports of these items.
138. The representative of New Zealand was pleased to receive confirmation from the Philippines
of its intention to implement the Customs Valu ation Agreement on 1 January 2000, and the additional
information provided in response to questions raised by some Members.  She noted the extent towhich the Philippines availed itself of technical assistance available to developing countries in the
customs area, including that from the APEC.
139. She sought clarification with regard to the temporary tariff adjustment pursuant to the
E.O. 63.  She wondered when exactly in 2000 the scheduled reduction would take place.
140. She noted that the Philippines Fisheries Code was a very good example of how to achieve
sustainable management of an important world res ource, in a manner that was not trade distorting.
141. The representative of the Philippines stated that the tariff reduction would take effect on
1 January 2000;  this was already inscribed in the Philippine tariff book.   Regarding the MFN
exemption on services, raised by Japan, he noted that the conditions still existed.
142. The representative of Bolivia noted that the Fifth Protocol of the GATS had been considered
by the Senate, and wondered whether this could include a modification of the Philippines'
commitments on financial services.
143. The requirement to obtain a franchise from the Philippine Congress to operate basic
telecommunications services probably would lead to high transaction costs to bring in a foreign
investment, as Latin American countries' experience might show.  He wondered whether the
Philippines would be ready to find more rapid mechanisms to issue licences for the operation of basic
telecommunications services.
144. The representative of the Philippines stated that the Government had no control over the
Senate, however, it would make every effort to accelerate the process.
145. On basic telecommunications, legislation would be required to make any changes in the
franchising authority of Congress.  Stating that  he could not make any commitments, however, he
noted that value-added telecommunications were not subject to franchising, which represented astrong advance in the franchising issue.
146. The second discussant thanked the Philippines for its clarification on upward adjustment of
duties on certain tariff lines, and welcomed its intention to return to its former rates by the end of
1999.
147. The first discussant thanked the Philippines for the replies provided which would benefit
developing countries and all WTO Members.WT/TPR/M/59
Page 24
VII. CONCLUDING REMARKS BY THE CHAIRPERSON
148. We have had frank and constructive discussions on the Philippines' trade policies and
measures, with Members warmly commending the Philippines on the economic reforms undertaken
since its previous Review in 1993.  The opening of the trade and investment regimes has contributed
to a more resilient economy which, in general, had dealt well with the Asian financial crisis and
natural disasters.  The Philippines thus provides a good example of the advantages of structural
reform, particularly trade liberalization, in withstanding  external shocks.  Continued efforts toenhance the outward orientation of the economy woul d bring further benefits to Filipino workers and
consumers.  This is necessary in view of the still low per capita income, and savings capacity in the
Philippines and of the on-going efforts to alleviate poverty.
149. Members were impressed by the decline in protection to producers, including reductions in
the average MFN tariff from 26% in 1992 to 10% at present.  The Philippines' WTO commitments inservices, and the expansion of its tariff bindings as a result of the Uruguay Round had significantly
enhanced predictability.  Furthermore, most quantitative import restrictions had been abolished.
Although the selective tariff increases introduced in  1999 were seen as detracting from the otherwise
positive direction of trade policies, Members were reassured by the clear statement from the Filipino
representative that those increases were temporary and would be phased out by 1 January 2000.  ThePhilippines was also commended on its goal to attain a generally uniform 5% tariff by 2004.
150. Members also took note of the Philippines' renewed commitment to comply to the best of its
ability with WTO rules:  in particular that it wo uld shift by 2000 to the transaction value method for
customs valuation, terminate PSI, as well as conform to the provisions of the TRIMs and TRIPS
Agreements;  in due time, the Philippines would notify the WTO of its new Anti-dumping and
Countervailing Duty Laws.
151. The Philippines shed light on a number of issues raised by Members during the Review,
including:
- rationalization of investment incentives;
- export incentives and their WTO consistency;
- liberalization of existing foreign ownership restrictions, including in the banking,
telecommunications and retail sectors;
- competition policy and possible adoption of a general competition law;
- relationship between WTO and preferential agreements, particularly AFTA,
commitments;
- customs administration (influence of local firms on customs clearance), customs
valuation, and trade facilitation;
- expansion of tariff bindings;
- potentially discriminatory excise taxes on distilled spirits, soft drinks and
automobiles;WT/TPR/M/59
Page 25
- import restriction on rice, fish products, coal, used cars, colour reproduction machines
and antibiotics;  and protective measures on food products, automobile parts andvehicles, and steel products;
- alignment to international standards,  and SPS measures;
- transparency and efficiency of government procurement practices;
- time frame to eliminate WTO-inconsistent TRIMs;
- current and future intellectual property legislation and its enforcement;- state trading in grains including rice, and administration of Minimum Access
Volumes;
- ratification of the Fourth and Fifth Protocols to the GATS;  and
- further liberalization and WTO commitments in transport, telecommunications,
financial services and natural persons supplying services
152. Members recognized that the Philippines had incurred social and political costs in liberalizing
its trade regime, but the stronger multilateral system that this had helped establish had been
instrumental in facilitating the fl ow into the Philippines of foreign investment and goods required to
increased domestic competitiveness, and the recent sharp expansion of Philippine exports. The
seriousness with which the Philippines itself takes its WTO commitments underlined its call to otherMembers to do the same.  In this respect, the Philippines expressed concern about certain trade-
inhibiting measures maintained by some of its trading partners, including the high levels of export
subsidies and domestic support measures in agriculture, as well as the application of rules of origin, in
textiles and clothing, contingency and SPS measures in steel and processed food, respectively.
153. In conclusion, Members encouraged the Philippines to continue on its liberalization path and
domestic reform process, and welcomed the Philippines' resolve to implement fully its WTO
commitments by the multilaterally agreed dates.  Members were cognizant of the Philippines'expectation that any new multilateral undertakings would need to be balanced to the benefit of all, and
contribute to sustainable development, and looked forward to its active role in the forthcoming
multilateral trade negotiations.WT/TPR/M/59
Page 26
ANNEX I
ADVANCE WRITTEN QUESTIONS AND RESPONSES
BY THE GOVERNMENT OF THE PHILIPPINES
AUSTRALIA
TARIFFS
The decision in January 1999 to increase tariff rates on over 700 tariff lines is of concern.  Will all of
the 700 tariff lines covered by Executive Order 63 revert to their lower levels on 1 January 2000?
Executive Order No. 63 was promulgated to provide temporary relief to certain industries that
were heavily affected by the Asian financial crisis.  It involved the tariffs for some 720 products at the8-digit tariff level.  Of these 720 tariff lines:
(a) six lines involving four steel slabs and scraps, one for crystal tissue paper, and a
monomer input had their tariffs reduced;
(b) twenty-three lines involving steel coils and wire rods, pocket lighters, kraft-liners and
petrochemical products had their tariffs aligned to uniform rates, albeit at higher
levels; and
(c) the scheduled tariff reductions for 691 lines involving textiles and clothing products
were postponed for one year, that is, the scheduled reductions for 1999 will only take
effect in 2000.
A
GRICULTURE
Australia's experience is that the cost of reclassifying imported sugar as "B" stock to enable it to be
sold on the domestic market acts as an additional tariff of nearly 100%, bringing the effective tariff
rate to over 150%.  How does the Philippines plan to reduce the effect of the sugar classification
system to act as a barrier to the importation and subsequent domestic sale of imported sugar?
The sugar classification system had been a long-standing mechanism to administer pre-
existing trading arrangements for sugar in respect of one major WTO Member.  The Philippine
Government is presently examining ways and means to further improve the transparency and
predictability of the system, which will need a re-orientation of the policies of the Sugar Regulatory
Administration.
Australia has suffered significant disruption to trade in recent years because of the failure of
Philippine authorities to notify quarantine problems through established and agreed channels.
Australia seeks clarification, including time- frames, on any proposed changes to improve
transparency in the application of sanitary and phytosanitary regulations and on commitments toadhere to SPS procedures for the notification of bilateral trade difficulties involving quarantine
issues.WT/TPR/M/59
Page 27
The Philippines considers transparency as a cornerstone of the SPS Agreement.  In this
regard, the Philippines has actively supported the SPS Committee’s efforts to significantly improvethe level of transparency in the application of SPS regulations.  Consistent with this overriding
objective, the Philippines has been transparent in its application of its SPS measures through the
agreed notification procedures in the WTO.  The Philippines has diligently notified every official
introduction or change in SPS measures since accession to the WTO, and ensures that these are
readily available from the national enquiry point.
On a number of sensitive agricultural products, the Philippines maintains high tariff rates (e.g. on
maize, pork, onions, cabbage, cauliflower and coffee) and minimum access volume tariff-rate quotas
(e.g. rice, poultry meat, chilled pork, goatmeat and poultry).  Does the Philippines plan to reduce
these tariffs and eliminate the tariff-rate quota s in question and if so, under which timetable?
The Philippines is committed to phase down tariffs on sensitive agricultural products
consistent with its WTO commitments.  The Philippines has a tariff reduction schedule for these
products up to 2004.
M
INING AND ENERGY
The Philippines maintains import lic ensing requirements to coal and coal derivatives under cover of
GATT Article XVIII:B.  Does the Philippines intend to simplify its coal tender purchase
arrangements, and provide longer response times and more realistic specifications?  Australia seeks
more details of the Philippines' commitment to lift import restrictions on coal.
The Philippines has already disinvoked recourse to Article XVIII:B of GATT 1994.  In
practice, quantitative restrictions do not exist insofar as the main users of coal in the Philippines are
cement plants, whose kilns were designed to use a mix of local and imported coal.  Plants cannot use
pure local coal nor pure imported coal; as such any and all coal importations are not restricted.
Figures on coal importation from 1993 to 1997, in Table IV.7 (page 85) of the Secretariat Report,reflect an increase of four times in the imports of coal (from 2.75 mbfoe to 11.8 mbfoe) during this
period.  On the other hand, domestic coal use was reduced by almost 50% (6.59 mbfoe in 1994 to 4
mbfoe in 1997).  The private sector, as well as the National Power Corporation (for its power plant),
specify the amount of imported coal they require and must secure, to be able to operate.  Nonetheless,
any inconsistent laws on coal importation which, in the main are not capable of being implementedanyway, are being reviewed with the end in view of their repeal.
CANADA
G
OVERNMENT REPORT (WT/TPR/G/59)
II. Active Participation in Regional Trading Arrangements, page 7, para. 12
The Report notes the Government's support for the ASEAN Free-trade area (AFTA) and, in
particular, commitments to maintain margins of preference for AFTA members.  How will such
commitments affect the country's implementation of WTO commitments, especially with respect to
tariff reduction?
The unilateral tariff reduction programme of the Philippines will eventually remove the
margin of preference (MOP) existing for ASEAN, and tariffs will converge towards the MFN
commitments being applied to WTO Members.WT/TPR/M/59
Page 28
III. Commitments Under the Multilateral Trading System, (5) Rules and Disciplines,
(ix) Intellectual property rights, page 12, para. 43
The Report states that the Philippine Government has created an Intellectual Property Office to
ensure compliance with its commitments under th e TRIPS Agreement.  How will the IPO enforce
compliance?  What is the actual role of IPO?
The Intellectual Property Office (the “Office”) administers the Intellectual Property Code of
the Philippines (the “Code”).  The Office registers IPRs and administratively adjudicates contested
proceedings affecting IPRs.  It can also impose administrative fines and penalties.
SECRETARIAT REPORT (WT/TPR/S/59)
Summary Observations, (3) Trade Policies and Practices, page x, para 1
The Report states that minimum import prices remain  in use.  It is our understanding that developing
countries can use minimum import prices only on a limited and transitional basis.  Please provide us
information on the products affected by minimum prices, the rationale for maintaining such prices,
how minimum prices are calculated, and when the Ph ilippine Government intends to phase them out.
The Philippines remains committed to the provisions of the Agreement on Customs Valuation.
Republic Act No. 8181 authorizes the shift to the transaction value system for import valuation by
2000.  As a developing country, the Philippines availed of the transitory provision allowing the delayfor a five-year period in the full application of the Agreement on Customs Valuation
(i.e. Article 20.1).  Hence, the Philippines relies on published values during this transition period.
Summary Observations, (4) Sectoral Policy Developments, page xii, para. 22
The Report states that foreign investment remains restricted in significant areas of the transport,
telecommunications, banking and business services i ndustries, notwithstanding recent initiatives to
liberalize foreign equity participation in other areas.  Could the Philippines provide its plans for
liberalization of foreign ownership ceilings, particularly in the areas of land ownership, advertising,
public utilities, deep sea commercial fishing vessels and broadcasting?
The restrictions existing under the transport, telecommunications, business services, land
ownership, advertising, public utilities, deep sea commercial fishing vessels and broadcasting are
specified in the Constitution and, as such, cannot be amended by legislation.  In the banking sector,
the Philippines has already exceeded its commitments under GATS.  Furthermore, Canada might wishto refer to Table III.11 (page 57) of the Secretariat Report for the foreign investment negative list.
Summary Observations, (5) Trade Policies and Foreign Trading Partners, page xii, para 23
Canada is pleased to note the commitments by the Ph ilippines under the General Agreement on Trade
in Services (GATS) in the area of financial, communication, transport, and tourism services, as well
as the participation by the Philippines in negotiations on Basic Telecommunications Services.  When
is the Philippines expected to sign the Fifth Protocol of the GATS?
The Fifth Protocol of the GATS is currently under consideration for ratification by the
Philippine Senate.  This is a requirement under existing constitutional and legal procedures.WT/TPR/M/59
Page 29
III. Trade Policies and Practices by  Measure, (2) Measures Directly Affecting Imports,
(i) Registration, documentation and customs procedures, page 28, para. 6
The Report states that when a letter of credit is used to finance imports, an advance duty deposit is
required.  Please explain why this measure is in place.
The requirement for advance duty deposit when letters of credit are opened is a prudential
measure of the Monetary Board designed to ensure the payment of the bank loan and import duties.
Moreover, such a requirement actually facilitates customs clearance and therefore contributes to trade
facilitation.  In the event that an importer has foreign currency deposit accounts, the importer is able
to import outright without having to pay the advance duty deposit.
III. Trade Policies and Practices by Measure, (2) Measures Directly Affecting Imports,
(iii) Customs valuation and rules of origin
Does the Philippines intend to implement fully th e Customs Valuation Agreement on 1 January 2000
as called for under that Agreement?  Does the Philippines intend not to use minimum prices after thandate and, hence, not seek an extension of its minimum values reservation?
The Philippines remains committed to the provisions of the Agreement on Customs Valuation.
Republic Act No. 8181 authorizes the shift to the transaction value system for import valuation by
2000.  As a developing country, the Philippines availed of the transitory provision allowing the delay
for a five-year period in the full application of the Agreement on Customs Valuation (i.e., Article
20.1).  Hence, the Philippines relies on published values during this transition period.
III. Trade Policies and Practices by Measure, (2) Measures Directly Affecting Imports,
(v) Tariff quotas, page 39, para 35
The Report states that the Philippines has not established in-quota TRQ volumes for several products.
Please provide a list of eight-digit products for which there are no in-quota volumes established.
Products for which there are no TRQ commitments are as follows:- 0210 (meat and edible meat offal, salted, in brine, dried or smoked, edible flours and
meals of meat and of meat offal) [except 0210.9010 & 0210.2000]
- 0703.10 (onions)
- 0703.20 (garlic)
- 0704.9010 (cabbage)
- 1602 (other prepared or preserved meat, meat offal or blood)
III. Trade Policies and Practices by Measure, (2) Measures Directly Affecting Imports,
(xii) Government procurement, page 50, para. 58
We are aware that the Philippines has, in recent years, required vendors to provide concessional
financing in order to qualify on government procurement tenders.  We further understand that bidders
are required to cut interest rates on financing of goods and services.   This has caused Canadian
firms extra time, effort and expense in developing bids and contractual arrangements acceptable to
Philippine government procurement authorities.  Th is practice would appear to be a form of offset,WT/TPR/M/59
Page 30
which is not permitted by the Agreement on Government procurement.  What are the intentions of the
Philippine Government with respect to becoming a signatory to this Agreement?
Concessional financing is required only when the procurement utilizes foreign borrowings in
accordance with the Official Development Assistance Act.  Under the bid-plus financing scheme,
participating bidders are encouraged to finance a certain project or a portion thereof through
concessional loans to lower the cost of financing.  It is resorted to when certain government projects
attract wide competition but are not included in the priority projects of donor institutions.  The
Government, through its relevant laws and regulations on procurement, does not require bidders to cut
down interest rates on the financing of goods and services.  Finally, the Philippines is not a party to
the Government Procurement Agreement. There are no pl ans, at the present, to become a party to that
plurilateral agreement.
THE CZECH REPUBLIC
The Philippines has continued to employ the Comp rehensive Import Supervision Scheme involving the
preshipment inspection of Philippine imports in the country of supply.  This measure makes the import
procedure longer and raised the import price of the goods.
Is there any intention to make changes to the present system and to abolish this import measure?
The Pre-Shipment Inspection (PSI) Agreement is an integral part of the WTO Agreement.
The Philippines is committed to the provisions of this agreement with the end in view of contributingto trade facilitation.  Since the time of the first trade policy review, we have progressively phased
down the application of PSI, and intend to terminate such practice by 2000.
Based on RA 8181 of 28 March 1996, the Philippines adopted the use, as an interim measure, of
"export value", and authorized a shift to the use of  "transaction value" method not later than1 January 2000.
Could the Philippine delegation give some in formation on the process of implementation of
"transaction value" method (will the scheduled deadline be observed by the Philippine authorities, the
adoption of respective procedural regulations, etc.)?
The Philippines remains committed to the provisions of the Agreement on Customs Valuation.
Republic Act No. 8181 authorizes the shift to the transaction value system for import valuation by
2000.  As a developing country, the Philippines availed of the transitory provision allowing the delay
for a five-year period in the full application of the Agreement on Customs Valuation(i.e. Article 20.1).  Hence, the Philippines relies on published values during this transition period.
The motor vehicle industry remains one of the most protected sectors of the Philippine industry, while
only participants in the Car Development Prog ram (CDP) are allowed to import CKDs, SKDs, or
parts and components for assembly purposes, subject to Board of Investment  (BOI) approval.   Theapproval criteria for new applicant to participate in the CDP include , inter alia , the establishment of
technical licensing agreement with foreign  supplier and particularly the minimum amount of the
capital investment.
Will there be some liberalization in import of regulated commodities, components and parts and also
in participation in CDP, especially the abolition of minimum capital investment and other measures,
which discriminate new applicants against those who are already participating?WT/TPR/M/59
Page 31
The Philippine Government is currently reviewin g the list of components and parts in respect
of whether they may be liberalized.  With regard to minimum capital investment requirements, these
are necessary to ensure the economic-size operations of industry participants.
HONG KONG, CHINA
Government Procurement (WT/TPR/S/59, pages 49-50, para. 56)
It appears from the Report that all interested suppliers have to be pre-qualified before they can
participate in any government procurement activity  in the Philippines.  We would like to seek
clarification from the Philippines on whether it is so.  If yes, we would encourage the Philippines to
consider using open and competitive tendering, the generally preferred method of tendering, so as to
enhance transparency on procurement opportunities, lower the costs of the procurement system and
achieve a better value for money through enhanced competition.
All interested suppliers have to be pre-qualified  before they can participate in any government
procurement activity in the Philippines.  The Philippines also takes note of the opinion expressed by
Hong Kong, China, on the matter of open and competitive tendering.
Investment Regulation and Promotion (WT/TPR/S/59, pages 57-59, Table III.1)
Table III.1 of the Secretariat Report provides for a list of economic activities which are subject to
foreign ownership restrictions.  Does the Philippine Government have any plans to remove such
restrictions progressively and if so, what are these plans?
The restrictions existing under the transport, telecommunications, business services, land
ownership, advertising, public utilities, deep sea commercial fishing vessels and broadcasting arespecified in the Constitution and, as such, cannot be amended by legislation.  In the banking sector,
the Philippines has already exceeded its commitments under GATS.  Furthermore, Canada might wish
to refer to Table III.11 (page 57) of the Secretariat Report for the foreign investment negative list.
Standards and Other Technical Requirem ents (WT(TPR/S/59, page 68, para. 127)
We note that the Philippine Bureau of Product Standards (BPS) has concluded MRAs with certain
bodies of Japan, Australia and Indonesia on product inspection, certification and approval.   We are
interested to know whether the MRAs are of the type provided for under Article 6.3 of the TBT
Agreement.
In accordance with Article 6.3 of the Agreement on Technical Barriers to Trade, the
Philippines has promoted mutual recognition of co nformity assessment, including in the APEC, and
has achieved or is in the process of negotiating, mutual recognition of conformity assessment with its
trading partners in the following areas:
(a) Australia for food and food products and product certification;
(b) Japan on factory inspection and test results; and
(c) Singapore and Malaysia on product certificationsWT/TPR/M/59
Page 32
In addition, the Philippine Standard (PS) Mark Certification Scheme has been awarded to a
number of Indonesian exports such as tires, incandescent lamps, etc.  Efforts have been directed tostrengthening the Bureau of Product Standards Laboratory Accreditation Scheme with APEC
members for mutual recognition of laboratory testing, calibration and measurement.  The Philippines
has also actively participated in the drafting of the Guidelines for MRA on Conformity Assessment of
electrical and electronic equipment.
Financial Services (WT/TPR/S/59, pages 93-94, para. 65)
The Philippines has made a number of new commitments in the negotiations in 1997.  But we note
that they have yet to sign the Fifth Protocol to brin g the commitments into effect.  We wish to know if
it has a target timeframe on when to sign the Protocol.
The Fifth Protocol of the GATS is currently under consideration for ratification by the
Philippine Senate.  This is a requirement under existing constitutional and legal procedures.
Banking (WT/TPR/S/59, page 96, paras. 75 and 77)
We note that since 1994 foreign participation in banking is limited to 60% ownership, which goes
beyond the Philippines' GATS commitments.  However,  up until now only two foreign banks were able
to meet the selection criteria.  Would the Philippine Government consider relaxing the selection
criteria?
Under R.A. 7721, foreign banks are authorized to operate within the Philippine banking system
via any one of three modes:  (a) by acquiring, purchasing or owning up to 60% of the voting stock of
an existing bank;  (b) by investing in up to 60% of the voting stock of a non-banking subsidiary
incorporated under Philippines; or (c) by establishing branches with full banking authority.  Foreign
bank entry under the first two  modes is unrestricted in numbers.  Under the third mode, foreign bank
entry is allowed within five years from the effectivity of the law.  During this period, six new foreignbanks may enter upon approval by the Monetary Bo ard of the Bangko Sentral ng Pilipinas.  An
additional four foreign banks may be allowed entry on recommendation of the BSP to the President.
As of July 1997, ten new foreign banks under the third mode of entry have been granted licenses by
the BSP.  However, one foreign bank opted to consolidate its operations with a local non-expanded
commercial bank effective 1 September 1999.  As to the second mode of entry, two foreign bankshave come in.  The first mode of entry involved three foreign banks.  It should be emphasized that in
addition to the foreign banks that have come in pursuant to R.A. 7721, there are four other foreign
bank branches operating in the Philippines.
It is mentioned that the criteria for issuance of licence to foreign banks include, among others,
reciprocity with requirements of  general applicati on set in the applicant's country.  We would like to
seek further information on what these criteria mean.
Section 3 of R.A. 7721 provides for the guidelines in approving entry of foreign banks by the
Monetary Board.  One of these guidelines is, to quote: “see to it that reciprocity rights are engaged byPhilippine banks in the applicant’s country”.  In the implementation of this provision, the
implementing rules and regulations provides, to quote:   “Reciprocity shall be deemed to exist when
the Philippine banks can qualify to do banking business in the applicant bank’s country in accordance
with requirements of general applications set in the applicant’s country”.  In other words, in
evaluating the application of a foreign bank to op erate in the Philippines, the approving authority in
the Philippines will make sure that the applicant’s country will apply the same requirements to a
Philippine bank that it applies to its own banks.WT/TPR/M/59
Page 33
(WT/TPR/S/59, page 96, para 76)
Financial services suppliers are subject to limitation on the number of establishments and
requirement for remitting capital.  Would the Philippine Government consider relaxing these
limitations?
These are issues being considered seriously by the GOP in view of the mandated negotiations
in services.
Insurance (WT/TPR/S/59, page 98, para. 85)
We are glad to note that from 1994, foreign equity participation in insurance is allowed up to 100%.
This exceeds the Philippines' commitments in GATS.  We would like to know if the changes will be
reflected in its Financial Services schedule.
These are issues being considered seriously by the GOP in view of the mandated negotiations
in services.
(WT/TPR/S/59, pages 98-99, para. 88)
We note that a number of categories of insurance services are administered and provided by the
Philippine Government.  Does the Philippine Government have any plan to corporatize/privatize
some of these services?
One of the Government’s policies and strategies in the medium-term is to increase
competition in the pension fund market and promote policies that will ensure the long-term viability
of the presently publicly-managed pension fund system .  Privatization of the pension fund market will
be undertaken through greater reliance on private employees and individual schemes.  TheGovernment, through a tripartite taskforce which shall include labour groups, will formulate an action
plan that will study the privatization of the management of publicly-managed pension fund system
and other options.  Reforms in the pension fund system will include the shift in the role of the
Government from manager to regulator.
Telecommunications services (WT/TPR/S/59, page 100, paras 93 and 97)
We note that telecommunications services are regarded as public utility.  Foreign participation in this
sector is limited to 40% ownership and foreigners are not allowed to be executives or managers of
companies providing such services.  Besides, call-back services, resale or leasing of licensednetworks are prohibited.   Would the Philippine Government consider relaxing these restrictions?
These are issues being considered seriously by the GOP in view of the mandated negotiations
in services.
REPUBLIC OF KOREA
Import Prohibitions, Quantitative Restrictions and Licensing
Paragraph 43 of page 44 of the Secretariat Report reads:  "The authorities noted that the Import
Liberalization Program has eliminated most non-tariff measures other than those maintained forWT/TPR/M/59
Page 34
reasons of health,  safety, and national security.  Since the previous Trade Policy Review in 1993,
various restrictions have been removed:  (…) the Agricultural Tariffication Act (RA 8178)ofMarch 996, superseded by RA 8479 of February 1998, lifted quantitative restrictions on sensitive
agricultural products, except rice. (…) To operationalize RA 8178 (the Agricultural Tariffication Act),
BSP Circular 109 of May 1996 eliminated 78 agricultural products from the remaining list of
regulated or prohibited import goods."  (…)  "The  only quantitative import restrictions maintained by
the Philippines concern Rice".  (Paragraph 44 on page 44).
How does the Philippines define the above-mentioned health, safety, national security?   Which
products are still import-restricted on grounds related to health, safety and national security ?
Article 61 of Philippine Fisheries Code stipulates that "Fishery products may be imported only when
the importation has been certified as necessary by the (Agriculture) Department (…).  No person shall
import fishery products of whatever size, stage or  form for any purpose without securing permit from
the Department."  What's the rationale for this restriction?  Could the Philippine delegation comment
on the fact that this restriction may constitute a quantitative restriction within the meaning of
Article XI of GATT?  Is the Philippine Govern ment contemplating a possible amendment of this
regulation?
The Philippines defines health, safety and national security justifications for trade measures in
accordance with the provisions the relevant provisions of the WTO, including in particular Article XX
of GATT 1994.  The list of regulated and prohibited imports is provided for in Tables III.7 and III.8 in
pages 45 and 46 of the Secretariat Report.
The quoted portions of Article 61 of the Philippine Fisheries Code (the “Code”) must not be
construed in isolation, but with other relevant provisions of the Code.  The Code as a whole deals
with, among others, the conservation of the fisheries resources of the Philippines in a manner
consistent with sustainable development.  Thus, the Code also authorizes the imposition of limitations
on domestic production through catch ceiling limitations and the establishment of closed seasons.Article XI.2(c)(i) allows import restrictions on fisheries products that are necessary for the
enforcement of governmental measures which operate to restrict the marketing or production of like
domestic products or domestic products for which the imported products can be directly substituted.
Furthermore, the Philippines is of the view that such regulation of imports is also authorized under,
among others, Article XX (b), (d) and (g) of GATT 1994.
FDI and Retail Sector
Paragraph 35 on page 13 of the Secretariat Report mentions that "FDI has been an essential part of
the development and modernization of the manufactur ing and the services sectors.  The FDI inflows
followed the enactment of the 1991 Foreign Direct Investment Act, allowing for 100% foreign equity
ownership in a large number of sectors, except where it was specifically restricted (to levels of
between 25% and 40%) or banned (including in retail trade and mass media (except recording))."
Why is the Philippines maintaining restrictions or banning certain sectors, such as retail trade, given
the benefits of FDI to the Philippine economic development ?
It is reported that the Philippine Parliament is discussing a Retail Trade Liberalization Bill, with a
view to boosting consumer welfare.   Could the Philippine delegation provide more details on the
purpose and contents of the bill?WT/TPR/M/59
Page 35
The Retail Trade Law of the Philippines was enacted almost half a century ago to address
specific socio-economic concerns and objectives particular to the Philippines.  The law is currentlybeing reviewed.  Today, retail trade liberalization is no longer a matter for policy debate as the
Government is committed to enacting a new law that would liberalize the retail trade sector.  New
socio-economic concerns, however, have to be addre ssed such as how not to adversely affect small
and medium enterprises (e.g., “mom and pop stores”) by prescribing the level of capitalization that
would be limited to Filipinos.
Anti-Dumping
In paragraph 47 on page 46, the Secretariat Report refers to the Anti-Dumping Act of 1994
(RA 7834).  However, in August 1999, this Act has been amended, seeking more harmony with WTOrules by strengthening requirements for dumping petitions and including an article for public notice.
However, at the same time, the object period for dumping investigations seems to be enlarged from a
previous 150 days to 365 days from the importing day, thus increasing import-restricting effects.
It would be appreciated if the Philippine delegation could provide more information on this new law
and, more specifically, explain why the object period for the dumping investigation will be extended to
365 days from the import day.   Is the purpose of this extension the protection of the domestic
industry?
As a matter of clarification, the anti-dumping legislation of the Philippines was recently
amended (Republic Act No. 8752).  The object period in RA 8752 for dumping investigations is
limited to 120 days and not 365 days.
Special Economic Zones
According to section III(4)(i) of the Secretariat Report, "the Special Economic Zone Act of 1995
(RA 7916) governs the establishment and operation of special economic zones (ecozones).   Ecozoneshave received a rising level of  investment since 1995, and have generated increasing exports;  their
share in total Philippine non-traditional exports rose to over 40% in 1997. (…) Companies operating
in ecozones are entitled to incentives comparable to those granted to export-oriented industries
operating outside ecozones."  Incentives for export enterprises and for enterprises located in free-
trade areas may include, inter alia, corporate income tax exemption for four years to a maximumeight years.
The enterprises operating in the ecozones are greatly contributing to the employment as well as
exports.  As such, it  seems desirable to encourage  these firms to continue operating in the ecozones.
Does the Philippine Government have any plan to prolong incentives for ecozones, including thecorporate income tax exemption?
The Philippine Government currently extends incentives for economic zones, which include
the existing exemption from corporate income tax subject to certain conditions.  There are no
immediate plans to make any changes on the package of investment incentives extended to businessestablishments operating in economic zones.  However, there are continuing inter-agency discussions
on how to ensure that such incentives effectively address the country’s development needs and are
consistent with obligations in the WTO.WT/TPR/M/59
Page 36
Trade-Related Investment Measures
Section III(4)(ii) of the Secretariat's Report highlights that "The Philippines has notified the WTO
Committee on Trade-Related Investment Measures (TRIMs) of local-content and foreign-exchange
requirements under the Car Development Programme, the Commercial Vehicle Development
Programme and the Motorcycle Development Programme.  All requirements that might be
inconsistent with the TRIMs Agreement must be eliminated by the year 2000, unless an extension is
granted by the WTO Council for Trade in Goods.  Pa rticipants in the CDP are subject to a local-
content requirement of 40%. (…) The authorities envisaged that these requirements would be
terminated by the year 2000 consistent with the TRIMs Agreement."
What is the latest position of the Philippine Government on the termination of local-content
programmes ?
The Philippines remains committed to the provisions of the Agreement on TRIMS.  (It might
be useful to recall that, at the last meeting of the Committee on TRIMS on 13 September 1999, the
matter of Article 5.3 of the Agreement was discussed.  No conclusions were drawn from thediscussions, and the matter would be referred to the Council for Trade in Goods when it meets on
14 October 1999.)
Government Procurement
In paragraphs 58 and 59, the Report writes that "The Philippines is not a party to the WTO
Agreement on Government Procurement (GPA).   The Philippines is a signatory to the ASEANPreferential Trading Arrangement (PTA), which pr ovides for a 2.5% preferential margin (not to
exceed US$40,000 worth of preferences per tender) in respect of international tenders for government
procurement for goods and auxiliary services from un tied loans submitted by ASEAN countries vis-à-
vis non-ASEAN countries. (…) The policy of the Government has been to procure goods and services
from local suppliers, except under certain specif ied circumstances.   Suppliers and manufacturers of
goods procured by the Government must be at least 60% owned by Filipinos, while civil works
contractors of government-financed projects must be at least 75% owned by Filipinos.  In several
sectors, the Government favours Philip pine firms for government contracts."
Could the Philippine delegation explain what is implied by "under certain specified circumstances"?
Korea would appreciate it if the Philippines could comment on the possibility of eliminating barriers
against the participation of foreign firms in pr ivate projects and open government projects to
foreigners, and this, for the sake of eliminating discrimination, even though the Philippines is not a
party to GPA.
The Philippines is not a signatory to the Government Procurement Agreement and as such is
able to maintain full flexibility in the area of proc urement in accordance with its trade, financial and
development needs.
As a matter of clarification, the requirement that suppliers must have a minimum level of
Filipino ownership is based on the Constitution and certain pertinent laws and its implementing rules
and regulations.  The Constitution cannot be amended by legislation.
In respect of the phrase “under certain specified circumstances”, procurement may be open to
foreign suppliers, among others, if the law and the Constitution allow for it, or if, clearly, only foreign
suppliers will be able to provide for the requirements of government.WT/TPR/M/59
Page 37
NEW ZEALAND
Increased tariffs
New Zealand is concerned by the increase in a number of the Philippines’ tariff lines (including kraft
paper and paperboard, from 10% to 15%) which occurred earlier this year  These tariff increases,implemented by E.O.63, were intended to provid e temporary import relief to industries adversely
affected by the Asian economic crisis.  Paragraph 16 of the Government Report states that the tariff
lines affected by E.O.63 are due to revert to their original rates at the end of 1999.  The Secretariat
Report notes, in para. 4, that a return to economic growth in early 1999 was forecast for the
Philippines.  These forecasts have been borne out:  the Philippines registered positive (1.2%) GDPgrowth in the first quarter of 1999.  After the release of these figures, the Philippine Government
announced that it was now more confident about  meeting  its year-end GDP growth
target of 2.6-3.2%.
Given that the country has re-emerged from the As ian economic crisis back into positive growth, can
the Philippines assure us that the tariff lines aff ected by E.O.63 will revert to their original rates at
the end of 1999 as scheduled?
Executive Order No. 63 was promulgated to provide temporary relief to certain industries that
were heavily affected by the Asian financial crisis.  It involved the tariffs for some 720 products at the
8-digit tariff level.  Of these 720 tariff lines:
(a) six lines involving four steel slabs and scraps, one for crystal tissue paper, and a
monomer input had their tariffs reduced;
(b) twenty-three lines involving steel coils and wire rods, pocket lighters, kraftliners and
petrochemical products had their tariffs aligned to uniform rates, albeit at higher
levels; and
(c) the scheduled tariff reductions for 691 lines involving textiles and clothing products
were postponed for one year, that is, the scheduled reductions for 1999 will only take
effect in 2000.
Inconsistently high tariff ratesDespite the generally decreasing rates of Philippine tariffs in most areas, there are some
inconsistencies.  One such is the absence of minimum access volumes (MAV) in some tariff lines,
noted in para. 35 of the Secretariat Report resulting in the imposition of high out-of-quota tariff rates
(OTQR) on all imports of these products (for example, canned corned beef (HS 1602.50.00), all
imports of which are subject to the high OTQR of 50%).
Does the Philippines intend to establish a MAV in all tariff lines subject to high OTQRs?  If so, when?
The Philippines has opened all quotas for pro ducts for which it has TRQ commitments in the
WTO.  TRQ commitments are all in the HS 4-digit level.  In addition to its WTO commitments, the
Philippines has unilaterally provided for the possi bility to open a minimum access volume for some
products (HS 0210 except 0210.9010 and 0210.2000; 0703.10; 0732.20; 0704.90; 1602) when the
Government deems it appropriate.  At present, the Philippines does not see the need to provide
minimum access volumes for these products.WT/TPR/M/59
Page 38
Customs
The Secretariat Report, in para. 14,  notes that RA 8181 of 28 March authorised a shift to the use of
the “transaction value” method for customs valuation not later than 1 January 2000.
Does the Philippines expect to remain on schedule for the transition to the transaction value method
for customs valuation by 1 January 2000?
The Philippines remains committed to the provisions of the Agreement on Customs Valuation.
Republic Act No. 8181 authorizes the shift to the transaction value system for import valuation by
2000.  As a developing country, the Philippines availed of the transitory provision allowing the delay
for a five-year period in the full application of the Agreement on Customs Valuation(i.e. Article 20.1).  Hence, the Philippines relies on published values during this transition period.
EUROPEAN UNION
Chapter II(1)(i):  Institutional Framework
In April 1999 Administrative Order (AO) 58 was signed into force by the President, and sought to
create import controls on petrochemicals entering the country. While this Order was subsequently
revoked and amended, we remain concerned about the process, and request information on what
practice exists for the scrutiny of legislation to ensure that it does not infringe multilateral
commitments.
Administrative Order No. 58, which pertained to petrochemicals, was precisely revoked so
that no commitments under the multilateral trading system will be infringed.  Any administrative
order, from hereon, will mandatorily have to be referred to the Department of Trade and Industry
(DTI) for review against consistency with the WTO befo re it is finalized.  Mainly for this purpose, the
DTI has strengthened the inter-agency government body in charge of WTO matters by creating the
Technical Committee on WTO Matters under the Cabinet Committee on Trade Related Matters, the
policy decision making body on trade and economic matters.
Chapter II(2)(ii):  Multilateral Agreements and Arrangements
According to §21, the Philippines “has envisaged”  amending legislation in areas such as AD and
CVD measures, and introducing new legislation on safeguard measures, the protection of layout
designs of integrated circuits, and plant variet y protection. We would welcome an update from the
Philippines on (i) the extent to which this legislative reform has actually been completed; and (ii)whether this is an exhaustive list of legislation still required to bring the Philippines’  trade regime
into conformity with its WTO commitments. If transitional periods are envisaged we would welcome
information on which WTO Agreements or GA TT 1994 Articles would be affected; and on the
justifications by which extensions would be sought.
The Philippines has recently passed new legislation on anti-dumping (Republic Act No. 8752)
and on countervailing measures (Republic Act No. 8751).  Legislation on safeguards are in process,
along with Congressional work in the area of layout design for integrated circuits and plant variety
protection.  (Please refer to the opening statement of the Philippines.)WT/TPR/M/59
Page 39
Chapter III(1):   Trade policies and practices by measure
Can the Government of the Philippines confirm that it will review its export incentives, such as fiscal
incentives, credit, guarantee and insurance activities to ensure consistency with its WTO obligations?
The Philippines confirms that it is reviewing its exports incentives, including fiscal
incentives, to address the triple challenges of maintaining fiscal soundness, achieving better efficiencyin resource allocation, and addressing the exigencies of development through national promotion
policy and strategies.
Chapter III.2:   Measures directly affecting imports
If only 1.5% of shipments have had a refusal/show n problems, we question the ongoing need to retain
pre-shipment inspection at all. When does the Philippines plan to remove PSI?
The use of self-assessment by the Philippines to determine whether a physical shipment inspection is
required, is welcomed. What has the Philippines' experience of this new system been since itsintroduction in March 1998? What has its effect been on revenue raised and detection of fraud?
In view of the recent problems in the import of cast-iron hubless pipes to the Philippines (with the
Bureau of Customs, the Department of Public Wo rks and Highways and as well as the Department of
Interior and Local Government), can the Philippine s provide information on the steps it intends to
take in order to improve internal co -ordination among government agencies?
The Pre-shipment Inspection (PSI) Agreement is an integral part of the WTO Agreement.
The Philippines is committed to the provisions of this agreement with the end in view of contributing
to trade facilitation.  Since the time of the first trade policy review, we have progressively phased
down the application of PSI, and intend to terminate such practice by 2000.  The use of self-
assessment to determine whether a physical inspection of the shipment is required has been quitepositive in terms of revenue protection and effective detection of fraud.
Given the experience with cast-iron hubless pipes, the Cabinet Committee on Trade Related
Matters has strengthened its role as  “clearing house” for all trade policy issues and directives.
To update the background information provided by the US, latest developments indicate that
the Office of the President has reversed its previous decision and now allows the importation of
hubless pipes.  There are several proposals that would amend the Plumbing Code, but there are no
sponsors in Congress.  In any event, amendments to the Plumbing Code are expected to proceed
slowly and in a cautious manner for safety proprietary reasons, especially in an earthquake-pronearchipelago like the Philippines.
Chapter III(2)(iii):  Customs valuation
We have some concerns about recent initiatives for closer collaboration between the Bureau of
Customs and local private industry, including im port-competing companies, and in particular the
potential for conflict of interest to arise in sensitive issues such as valuation. Can the Philippines
assure us that it is examining the issue with a vi ew to ensuring fair and transparent treatment for all?
Could the Philippines indicate  whether it is on track to conform to the WTO Agreement on
Implementation of Article VII of GATT 1994, incl uding adoption of the transaction value import
valuation method, by 1 January 2000?WT/TPR/M/59
Page 40
Will minimum import prices be eliminated once the "transaction value" is adopted? If not, then in
what cases would the Philippines expect to maintain minimum import prices? Does the Philippines
intend to maintain the BOC-SGS Appeals procedure?
It is noted that 24,000 of the 24,344 appeals lodged between 1993 and 1998 have been resolved: in
how many of these cases was the origin al decision on the import price upheld?
On the matter of “closer collaboration between the Bureau of Customs and the private sector”
concerning valuation, the Philippine Government has not and does not intend to relinquish its
authority on valuation issues.  The move to consult more closely with the private sector, among other
repositories of data and information, was primarily driven by the impending shift to the transactionvalue method for customs valuation and the need to ensure that customs revenues do not suffer on
account of such shift.  In any event, Customs Memorandum Order 9-99, which allows for the
utilization of industry commodity experts, is under continuing review precisely to ensure fair and
transparent valuation practices and the preservation of revenue objectives.
Chapter III(2)(iv):  Tariffs
Could the Philippines delegation clarify the lead time provided for in the Tariff and Customs Code
between a decision to alter a tariff rate and the implementation of that duty change?
Under EO 63 the Philippine Government revised tariff schedules in order to provide some respite
from the Asian crisis. Taking into account the substantial depreciation of the peso and subsequent fallin overall imports, can the Philippines confirm that tariff increases, in particular in petrochemicals,
certain paper products, lighters, automotive batteries, iron and steel products, as well as in yarns will
indeed lapse at the end of 1999? Can the Philippines confirm that these increases in tariff protection
will not be maintained in the ongoing exercise to define the Philippine's applied tariff schedule for
2001-2004? In addition, in the textiles sector, where average tariffs for yarns, fabrics and appareloccurred in 1999, we request some explanation of the specific reasons for increasing tariff protection.
Will the Government of the Philippines consider binding more of its tariff lines (only 64% are bound)
and bringing the bound rates into line with the applied rates to increase tariff predictability for
trading partners?
On the matter of public hearings for purposes of adjustments in the Tariffs and Customs Code
of the Philippines, such hearings are required by law and, depending on the number of tariff lines
being considered, may take from one hearing to as many as required by due process.  The results of
the hearing are thereafter transmitted to the Cabinet Committee on Trade Related Matters for finaldecision.  Implementation of any adjustment in ta riffs may take place immediately after the Cabinet
Committee makes a recommendation to the President and the President approves it, or may set a
future date for effectivity in line with the on-going tariff reform programme (TRP).
Executive Order No. 63 was promulgated to provide temporary relief to certain industries that
were heavily affected by the Asian financial crisis.  It involved the tariffs for some 720 products at the
8-digit tariff level.  Of these 720 tariff lines:
(a) six lines involving four steel slabs and scraps, one for crystal tissue paper, and a
monomer input had their tariffs reduced;WT/TPR/M/59
Page 41
(b) twenty-three lines involving steel coils and wire rods, pocket lighters, kraft-liners and
petrochemical products had their tariffs aligned to uniform rates, albeit at higherlevels; and
(c) the scheduled tariff reductions for 691 lines involving textiles and clothing products
were postponed for one year, that is, the scheduled reductions for 1999 will only take
effect in 2000.
On the matter of binding more tariff lines and bringing bound rates into line with applied
rates, there are no such plans for the moment but this may be considered in conjunction with tariff
negotiations in the WTO, should one be agreed and launched under the ambit of a new round of
multilateral trade negotiations.
Chapter III.2.vi:  Other charges on imports
The Philippines continues to apply a taxation system to spirituous beverages that is in manifest
contradiction with national treatment principle of Article III of the GATT as confirmed by recent
panel and appellate body decisions. We request that the Philippines present a clear scheme as to how
it intends to comply with its WTO obligations in this respect.
Furthermore, the Philippine authorities have indicated their intention to increase the excise tax of all
alcohol products by 12% from the beginning of next year (cf p. 43, footnote a). We therefore should
ask the Philippine delegation to provide the Committee with an explanation how this increase is
related to the overall reform of the excise taxation regime to bring it in line with WTO obligations.
Can the Government of the Philippines explain why the proposed excise tax on soft drinks also
includes a discriminatory element against those with foreign brand names?  This if imposed would
also appear incompatible with the WTO.
We would note that in order to create a system th at guarantees a maximum of transparency and which
minimises the possibility for customs valuation related problems, we would advise the Philippine
Government to introduce a system which is based on alcohol content, as opposed to ad valorem.
What steps are being taken to ensure that all dist illed spirits are subjected to the same tax rates
regardless of the raw material used in its production?
The matter of rationalizing the internal taxation for wines and spirits is under review, and the
Cabinet Committee on Trade Related Matters has agreed that this is a priority legislative agenda.  The
increase of 12% on all excise taxes by 2000 is not a proposal as it is already a provision in Republic
Act No. 8240.
With respect to soft drinks, the executive branch has been consulted by the legislature and has
expressed the view, among others, that excise taxation must respect Article III of GATT 1994.  To
date, the proposed excise tax on soft drinks (House Bill No. 3069) is uniform for both imported and
local brands.
Finally, under RA 8240, excise taxation of alcoholic beverages is also based on per proof liter
and not ad valorem .WT/TPR/M/59
Page 42
Chapter III(2)(viii):  Import prohibitions, quantitative restrictions and licensing
From the report it could be inferred that import-licensing requirements on coal products have
disappeared. However, the last available replies by the Philippines to the WTO questionnaire on
import licensing procedures still lists categories (321.10-00, 321.21-00, 321.22-00 and 322.10-00)
under the Philippines Standard Commodity Classification Manual (PSCCM revised). Can the
Government of the Philippines provide informati on on when and by which measure import licensing
requirements for coal products have been lifted?
Furthermore, on used motor vehicles, parts and components, the Philippines maintains import
restrictions under the grounds of human safety. Similar restrictions on used trucks above 6 tons and
used buses above 12 tons have been at least partially lifted as of 19 October 1995 (Bangko Sentral ngPilipinas Circular No 92). Restrictions on used ca rs could be abolished or if restrictions for human
safety reasons may be appropriate for a certain category of used vehicles (e.g. cars older than 5 or 10
years), a general import regulation of used ca rs, parts and components does not appear, however,
appropriate. In a similar way, import restrictions on colour reproduction machines (national
security) and on penicillin (public health) seem to be questionable.
Can the Government of the Philippines provide information on the steps it intends to undertake in
these three subsectors  (used motor vehicles, parts and components, colour reproduction machines
and penicillin) to lift the existing restrictions?
On the matter of coal:  the Philippines has already disinvoked recourse to Article XVIII:B of
GATT 1994.  In practice, quantitative restrictions do not exist insofar as the main users of coal in thePhilippines are cement plants, whose kilns were designed to use a mix of local and imported coal.
Plants cannot use pure local coal nor pure imported coal; as such any and all coal importations are not
restricted.  Figures on coal importation from 1993 to 1997, in Table IV.7 (page 85) of the Secretariat
Report, reflect an increase of four times in the imports of coal (from 2.75 mbfoe to 11.8 mbfoe)
during this period.  On the other hand, domestic coal use was reduced by almost 50% (6.59 mbfoe in1994 to 4 mbfoe in 1997).  The private sector, as well as the National Power Corporation (for its
power plant),  specify the amount of imported coal they require and must secure, to be able to operate.
Nonetheless, any inconsistent laws on coal importation which, in the main are not capable of being
implemented anyway, are being reviewed with the end in view of their repeal.
On the matter of automotive products:  the Phi lippine Government is currently reviewing the
list of components and parts in respect of whether they may be liberalized.  With regard to minimum
capital investment requirements, these are necessary to ensure the economic-size operations of
industry participants.
On the matter of used vehicles:  further liberalization in the area of used motor vehicles will
be facilitated by the completion of the  system of rules on motor vehicle inspection.
On the matter of colour reproduction machines, the reproduction of bills and other legal
tender is a primary concern, especially with the inab ility of some segments of society to discern the
difference between real and counterfeit money.
Chapter III(2)(xi):  Balance-of-payments measures
Can the Government of the Philippines confirm that it has no balance-of-payments measures in place
now?WT/TPR/M/59
Page 43
The Philippines has disinvoked recourse to Article XVIII:B of GATT 1994.
Chapter (III)(2)(xii):  Government procurement
The Philippines’ legislative base for government procurement appears to grant preferences
particularly on a regional basis. Can the Philippines outline its intentions with respect to joining the
WTO Government Procurement Agreement, with a view to ensuring a more equitable regime? Towhat extent are the provisions of the 1936 Flag Law, granting preference to the US, actually utilised?
The Philippines does not foresee, at the mo ment, any tangible benefit in joining the
Government Procurement Agreement.  The provision in the 1936 Flag Law that granted preference to
the US was repealed upon the expiry of the Laurel-Langley Act in 1972.
Chapter III(4)(i):  Investment regulation and promotion
Can the Government of the Philippines confirm the cu rrent status and efforts being made to open the
important sector of retail trade to foreign equity and the nature of delays encountered in itsliberalisation?
Will the Philippines consider liberalising other sectors on the negative list for foreign investment e.g.
engineering, law, accountancy, chemistry, etc.? and liberalising further advertising and ownership of
land?
Can the Government of the Philippines provide a figure for the fiscal cost of the Philippines
Investment Priorities Plan, described as "probably high"?
The provisions under the Export Development Act by which exporters using locally produced raw
materials etc benefit from enhanced tax credits appea r to be inconsistent with the TRIMs Agreement.
Can the Government of the Philippines confirm its intention (a) to notify, if necessary, to the WTO;and (b) to bring such incentive schemes into conformity with its WTO commitments by 2000?
According to press reports in the first half of 1999, the Philippine Government has recently adopted a
"10-measure-plan" aiming at expans ion of exports from 29.5 bn US$ in 1998 to 50 bn in 2001. After
having studied the description of export promotion measures (§ 76-99) in the Secretariat Report itremains unclear, however, whether these describe th e new programme or not. Could the Philippines
therefore outline the recent plan in detail?
On the matter of retail trade and other service sectors:  The restrictions existing under the
transport, telecommunications, business services, land ownership, advertising, public utilities, deepsea commercial fishing vessels and broadcasting are specified in the Constitution and, as such, cannot
be amended by legislation.  In the banking sector, the Philippines has already exceeded its
commitments under GATS.  Furthermore, Canada might wish to refer to Table III.11 (page 57) of the
Secretariat Report for the foreign investment negative list.
The Retail Trade Law of the Philippines was enacted almost half a century ago to address
specific socio-economic concerns and objectives particular to the Philippines.  The law is currently
being reviewed.  Today, retail trade liberalization is no longer a matter for policy debate as the
Government is committed to enacting a new law that would liberalize the retail trade sector.  New
socio-economic concerns, however, have to be addre ssed such as how not to adversely affect small
and medium enterprises (e.g., “mom and pop stores”) by prescribing the level of capitalization that
would be limited to Filipinos.WT/TPR/M/59
Page 44
On the matter of the so-called fiscal cost of the Philippines’ Investment Priorities Plan
described as being “ probably high”, the Board of Investments has calculated that for every peso
revenue foregone, 28 pesos representing new capital formation is achieved.
The Export Development Act was lengthily revi ewed when the subsidies legislation of the
Philippines was considered by the Committee on Subsidies and Countervailing Measures in 1996.The EC, for one, participated most actively in that  exercise.  In any event, the Philippines remain
committed to the provisions of the Subsidies Agreement, but must lament the imbalance that while
Article 8 subsidies remain non-actionable, Article 27 flexibilities for developing countries are
countervailable.
Chapter III(4)(ii):  Trade related investment measures
Can the Government of the Philippines confirm that  it will comply with its TRIMs commitments on
local content and will not retain its requirements for local automotive parts industry and soap and
detergents sector beyond 1999?
The Philippines remains committed to the provisions of the Agreement on TRIMS.  (It might
be useful to recall that, at the last meeting of the Committee on TRIMS on 13 September 1999, the
matter of Article 5.3 of the Agreement was discussed.  No conclusions were drawn from the
discussions, and the matter would be referred to the Council for Trade in Goods when it meets on 14
October 1999.)
Chapter III(4)(ix):   Intellectual property rights
Can the Government of the Philippines give assurances that all precautions are being taken to
prevent any incompatibility between the draft of the new AO regarding initial registration and
renewal of prescription pharmaceutical products and po tential contravention of trademark protection
under TRIPs Agreement, as well as national treatment provision of Art. III.4 of the GATT?
In relation to distilled spirits, the results of se izures made in 1998 under IP enforcement actions
illustrate the large counterfeiting capacity existing in the Philippines. The EC has also received
serious complaints concerning the counterfeiting of certain spirits produced under European brands;and concerning the lack of effective enforcement of the intellectual property rights of European
companies in this sector. Despite the fact that  the government authorities have organised a large
number of raids and counterfeit product seizures, only a handful of cases have come before the courts
leading to only minor punishments. The EC theref ore stresses that legal and judicial action against
counterfeiting of European spirits should be prioritised, noting in this regards that such action wouldalso be in the interest of the Government - counterfeiting causes significant losses in tax revenue and
important risks for public health.
Can the Government of the Philippines inform us of what steps it intends to take to improve IP
enforcement, in particular facilitating obtention of search warrants, adequate fines andextemporaneous costs to pursue legal actions?
Paragraph 146 of WT/TPR/S/59 does not expressly state that the IP Code of the Philippines provides
for retroactive protection of sound recordings.  Could the Philippine authorities confirm that the IP
Code complies fully with the requirements of  Article 12 and 14(6) of the TRIPs Agreement?WT/TPR/M/59
Page 45
Paragraph 147 states that the IP Code grants works of applied art a term of protection of 25 years
from the making.  Could the Philippine authorities please clarify how this complies with Article 12 ofthe TRIPs Agreement that requires that works of applied art are granted a period not less than 50
years from the making?
Paragraph 150 states that the IP Code grants industrial designs a term of protection of 5 years
(which may be renewed for two further 5-year periods).  Could the Philippine authorities pleaseclarify how this complies with Article 26(3) of the TRIPs Agreement that requires that the duration of
protection should amount to at least 10 years.
Could the Philippine authorities please clarify how Article 50 of the TRIPs Agreement is implemented
into Philippine law to allow for provisional measures to enforce intellectual property right?.
Could the Philippine authorities please confirm when TRIPs compliant legislation for the protection
of layout designs for integrated circuits and for the protection of plant varieties will be implemented.
Could the Philippine authorities clarify how the IP  Code implements the requirements of Article 14(2)
of the TRIPs Agreement in respect of exclusive rights over on-demand distribution of sound
recordings.
Does the Philippines volunteer for an early review of their legislation by the TRIPs Council?(a) The administrative order being drafted regarding registration and renewal of pharmaceutical
products will take into account the views and opinions expressed by all sectors of society,including the objective of making available medicines to the general public at affordable prices,
and commitments of the Philippines in the WTO.
(b) In respect of the alleged counterfeiting of wines and spirits, the Government is keenly aware
of the potential huge losses in terms of revenue.  Thus, all concerned agencies haveintensified the drive against counterfeit and smuggled products. The Philippine enforcement
system is complaints-based, though not exclusively.  There have been many instances where
IPR owners themselves have settled cases in the course of the investigation, or even after a
prima facie   case had been established.
(c) Earlier, the Inter-agency Committee on Intellectual Property Rights (IAC-IPR) had been
established precisely to coordinate the efforts of various government agencies in the
enforcement of IPRs.
Among other efforts, seminars have been held in various regions of the country to ensure that
information on IPRs is widely disseminated, an indispensable element in enforcement.
The authority to issue search warrants has always been part of the Philippine judicial system.
At the same time, there are current efforts to further enhance the geographical coverage of
warrants issued by courts, in light of the specific circumstances obtaining in the enforcementof IPRs.
The Intellectual Property Office (the “Office”) is also seeking additional budgetary outlays to
enable it to effectively enforce IPRs.
Adequate fines and criminal penalties are imposed for violations.  In addition, there is
corresponding civil liability.WT/TPR/M/59
Page 46
The Philippines needs clarification on the meaning of “extemporaneous costs” .
(d) On sound recordings, the Intellectual Property Code of the Philippines (the “Code”) is in
compliance with the requirements of Article 12 and 14.6 of the TRIPs Agreement.
(e) On works of applied arts, it is the understanding of the Philippines that Article 12 of the
TRIPs Agreement applies to copyrighted work other than “a photographic work or a work of
applied art”.
(f) On industrial designs, the Code is consistent with Article 26.3 of the TRIPs Agreement.
Renewal at each 5-year period is automatic upon payment of the prescribed fee.  In effect, thelaw grants the IPRs owner the option to determine for itself the duration of protection up to a
maximum of 15 years.
(g) On provisional measures:
At present, it is the view of the Government of the Philippines that certain provisions on
Philippine laws on human relations and torts are sufficient to provide the protection required
under the TRIPs Agreement.
(h) On layout designs for integrated circuits, geographical indications and new plant varieties:
The Philippines acknowledges that the additional transition period provided for developing
country Members under Article 65.2 of the TRIPs Agreement expires on 31 December 1999.
Immediately thereafter, or as of 1 January 2000, the Philippines must therefore comply with
its relevant obligations under the same Agreement in accordance with the specified terms and
conditions.
As early as June 1997, the Philippines had promulgated R.A. 8293, otherwise known as the
“Intellectual Property Code of the Philippines” (the “Code”) which took effect as of 1 January
1998, or a full two years prior to the end of the additional transition period provided for in
Article 65.2 of the TRIPs Agreement.  The Code consolidates various laws on intellectual
property found in various prior legislation.  It also upgraded those laws in line with theprovisions of the TRIPs Agreement.
At present the Congress of the Philippines is considering legislation on protection of layout
designs of integrated circuits and of plant varieties.  It is the policy of the GOP to be in full
compliance with its obligations under the TRIPs Agreement as and when the obligationsaccrue.
There are two levels of enforcement of IPRs:  (1) administrative through the Intellectual
Property Office (IPO), and (2) judicial, through the regular courts.
The Philippines acknowledges that the additional transition period provided for developing
country Members under Article 65.2 of the TRIPs Agreement expires on 31 December 1999.
Immediately thereafter, or as of 1 January 2000, the Philippines must therefore comply with
its relevant obligations under the same Agreement in accordance with the specified terms and
conditions.WT/TPR/M/59
Page 47
As early as June 1997, the Philippines had promulgated R.A. 8293, otherwise known as the
“Intellectual Property Code of the Philippines” (the “Code”) which took effect as of 1 January
1998, or a full two years prior to the end of the additional transition period provided for in
Article 65.2 of the TRIPs Agreement.  The Code consolidates various laws on intellectual
property found in various prior legislation.  It also upgraded those laws in line with the
provisions of the TRIPs Agreement.
At present the Congress of the Philippines is considering legislation on protection of layout
designs of integrated circuits and of plant variet ies.  It is the policy of the GOP to be in full
compliance with its obligations under the TRIPs Agreement as and when the obligations
accrue.
There are two levels of enforcement of IPRs:  (1) administrative through the Intellectual
Property Office (IPO), and (2) judicial, through the regular courts.
(i) On demand-distribution of sound recordings, Section 208.1 of the Code provides that the
producer of sound recordings has the exclusive right to “authorize the direct or indirectreproduction of their sound recordings, in any manner or form”.  This is consistent with
Article 14.2 of the TRIPs Agreement.
(j) On volunteering Philippine legislation for an  early review by the TRIPs Council, the answer
is negative.
Chapter IV(2)(iii)(a):   Rice
Given the increase in the price of rice in recent years, what is the justification for continuing
quantitative restrictions on rice imports?
The Philippines’ trade policy for rice is based on food security objectives which in turn is
defined as ensuring for and at all times, access to food supplies at affordable costs.  The adopted
strategy for food security is to maximize reliance on domestic production without precluding imports.
Thus, rice is imported by the National Food Authority only to ensure domestic stocks in government
hands, which is essential for stablilizing prices.  The maintenance of the import limit on rice is
possible under Annex 5 of the Agreement on Agriculture.  The NFA has the sole authority to importrice, as mandated by law.
Chapter IV(3)(i):  Mining and energy
In view of the continuation of the successful addressing of the power crisis, can the Government of the
Philippines confirm its resolve to further restructure the energy sector and to deregulate the
downstream oil industry?
As stated in the opening statement of the Ph ilippines, comprehensive reform in the power
sector will be continued with even greater confidence and determination.
Chapter (IV)(3)(ii):  Petroleum and petrochemical products
In view of the attempt to create an import board on petrochemicals and plastics through AO 58, can
the Government of the Philippines confirm its vigila nt position to prevent the return of protectionist
policies?WT/TPR/M/59
Page 48
Administrative Order No. 58, which pertained to petrochemicals, was precisely revoked so
that no commitments under the multilateral trading system will be infringed.  Any administrativeorder, from hereon, will mandatorily have to be referred to the Department of Trade and Industry
(DTI) for review against consistency with the WTO befo re it is finalized.  Mainly for this purpose, the
DTI has strengthened the inter-agency government body in charge of WTO matters by creating the
Technical Committee on WTO Matters under the Cabinet Committee on Trade Related Matters, the
policy decision making body on trade and economic matters.
Chapter IV(5)(ii):  Financial services
Can the Government of the Philippines confirm its inte ntion to further liberalise the entry of foreign
banks and insurance companies in order to strength en the Philippine banking and insurance sectors?
Can the Government of the Philippines confirm its intention to sign the Fifth Protocol of the GATS
and inform of its planned date for signing?
The restrictions existing under the transport, telecommunications, business services, land
ownership, advertising, public utilities, deep sea commercial fishing vessels and broadcasting are
specified in the Constitution and, as such, cannot be amended by legislation.  In the banking sector,
the Philippines has already exceeded its commitments under GATS.  Furthermore, Canada might wish
to refer to Table III.11 (page 57) of the Secretariat Report for the foreign investment negative list.
The Fifth Protocol of the GATS is currently under consideration for ratification by the
Philippine Senate.  This is a requirement under existing constitutional and legal procedures.
Chapter IV(5)(iii):  Telecommunications
Can the Government of the Philippines confirm its intention to sign the Fourth Protocol of the
GATS and inform of its planned date for signing?
The ratification of the Fourth Protocol of th e GATS in currently being considered in the
Philippine Senate.  This is a legal requirement that must be completed.
Chapter IV(5)(iv)(a):  Air transport
Can the Government of the Philippines confirm the continuation of its open skies policy to ensure
efficient transportation of goods and passengers?
The Philippines has not adopted an “open-skies” policy. Instead, a policy of progressive
liberalization of international air services is being followed.  Under E.O. 219, the frequency and
capacity of third and fourth freedom carriers are determined based on reciprocity and value for the
Philippines.  Fifth freedom traffic are secondary and supplemental to third and fourth freedom traffic
except that the Civil Aeronautics Board may grant fifth freedom rights in order to promote the
development of routes and destinations.  Nonethel ess, the CAB may authorize special flights when,
for any reason, the designated carriers fail to accommodate a route or line traffic demand.
Chapter III(2)(v)  Tariff quotas
Can the Government of the Philippines provide evidence that the administration of the Minimum
Access Volume system has improved after the introduction of AO1 of 1998?WT/TPR/M/59
Page 49
Yes, the administration of the minimum access volume system has resulted in improvements
in utilization rates, and recent utilization rates will soon be notified to the Committee on Agriculture.For the information of the EC, the US which invoked formal dispute settlement procedures against the
Philippines in 1997 on the issue of MAV administ ration has made the following observation in its
written questions:  “Since the Philippines modified the manner in which the TRQ system is
administered, utilization rates have improved.”
Chapter III(2)(vi)  Other charges on imports
What steps are being taken to ensure that all dist illed spirits are subjected to the same tax rates
regardless of the raw material used in its production?
The matter of rationalizing the internal taxation for wines and spirits is under review, and the
Cabinet Committee on Trade Related Matters has agreed that his is a priority legislative agenda.  The
increase of 12% on all excise taxes by 2000 is not a proposal as it is already a provision in Republic
Act No. 8240.
With respect to soft drinks, the executive branch has been consulted by the legislature and has
expressed the view, among others, that excise taxation must respect Article III of GATT 1994.  To
date, the proposed excise tax on soft drinks (House Bill No. 3069) is uniform for both imported and
local brands.
Finally, under RA 8240, excise taxation of alcoholic beverages is also based on per proof litre
and not ad valorem .
Pharmaceuticals
Can the Government of the Philippines provide assurances that recent efforts to lower drug prices
will not lead to a violation of the Philippines' WTO commitment?
Yes.  Also, the administrative order being drafted regarding registration and renewal of
pharmaceutical products will take into account the views and opinions expressed by all sectors of
society, including the objective of making available medicines to the general public at affordable
prices, and commitments of the Philippines in the WTO.
JAPAN
Customs valuation
As stated in paragraph 15, page 31, of the Secretariat Report, the Philippines uses minimum import
prices which is prohibited under Article 7.2(f) of  the Agreement on Implemen tation of Article VII of
the GATT.  Does the Philippines cease to apply such minimum import prices on the expiration of 5-
year grace period for the application of the Agreement?
The Philippines remains committed to the provisions of the Agreement on Customs Valuation.
Republic Act No. 8181 authorizes the shift to the transaction value system for import valuation by
2000.  As a developing country, the Philippines availed of the transitory provision allowing the delay
for a five-year period in the full application of the Agreement on Customs Valuation
(i.e. Article 20.1).  Hence, the Philippines relies on published values during this transition period.WT/TPR/M/59
Page 50
Safeguards
According to paragraph 52, page 49, of the Secretariat Report, the Government is in the process of
drafting a bill to introduce safeguard legislation.  Please explain the current status and expected
schedule for the legislation.
A draft safeguards bill is being deliberated in Congress to address injurious imports brought
about by surges in imports under fair trade situations.  It is the objective of the executive branch of
government to ensure that such safeguard measures will be fully consistent with the GATT
Article XIX and the Agreement on Safeguards.
Investment
It is reported that the incentive system for investment in the Philippines has become complex and
burdensome to administer and that it may potentially divert investment from efficient uses, attract
rent-seeking companies that are al ready world-competitive or, on the contrary, attract inefficient
producers that need extra financial assistance.  It is also reported that the implicit fiscal cost ofinvestment incentives is probably high (paragraphs 80-82, page 56).
(a) Does the Philippines have any intention to simplify such complicated incentive
system?
(b) When modifying a certain incentive scheme, is such modification made public well in
advance?
(c) Does the Philippines establish an enquiry point where information on such incentive
scheme is available?
(d) Are the criteria to provide incentive scheme made public?
(e) When providing incentives to investment, are they provided under the MFN and the
national treatment principle?
(f) How does the Philippines cope with the abo ve-mentioned implicit fiscal cost caused
by maintaining these investment incentives?
(g) Are those investment incentives in conformity with the Agreement on Subsidies and
Countervailing Measures?  Do those incentives not fall into export subsidies
prohibited under Article 3.1 of the Agreement?  Please also explain the reason.
In our view the incentives system in the Philippines is not burdensome.
The answers to questions (a) to (e) is yes.On the matter of retail trade and other service sectors:
The restrictions existing under the transport, telecommunications, business services, land
ownership, advertising, public utilities, deep sea commercial fishing vessels and broadcasting are
specified in the Constitution and, as such, cannot be amended by legislation.  In the banking sector,
the Philippines has already exceeded its commitments under GATS.  Furthermore, Canada might wish
to refer to Table III.11 (page 57) of the Secretariat Report for the foreign investment negative list.
The Retail Trade Law of the Philippines was enacted almost half a century ago to address
specific socio-economic concerns and objectives particular to the Philippines.  The law is currentlyWT/TPR/M/59
Page 51
being reviewed.  Today, retail trade liberalization is no longer a matter for policy debate as the
Government is committed to enacting a new law that would liberalize the retail trade sector.  Newsocio-economic concerns, however, have to be addre ssed such as how not to adversely affect small
and medium enterprises (e.g., “mom and pop stores”) by prescribing the level of capitalization that
would be limited to Filipinos.
On the matter of the so-called fiscal cost of the Philippines’ Investment Priorities Plan
described as being “ probably high”, the Board of Investments has calculated that for every peso
revenue foregone, 28 pesos representing new capital formation is achieved.
The Export Development Act was lengthily revi ewed when the subsidies legislation of the
Philippines was considered by the Committee on Subsidies and Countervailing Measures in 1996.The EC, for one, participated most actively in that  exercise.  In any event, the Philippines remain
committed to the provisions of the Subsidies Agreement, but must lament the imbalance that while
Article 8 subsidies remain non-actionable, Article 27 flexibilities for developing countries are
countervailable.
It is reported that the Philippines maintain a variety of industrial policy measures, including tax
holidays, duty exemptions and simplified customs procedures.  Which sector do the Philippines intend
to protect and promote?  Which policy measures do the Philippines provide to such sectors?
The incentives provided by the Philippines are for promotion of preferred areas of investment
and not for protection.  Moreover, incentives are mostly of the fiscal type as the Philippines is not in
any position to grant up-front cash grants as developed countries are prone to give.
Table III.11, page 57, shows a foreign investment negative list.
(a) Please explain the reason for not allowing foreign equity in sectors such as
engineering and accountancy.
(b) Do the Philippines have any plan to allow foreign equity in sectors listed in the
LIST A.A, including retail service?
(c) Do the Philippines have any plan to allow more foreign equity in sectors listed in the
other sectors of the LIST?
The restrictions existing under the transport, telecommunications, business services, land
ownership, advertising, public utilities, deep sea commercial fishing vessels and broadcasting are
specified in the Constitution and, as such, cannot be amended by legislation.  In the banking sector,
the Philippines has already exceeded its commitments under GATS.  Furthermore, Canada might wish
to refer to Table III.11 (page 57) of the Secretariat Report for the foreign investment negative list.
A scheme to establish and operate special economic zones (ecozones) is reported in paragraphs 95-
99, pages 60-62, of the Secretariat Report.  Are incentives described in the paragraphs in conformity
with the Agreement on Subsidies and Countervailing Measures?
The Export Development Act was lengthily revi ewed when the subsidies legislation of the
Philippines was considered by the Committee on Subsidies and Countervailing Measures in 1996.
The EC, for one, participated most actively in that exercise.  In any event, the Philippines remains
committed to the provisions of the Subsidies Agreement, but must lament the imbalance that whileWT/TPR/M/59
Page 52
Article 8 subsidies remain non-actionable, Article 27 flexibilities for developing countries are
countervailable.
TRIMs (pages 62-63, paras. 102-104)
Some local-content and foreign-exchange requir ements which have been notified to the TRIMs
Committee are reported in the Secretariat Report.  Does the Philippines eliminate all the trade-related investment measures which are not in conformity with the provisions of the TRIMs Agreement,
or intend to request the extension of the transition period for the elimination of the TRIMs?
The Philippines remains committed to the provisions of the Agreement on TRIMS.  (It might
be useful to recall that, at the last meeting of the Committee on TRIMS on 13 September 1999, thematter of Article 5.3 of the Agreement was discussed.  No conclusions were drawn from the
discussions, and the matter would be referred to the Council for Trade in Goods when it meets on
14 October 1999.)
State trading (page 64, paras. 107-108)
It is reported that the National Food Authority 8NFA) has been notified to the WTO as the sole state-
trading enterprise in the Philippines engaging in the import and export of rice and sugar.  It is also
reported that starting 1999, and in support of the food security agenda of the current administration,
the NFA has been engaged in the procurement and sale of non-grain basic commodities including
cooking oil, sardines and milk.  Please explain the scheme of the procurement and sale of non-grain
basic commodities by the NFA.
The National Food Authority does not procure nor sell non-grain basic commodities.  Its role
in these commodities is limited to serving as a li nk or guarantor between the suppliers and retailers
under the Enhanced Retail Access for the Poor (ERAP) project in line with the Government’s food
security program.  Under this scheme, there is neither NFA intervention nor competition, but rather
complementation with the private sector to improve the availability of and access to basic food items
by the public.
It is reported that private traders are allowed to export and import the products which are engaged by
the NFA depending on the supply-demand situation of the country.  Please explain concreteconditions for allowing private traders to export and import.
The NFA is the sole entity mandated under Presidential Decree No. 4 (as amended by
Republic Act No. 8178) to import rice.  PD 4 allows NFA to undertake direct importation of rice, or it
may allocate import quotas to certified and licensed importers.  Importation is deemed required byNFA when supply shortfalls occur due to natural calamities and/or to avert market distortions due to
speculations that result in hoarding.  For instance, this year, the NFA has allocated to private traders
the importation of 75,000 metric tons from the minimum access volume.
WTO document G/STR/N/1/PHL, which is sited in footnote 28 of page 64 of the Secretariat Report,
states that quantities allowed for export or import depends on the excess or shortfall of the
actual/projected national inventory compared to the desired buffer stock of the country.  Please give
concrete explanation on how such quantities are determined.
In respect of how the desired buffer stock quantities are determined, the recommendation to
import rice and corn is made by an inter-agency committee composed of representatives of the
Department of Agriculture, Bureau of Agricultura l Statistics, Bureau of Animal Industry, NationalWT/TPR/M/59
Page 53
Irrigation Administration, the Philippine Atmospheric Geophysical Astronomical Service
Administration and the NFA, using quarterly production survey results and the rice and corn stockinventory.  The recommendation is then elevated to the Secretary of Agriculture and the NFA Council
for decision.  Rice importation is subject to Presidential approval.
Importation of rice and corn is resorted to when production and stock levels are deemed
insufficient to meet the requirements during the lean months of July-September for rice, and January-March for corn and/or when domestic rice prices during the lean months are expected to rise beyond
the normal seasonal peaks.  For purposes of food security, the Philippines maintains a 90-day buffer
stock for rice.
Standards and other technical requirements
It is reported that no foreign test laboratory had been accredited under the Bureau of Product
Standards Laboratory Accreditation Scheme (BPSLAS) as of June 1999. Please explain the reason.
To date, there are 26 laboratories accredited with the Bureau of Product Standards Laboratory
Accreditation Scheme, but no foreign test la boratory has applied for BPSLAS accreditation.
IPRs
As of 1 January 2000, the Philippines are obliged to comply with the provisions of the TRIPS
Agreement.  Please describe the efforts taken so far an to be taken by the Philippines to bring its
legislation to effectively conform with the TRIPS Agreement as well as regarding enforcement ofIPRs.
The Philippines acknowledges that the additional transition period provided for developing
country Members under Article 65.2 of the TRIPs Agreement expires on 31 December 1999.
Immediately thereafter, or as of 1 January 2000, the Philippines must therefore comply with itsrelevant obligations under the same Agreement in accordance with the specified terms and conditions.
As early as June 1997, the Philippines had promulgated R.A. 8293, otherwise known as the
“Intellectual Property Code of the Philippines” (the “Code”) which took effect as of 1 January 1998,
or a full two years prior to the end of the additi onal transition period provided for in Article 65.2 of
the TRIPs Agreement.  The Code consolidates various laws on intellectual property found in various
prior legislation.  It also upgraded those laws in line with the provisions of the TRIPs Agreement.
At present the Congress of the Philippines is considering legislation on protection of layout
designs of integrated circuits and of plant variet ies.  It is the policy of the GOP to be in full
compliance with its obligations under the TRIPs Agreement as and when the obligations accrue.
There are two levels of enforcement of IPRs:  (1) administrative through the Intellectual
Property Office (IPO), and (2) judicial, through the regular courts.
Does the Philippines have legislation regarding injunctions by the judicial authorities as provided for
in Article 44 of the TRIPs Agreement?
Yes.  Section 225 of the Code provides that remedial action authorized therein “shall be
cognizable by courts with appropriate jurisdiction”.  The Revised Rules of Court in the Philippines, as
amended, in turn, provides that a court may issue and enforce writs of preliminary injunction as a
provisional remedy.WT/TPR/M/59
Page 54
It is reported that the authorities consider that the Intellectual Property Code (IP Code) has aligned
existing laws on patents, trade marks, geographi cal indications and copyrights with the TRIPS
Agreement (para. 136, p. 69).
- Please explain the legal status of the IP Code.  Does the IP Code have same legal
effect as existing laws:  or does the IP Code have the effect to amend the existinglaws?
- Does this mean that the Philippines do not have to further amend laws on patents,
trade marks, geographical indications and copyrights to bring its scheme into
conformity with the TRIPS Agreement?
The Code has the force and effect of law.  It amends or repeals prior laws on IPRs that are
inconsistent with its provisions.
Yes, with the sole exception of a further amendment providing either patent or sui generis
protection, or both, for plant varieties.
It is reported that the IP Code includes a fair-use provision on decompilation of software.  Please
explain the concrete interpretation of the "fair-use provision".  (para. 146, page 71)
“Fair use” in the context of de-compilation refers to criticism, comment, news reporting,
teaching, scholarship, research, and similar purposes.  The following factors, among others, are also
taken into consideration:
(a) whether such use is of commercial nature is for non-profit education purposes;
(b) the effect of the use upon the potential market or value of the protected work;  the
amount and substantiality of the portion used in relation to the protected work as a
whole;
(c) the nature of the protected work.
Please explain further on the measures taken or to be taken regarding enforcement on copyrights to
cope with illegal reproduction of works.  Has a dispute settlement system been established concerning
the enforcement of copyright?
As earlier stated, there are two modes of enforcement, ie., administrative and judicial.  The
judicial mode of enforcement is in place.  As for the administrative mode, the Office is in the process
of hiring more lawyers to assure full implementation.
Competition policy
It is reported that ten of the top 1.000 corporations in the Philippines accounted for 26% of all
revenues, 40% of total net income, and 34% of total assets in 1991 (para. 159, page 76).  Please
provide more recent data, if available.  Is there any tendency towards such a market concentration
situation being relaxed?
It is reported that there is no comprehensive competition law in the Philippines (paragraph 160,
page 76).  Does the Philippines have any intention to establish a comprehensive competition law?WT/TPR/M/59
Page 55
It is reported that no central government agency ov ersees the implementation of competition policy
(para. 162, page 76).  Is there any difficulty in enforcing various laws on competition?
Please explain how the Philippines Government cope with transborder anti-competitive behaviour.
Reports on the Top 1000 Philippine Corporations are usually based on private sector surveys.
These do not represent the universe of corporations in the Philippines nor official government reportsand therefore government would not be in a position to verify whether or not market concentration
levels have been reduced on the basis of these surveys.
Agriculture, forestry and fisheries
It is reported that production support for grain, high-value commercial crops, livestock, and fisheries
has been implemented under "Gintong-Ani" programme s, which include technical and infrastructural
support as well as marketing promotion training, and various inputs.  Please explain the scheme of
these programmes (para. 8, page 78).
It is reported that the Agricultural and Fisheries Modernization Act (AFMA) requires the Government
to establish strategic agriculture and fisheries development zones and to provide and facilitate
various support services to enhance productivity (para. 9, page 79).
- Please explain the scheme of "strategic agriculture and fisheries development zones".
- Please also explain which "support services" are provide.
The Gintong Ani  Program has been replaced by the Agriculture and Fisheries Modernization
Act (AFMA).  The AFMA is focused on providing in formation and marketing support, credit support,
irrigation, farm to market roads and other basic infrastructure development, and research,
development and extension services.  These programs are focused on strategic agriculture and
fisheries development zones where agro-climatic conditions are suitable for the production ofparticular crops.  Promotion of production, agro-processing and marketing activities are undertaken in
these identified zones to help develop and modernize the agriculture and fisheries sector in an
environmentally and socio-culturally sound manner.
Textiles and Clothing
Paragraph 27, page 9, of the Government Report raises a problem regarding rules of origin and the
MFA.   Japan also has an interest in this matter.  It would be appreciated if the Philippines could
provide further concrete explanation on this case including data such as quota.
The matter of rules origin as it applies to the MFA and as implemented by one major WTO
Member has been raised and discussed in the Textiles Monitoring Body where Japan sits as a
member.
Services
MFN exemption :  It is reported that the Philippines' list of GATS Article II (MFN) exemptions covers
the entry and temporary stay of natural persons for all sectors, and commercial banking, investment
houses, liner cargo trade and cabotage transport services (para. 63, page 93).  Do the conditions
which created the need for the exemption still prevail?   If so, please explain such conditions in detail.WT/TPR/M/59
Page 56
Financial services :  Japan appreciates that the Philippines are liberalizing its financial regime.  Do
the Philippines intend or plan to make further liberalization in this field?  If so, please explain the
detail.
Communications services :  It is reported that section 17 of RA 7925 provides that a healthy
competitive environment be fostered.  What is the "healthy competitive environment"?  (para. 94,page 100, of the Secretariat Report, para. 32, page 10, of the Government Report).
The limitations on foreign equity are mandated by the Philippine Constitution.  But the
number of carriers have increased, resulting in a healthier competitive environment.  Thus, the phrase
“healthy competitive environment” must be cons trued within the context of equity limitations
imposed by the Constitution.
The restrictions existing under the transport, telecommunications, business services, land
ownership, advertising, public utilities, deep sea commercial fishing vessels and broadcasting are
specified in the Constitution and, as such, cannot be amended by legislation.  In the banking sector,the Philippines has already exceeded its commitments under GATS.  Furthermore, Canada might wish
to refer to Table III.11 (page 57) of the Secretariat Report for the foreign investment negative list.
UNITED STATES
Tariff Increases  (WT/TPR/S/59, pages 32 and 33, paras 32 and 33;  and WT/TPR/G/59 page 7,
paras 14-18)
We applaud the Philippines for its ambitious unilateral tariff reduction program.  We are concerned,
however, about recent reversals in tariff liberalization policy, which have encouraged local import-
sensitive firms to lobby for continued protection.  In Executive Order (EO) 63, the Philippines raisedtariffs on 694 tariff lines (approximately 12% of the total tariff lines in the Philippine Tariff
Schedule), including most textiles, yarns, garments, as well as kraft paper and certain steel products.
As a result, the actual average tariff rate in 1999 is higher than the rate targeted under the
Government's unilateral tariff reduction program.  Philippine authorities have asserted that theincrease was necessary to provide relief to industries negatively affected by the Asian financial crisis
and to address alleged "surges" in imports.  We understand, however, that the initial analysis of the
Philippine Tariff Commission found evidence to support assertions of import surges for only a small
number of tariff lines.
In addition, we note that tariff rates for most of the products included in EO 63 were increased once
before, in 1998, pursuant to EO 463 or EO 486.  At that time, the increases also were justified as a
one-time action to provide time for certain local firms to become more competitive.
While we have been assured by the Philippines that these increases are temporary and limited to the
remainder of 1999,  the Government recently extended the higher rate of duty on hot rolled steel coil
(HS 7213.91 and 7213.99) granted in EO 63.  This incr ease was implemented, despite the failure of
the National Steel Corporation to meet the requirements for such an extension, as required in EO 63
(i.e., HRC capacity utilization of at least 50% from 1 July 1999).  We are concerned that this action
appears inconsistent with the "temporary" status of  the EO 63 rate increases and raises doubts about
the Government's commitment to reduce tariffs on these items by the end of the year.WT/TPR/M/59
Page 57
Can the Philippines acknowledge that the tariff ra tes for products contained in EO 63 will be reduced
in line with the original schedule planned under the Government's Tariff Reduction Program?
Executive Order No. 63 was promulgated to provide temporary relief to certain industries that
were heavily affected by the Asian financial crisis.  It involved the tariffs for some 720 products at the
8 digit tariff level.  Of these 720 tariff lines:
(a) six lines involving four steel slabs and scraps, one for crystal tissue paper, and a
monomer input had their tariffs reduced;
(b) twenty-three lines involving steel coils and wire rods, pocket lighters, kraft-liners and
petrochemical products had their tariffs aligned to uniform rates, albeit at higher
levels; and
(c) the scheduled tariff reductions for 691 lines involving textiles and clothing products
were postponed for one year, that is, the scheduled reductions for 1999 will only take
effect in 2000.
Tariff Reduction Program  (WT/TPR/S/59, page 33, para. 21)
We applaud the Philippines for its unilateral progr am to reduce applied MFN tariff rates.  We
understand that the Government intends to achieve tariff rates of 0-5% by 2004 for all but sensitive
agricultural products.  The existing published tariff schedule shows rates thorough January 1, 2000.
The lack of a published rate reduction schedule beyond the year 2000 has generated some uncertainty
within the business community about the Philippine Government's commitment to further reduce
tariffs.
To enhance transparency and help businesses to plan ahead, does the Government intend to issue an
Executive Order outlining the annual tariff reduction schedule from 2001 to 2004?  Will the
Philippines bind these rates?
Please comment on Philippine efforts to fulfill the ASEAN's decision to accelerate the elimination and
reduction of tariffs under the ASEAN Free-trade area (AFTA).
Also, given the expansion of AFTA's membership and alteration of market access commitment, does
ASEAN plan to formally notify WTO members of these policies though established notificationprocedures governing regional trade arrangements?
Yes, there is currently an ongoing process that would result in the issuance of an appropriate
Executive Order.  In respect of binding these rates, these would depend on the dynamics of tariff
negotiations within the context of a new round of multilateral trade negotiations, should there be any.
The unilateral tariff reduction programme of the Philippines will eventually remove the
margin of preference (MOP) existing for ASEAN, and tariffs will converge towards the MFN
commitments being applied to WTO Members.
The ASEAN has already been notified to the Committee on Trade and Development under
the “Enabling Clause”.WT/TPR/M/59
Page 58
Information Technology Agreement  (ITA) (WT/TPR/S/59, page 33, para. 24)
We commend the Philippines for its announced intention to accelerate certain reductions in applied
tariff rates on ITA products. However, we have noted that, for certain ITA products, the year 2000
tariff rates shown in the existing applied tariff schedule of the Philippines (dated April 1999) are at
variance with the bound rates for the year 2000, as outlined in the Philipines'ITA WTO schedule.  we
understand that the National Economic Development Authority (NEDA) has approved an ExecutiveOrder to modify the tariff schedule to reflect accurately all ITA bound rates.
When does the Government expect the Executive Order regarding ITA tariff reductions to be issued?
Will certain rate reductions be accelerated?
The required public consultations have already been completed.  The Government expects to
be able to issue the appropriate Executive Order soon.
Proposed Administrative Order on Brand-name Pharmaceuticals  (not referenced in Secretariat
Report)
Of serious concern is a proposed Administrative Order (AO), under discussion at the Department of
Health, to restrict the ability of pharmaceutical companies to register certain brand-name
pharmaceutical products.  The proposal under discussion appears to be inconsistent with Philippine
obligations under the WTO Agreement on Trade-Related Intellectual Property Rights.
What is the current status of the proposed draft AO and what efforts are being made to ensure that the
final measure is consistent with the Philippines WTO obligations?
The administrative order being drafted regarding registration and renewal of pharmaceutical
products will take into account the views and opinions expressed by all sectors of society, including
the objective of making available medicines to the general public at affordable prices, andcommitments of the Philippines in the WTO.
Failure to Ratify WTO Services Obligations (WT/TPR/G/59, page 9, para. 22)
We are concerned that the Philippines has not yet ratified the WTO Financial Services Agreement and
the WTO Telecom Services Agreement.
Given that one of the priorities of the Philippines in the WTO has been the "full and faithful
implementation of commitments", what action in the Philippine Government taking to ensure that
these Agreements are ratified by the Philippine Congress?
Also, given the expansion of AFTA's membership and creation of new services commitment among
ASEAN members, does ASEAN plan to formally no tify WTO members of these policies thorough the
notification procedures established under the GATS?.
The Fifth Protocol of the GATS is currently under consideration for ratification by the
Philippine Senate.  This is a requirement under existing constitutional and legal procedures.
Yes, in due course, and under the Enabling Clause.WT/TPR/M/59
Page 59
SECTION III:  TRADE POLICIES
Customs Procedures  (WT/TPR/S/59, page 28, para. 6)
Recent actions appear to have further institutionalized the role of the Philippine private sector in the
import clearance process, which appears to pose a non-tariff barrier to imports.  customs
Memorandum Order (CMO) 9-99 allows "Industry Co mmodity Experts," accredited by the private
sector, to recommend that Customs officials issue alert orders on certain incoming importations and
to assist Customs officials in physically inspecting su ch imports.  A list of accredited experts indicates
that most are form individual ma nufacturing companies or trade associations.  The list of products
subject to the provisions of CMO 9-99 apparently was developed by industry and includes a broad
range of items which have been the subject of repeated requests by industry for tariff increases, whichor have been the subject of anti-dumpling complaints.
How does the Philippines justify the ability of privat e sector "experts" to play a role in the customs
clearance process?
What criteria did the Government use for developing the list of products subject to the provision of
CMO 9-99?
What procedures and sanctions are in place to prevent the accredited "experts" form engaging in
anti-competitive actions to disrupt imports?
What steps does the Government take to ensure th at no business confidential information provided by
the importer or exporter for purposes of customs va luation purposes is not disclosed to the private
sector "experts" without permission of the entity that is providing the information?
These are currently under review by the Government.
On the matter of “closer collaboration between the Bureau of Customs and the private sector”
concerning valuation, the Philippine Government has not and does not intend to relinquish its
authority on valuation issues.  The move to consult more closely with the private sector, among other
repositories of data and information, was primarily driven by the impending shift to the transaction
value method for customs valuation and the need to ensure that customs revenues do not suffer onaccount of such shift.  In any event, Customs Memorandum Order 9-99, which allows for the
utilization of industry commodity experts, is under continuing review precisely to ensure fair and
transparent valuation practices and the preservation of revenue objectives.
Pre-shipment Inspection  (WT/TPR/S/59, pages 21-29 paras. 10-12)
Reliance by the Philippine Government on a private entity, which is contracted to perform pre-
shipment inspections (PSI), has negatively affected market access for U.S. exporters.  We remain
deeply concerned by non-transparent and arbitrary price verification practices conducted by this
entity.
We also are concerned that the PSI appeals mechanism lacks transparency and fails to resolve cases
within acceptable timeframes.
We understand the Government's contract with the PSI entity is due to expire December 31, 1999.WT/TPR/M/59
Page 60
Please describe the Philippines' efforts to ensu re the elimination of PSI-related import barriers and
make improvements in transparency and appeals procedures, so that the Philippine Government willbe in compliance with its WTO obligations.  In addition, please clarify whether your Government
intends to renew the inspection contract with the same entity?
The Pre-Shipment Inspection (PSI) Agreement is an integral part of the WTO Agreement.
The Philippines is committed to the provisions of this agreement with the end in view of contributingto trade facilitation.  Since the time of the first trade policy review, we have progressively phased
down the application of PSI, and intend to terminate such practice by 2000.
Customs Valuation  (WT/TPR/S/59, page 31, paras. 13-17)
The Philippines is obligated to implement the tr ansaction value methodology, in compliance with the
WTO Valuation Agreement, no later than January 1, 2000.  Existing law (RA 8181) provides for the
shift to transaction value, but also mandates continued use of published values.  This provision is
inconsistent with Philippine obligations under the WTO Valuation Agreement.
What steps specifically are being taken to ensure that the Philippines will fully comply with its
obligations under the Agreement by the January 2000 deadline?
The Philippines remains committed to the provisions of the Agreement on Customs Valuation.
Republic Act No. 8181 authorizes the shift to the transaction value system for import valuation by
2000.  As a developing country, the Philippines availed of the transitory provision allowing the delay
for a five-year period in the full application of the Agreement on Customs Valuation (i.e.,Article 20.1).  Hence, the Philippines relies on published values during this transition period.
We note that the Government has submitted to congress a bill (HB 8011) on valuation that offers a
number of positive changes.  But it would also  give the Bureau of Customs (BOC) the right of
compulsory acquisition in cases where there is uncertainty over valuation.
How is this provision consistent with the WTO Valuation Agreement, particularly the Agreement's due
process and transparency obligations?
A number of provisions of the WTO Valuation Ag reement do not appear to be implemented by HB
8011.  how does the Government plan to implement th e Agreement's requirements on related parties
(Article 1.2); identical and similar goods (Sections 1b, 2 and 3 of Article 2 and 3); computed value
(Article 6.2), adjustments to transaction value (Article 8.3 and 8.4); currency conversion (Article 9);
confidentiality (Article 10); the importer/declarant's right to appeal (Article 11); and the
interpretative notes set forth in Annex 1 (Article 14)?
With regard to the use of published values, what is the mechanism provided by the Philippines for
importers to appeal the use of any information contained in a price data base which may be incorrect,
or may be prohibited by the Agreement on Customs Valuation, as a valid basis for determining
Customs Valuation?
The Department of Trade and Industry has recommended that the provision on government’s
right for compulsory acquisition be deleted.
The issues raised on the implementation by H.B. 8011 of various provisions of the Agreement
can be addressed when the implementing rules and regulations are formulated.WT/TPR/M/59
Page 61
The reference to the use of “published values” is being deleted under the House Bill no. 8011.
We also are concerned about the institutionalization of mechanisms that will allow local imports-
sensitive firms in the Philippines to influence customs valuations decisions.  Customs Memorandum
Order (CMO) 39-98 crated a "Valuation Team" comprised of Bureau o Customs and industry
representatives and expands on a valuation working group established pursuant to a March 1997
MOU between the BOC, the Federation of Philippine Industries (FPI) and the Philippine Chamber ofCommerce and Industry (PCCI).  The team apparently review and makes recommendations
concerning published values and petitions, and private sector representatives are tasked with
assisting BOC in providing technical experts and "sources of value information."
How is this mechanism consistent with Phili ppine obligations under the WTO Customs Valuations
Agreement?  Please advise whether this CMO will be repealed.
If the "valuations team," which includes industr y representatives, examines information provided by
importers for purposes of customs valuations, ins pe rmission first obtained form the importer or other
entity providing the information?
This is likewise currently being reviewed by the Government.  In any event the views of the
US on this matter is well known.
Harmonized System  (WT/TPR/S/59, page 32, para. 19)
The Philippines has signed but not yet ratified the Harmonized System convention.Please describe the status of the ratification process and when the Philippine Senate might be
expected to complete work to ratify the Convention?
There has been no formal ratification of the HS Convention.  But the executive branch is
exerting all efforts to have the Senate complete the ratification process soon.
Agriculture TRQs and Minimum Access Volume (MAV) Commitment  (WT/TPR/S/59, page 40,
para. 36)
Since the Philippines modified the manner in wh ich the TRQ systems are administered, utilization
rates have improved.  We urge the Philippines to continue to fully implements its MAV system in a
manner that ensures full utilization.
However, we are concerned about the recent "Ban on Certain Importations by Duty Free Shops" (not
identified in Secretariat Report).  On September 9, the Department of Agriculture issued
Administrative Orders 32, 33, and 34 which ban the importation of (respectively) pork, chicken, and
beef by duty-free shops.  These imports were not  covered by the MAV system.  The ban excludes
imports in transit from exporting countries, provided that such imports arrive in the Philippines no
later than September 30, 1999.
We are concerned that there may be some shipments that are in transit as of September 9, but which
may not arrive before September 30.  Please advise if the Government will allow for additional
flexibility for such shipments.WT/TPR/M/59
Page 62
The Philippines takes note of the concern expressed by the US.  We, however,  have no
obligation to accord zero duty to certain agricultural imports.  On the contrary, the Government hasthe obligation to address tax avoidance through sales in duty free outlets.
Excise Tax on Alcohol products (WT/TPR/S/59, page 41, para. 38)
Please explain how the current excise tax treatment of distilled spirits is consistent with GATT
Article III obligations.  Does the Philippines intend to introduce legislation to amend RA 8424 to
remove the discriminatory effect of the present excise tax regime on distilled spirits?
The matter of rationalizing the internal taxation for wines and spirits is under review, and the
Cabinet Committee on Trade Related Matters has agreed that this is a priority legislative agenda.  Theincrease of 12% on all excise taxes by 2000 is not a proposal as it is already a provision in Republic
Act No. 8240.
With respect to soft drinks, the executive branch has been consulted by the legislature and has
expressed the view, among others, that excise taxation must respect Article III of GATT 1994.  To
date, the proposed excise tax on soft drinks (House Bill No. 3069) is uniform for both imported and
local brands.
Finally, under RA 8240, excise taxation of alcoholic beverages is also based on per proof liter
and not ad valorem .
Excise Tax on Automobiles  (WT/TPR/S/59, page 41, para. 38)
The Philippines' excise tax regime for automotive vehicles includes tiers based on engine
displacement,   This serves to discriminate against vehicles with larger engine size.  Given new
technologies, larger-engine vehicles ar not necessarily less fuel efficient.  In addition, the size of the
engine is not necessarily relevant to the level of pollution it produces.
Please advise if the Philippines is planning to modify the excise tax structure to remove this taxation
structure which effectively discriminates against autos with larger engines?
A bill (HB 6863) approved recently in the Philippine House of Representatives would subject "Asian
Utility Vehicles," defined as "originally Philippine designed low-cost utility vehicles" to a lower rate
of tax than other utility vehicles, including imported utility vehicles.  This provision appears
inconsistent with Philippine obligations under GATT Article III.
Please advise if this provision will be modified in a way that will ensure WTO consistency.
The GOP is currently reviewing the relevant provision of the new Internal Revenue Code.
Quantitative Restrictions  (WT/TPR/S/59, page 44, para. 44)
Please describe the rationale for the maintenance of quantitative restrictions on rice import.
The Philippines’ trade policy for rice is based on food security objectives which in turn is
defined as ensuring for and at all times, access to food supplies at affordable costs.  The adopted
strategy for food security is to maximize reliance on domestic production without precluding imports.
Thus, rice is imported by the National Food Authority only to ensure domestic stocks in government
hands, which is essential for stablilizing prices.  The maintenance of the import limit on rice isWT/TPR/M/59
Page 63
possible under Annex 5 of the Agreement on Agriculture.  The NFA has the sole authority to import
rice, as mandated by law.
Fishery Products  (not identified in Secretariat Report)
Section 61 of RA 8550 (Fisheries Code of 1998) st ates that fishery products may be imported only
when the importation has been certified as necessary by the Department of Agriculture inconsultation with the Fisheries and Aquatic Resources Management Council.
Please advise on how this provision is consistent with Philippine WTO obligations, including those
under GATT Article XI?
The Philippines defines health, safety and national security justifications for trade measures in
accordance with the provisions the relevant provisions of the WTO, including in particular Article XX
of GATT 1994.  The list of regulated and prohibited imports is provided for in Tables III.7 and III.8 in
pages 45 and 46 of the Secretariat Report.
The quoted portions of Article 61 of the Philippine Fisheries Code (the “Code”) must not be
construed in isolation, but with other relevant provisions of the Code.  The Code as a whole deals
with, among others, the conservation of the fisheries resources of the Philippines in a manner
consistent with sustainable development.  Thus, the Code also authorizes the imposition of limitations
on domestic production through catch ceiling limitations and the establishment of closed seasons.
Article XI.2(c)(i) allows import restrictions on fisheries products that are necessary for the
enforcement of governmental measures which operate to restrict the marketing or production of likedomestic products or domestic products for which the imported products can be directly substituted.
Furthermore, the Philippines is of the view that such regulation of imports is also authorized under,
among others, Article XX (b), (d) and (g) of GATT 1994.
Additionally, the Philippines is still in the process of formulating the implementing rules and
regulations.  The legislation and such rules and regulations will be notified after due promulgation of
such rules and regulations.
Pending the formulation of such rules and regulations, licensing has been automatic if imports
are for processing purposes.
Yes, import permits are again being issued.
Import Licensing   (WT/TPR/S/59, page 46, para. 45)
In addition to posing quantitative restriction pr oblems, Section 61 of RA 8550 (Fisheries Code of
1998) also appears to impose a WTO-inconsistent licen sing requirement.  Specifically, this provision
states that no person shall import and/or export fishing products of whatever size, stage, or form for
any purpose without securing a permit from the Department of Agriculture.
What is the justification for this license requirement?  Has the Philippines notified this licensing
requirement to the WTO?
Is licensing automatic or discretionary?  If discretionary, please provide information regarding the
criteria utilized by the Department of Agriculture to evaluate applications for licenses?WT/TPR/M/59
Page 64
We understand that, in June 1999, the Bureau of Fisheries and Aquatic Resources (BFAR)
temporarily placed on hold processing of import licenses for frozen fish.  Are import permits againbeing issued?
The Philippines is still in the process of fo rmulating the implementing rules and regulations
for Republic Act No. 8550, the Fisheries Code.  The legislation and its rules and regulations will be
notified after due promulgation of such rules and regulations.  Pending the formulation of such rulesand regulations, licensing has been automatic if imports are for processing purposes.  Finally, import
permits are being issued again.
Used Motor Vehicles and Parts
The Government justifies the regulation of imports of used motor vehicles, parts and components, on
the basis of the need "to protect human safety."  This effective ban on used motor vehicle imports
appears to have a disproportionate impact on lower-income consumers and serves to protect local
vehicle assemblers and auto parts producers.
Please describe current Government thinking toward further liberalization in this area.  Do similar
regulation apply to domestically-produced used motor vehicles?
Further liberalization in the area of used motor vehicles will be facilitated by the completion
of the system of rules on motor vehicle inspection.
Anti-dumpling and CVD actions  (WT/TPR/S/59, page 46, para. 47)
President Estrada signed the a new Anti-Dumpling Act (R.A. 8752) and Countervailing Duties Act
(R.A. 8751) on August 12, 1999.  We understand the intent of the Philippine Government was that the
new AD law would be aligned with the WTO Agreem ent on Implementation of Article VI of the GATT
1994 (THE ad Agreement).  We note, however, that Section 5 of the AD law (RA 8752) mandates the
imposition of punitive damages on the importer, once the Tariff Commission comes up with a positive,
definitive anti-dumping finding.  The damages include  a fine of "twice the anti-dumpling duty," and
revocation of the importer's import and business licenses.  The final paragraph of Section 8 states that
"the Secretary (of Trade and Industry) shall extend legal, technical, and other assistance to the
concerned (domestic) producers and their organizations at all stages of the anti-dumpling action.
Please explain how these provisions are consistent with the WTO Anti-Dumping Agreement.
The penalty provisions, including those on impor ters found to be dumping, were inserted by
Congress.  The Executive Branch has never supported this and will propose amendments to the sameshould it not be legally feasible to address the potential WTO inconsistency in the implementing rules
and regulations.
Rationalization of Investment Incentives  (WT/TPR/S/59, page 56, paras. 81-82)
We understand that the Government will submit legislation to rationalize investment incentives.
Please describe which incentives will be retained and which will be eliminated.
The Philippines confirms that it is reviewing its exports incentives, including fiscal
incentives, to address the triple challenges of maintaining fiscal soundness, achieving better efficiency
in resource allocation, and addressing the exigencies of development through national promotion
policy and strategies.WT/TPR/M/59
Page 65
Investment Restrictions  (WT/TPR/S/59, page 57, paras. 84-85)
We applaud the Estrada Administration's efforts to remove barriers to foreign investment.  We also
commend the Administration for supporting legislation that will permit foreign investment in retail
trade.  We believe such action would create greater competition and substantial benefits for the vast
majority of Filipinos.  However, we understand that Congressional consideration of legislation to liftthe prohibition on foreign investment in the retail sector is moving forward slowly.
Please describe the status of efforts to obtain passage of such legislation and the anticipated
legislative calendar?
What is the Government's policy on the minimum capitalization requirement for foreign investors in
the retail trade sector?
The restrictions existing under the transport, telecommunications, business services, land
ownership, advertising, public utilities, deep sea commercial fishing vessels and broadcasting arespecified in the Constitution and, as such, cannot be amended by legislation.  In the banking sector,
the Philippines has already exceeded its commitments under GATS.  Furthermore, Canada might wish
to refer to Table III.11 (page 57) of the Secretariat Report for the foreign investment negative list.
Investment Restrictions Affecting Corn and Rice Trade
Under a 1961 Philippine law (R.A. 3018), foreign companies are banned from engaging in corn and
rice trade.  A 1973 presidential decree (Decree 194), which has the status of law, offers an exception
to foreign-owned businesses that require rice and corn as a raw material for milling, processing, and
trading.  However, Decree 194 also mandates that foreign companies benefitting from the exception
transfer at least 60% of their equity to Filipino citizens over a time-period to be established by the
Government and requires such companies to subm it a divestment plan.   This restriction hampers
investment in agricultural modern ization, a key Government priority.
Please indicate whether the Government plans to seek legislation to revoke this divestment
requirement.
RA 3018 is an old legislation.  It would need to be verified whether or not its provisions are
still being implemented or they have been modified under any other subsequent legislation, or if the
law has been repealed altogether.
Local Content Requirements – Car development Program and Detergents  (WT/TPR/S/59,
page 62, para. 102)
Memorandum Order 346, issued on February 26, 1996, which amends the guidelines on the Motor
Vehicle Development Program (MVDP), indicates that the phase –out of local content and foreign
exchange requirements will be completed by the year 2000.  However, the Order does not provide aphase-out schedule.  We also understand some domestic industry groups have called for the retention
of these measures beyond January 1, 2000.  We also note that only approved participants in the Car
Development Program, who meet certain export requirements, are permitted to import vehicles in
completely-knocked down (CKD) form.  Meanwhile, CKD import requirements are more stringent for
foreign-owned companies.WT/TPR/M/59
Page 66
Local content requirement for detergents (para. 102):  Executive Order 259 bans the importation of
laundry soap and detergents containing less then 60 percent coconut-based surface active agents(surfactants), implicitly requiring local sourcing by soap and detergent manufactures.
Please advise your Government's efforts to ensure elimination these prohibited local content rules by
no later than the January 1, 2000 deadline, as established under the WTO TRIMS Agreement.
The Philippines remains committed to the provisions of the Agreement on TRIMS.  (It might
be useful to recall that, at the last meeting of the Committee on TRIMS on 13 September 1999, the
matter of Article 5.3 of the Agreement was discussed.  No conclusions were drawn from the
discussions, and the matter would
Local content requirements on antibiotics  (not identified in Secretariat Report)
Executive Order 776 requires that pharmaceutical companies purchase semi-synthetic antibiotics
from a specific local company, unless they can demonstrate that the landed cost of imported semi-
synthetic antibiotics is at least 20% less.  The Philippines does not appear to have notified this TRIMto the WTO.
Please describe your Government's efforts to ensure the elimination of these "un-notified" investment
measures by no later than the January 1, 2000 deadline set forth in the WTO TRIMS Agreement.
EO 776 is currently being reviewed.  The GOP, howev er, is of the view that it is not a TRIMs
issue.
Foreign Exchange provisions in ASEAN Industr ial Cooperation ("AICO") scheme applications
(not identified in Secretariat Report)
There have been assertions that the Philippine Government's Board of Investments (BOI) has applied
unwritten "trade balancing" criteria for approval of investment incentives under the ASEAN
Industrial Cooperation (AICO) Scheme.  Applicants are required to supply information on the value
of planned importations and exportations.  When questioned about the allegations, benefits the
Philippines will derive from the project."
Please advise how the AICO evaluation process will be consistent with obligations under the WTO
TRIMS Agreement.  Please provide a detailed explanation of these criteria, and a table of approved
AICO applications, showing planned imports and exports.
The ASEAN Industrial Complementation (AICO) Scheme is an industrial complementation
scheme among manufacturers in ASEAN.  It allows th e entry immediately at “0” to “5%” duty of any
product manufactured in any ASEAN country imported by any participating ASEAN country.  The
AICO Scheme is in effect a further acceleration of the Common Effective Preferential Tariffs (CEPT)
among ASEAN countries.  In the evaluation of AICO projects it is necessary to determine the values
of the enhanced products and there is no deliberate attempt to imposing “trade balancingrequirements”.  In evaluating AICO projects application, the Philippines asks the following questions:
(a) Is the project economically viable?
(b) Is it good for the country?
(c) Is it beneficial to participating countries?WT/TPR/M/59
Page 67
If the answers to the foregoing are in the affirmative, the project will proceed.  Standard
economic parameters are used to obtain the answers, and the values and volumes of the exchanged
products are necessary in this exercise.
The requested table of approved AICO applications, showing planned importation and
exportation may be provided at a later date as this has to be referred to the capital.
National Food Authority  (WT/TPR/S/59, page 64, para. 107)
The National Food Authority remains the sole importe r of rice, resulting in market distortions that
may negatively affect food security goals.
Please provide justification for maintaining the rice  import monopoly enjoyed by the NFA.  What are
the possibilities for allowing the private sector to import rice?
Why are NFA's trading activities being expanded to include non-grain basis commodities, in
competition with private sector firms, whic h appears contrary to the Government's avowed
commitment to further liberalization?
The National Food Authority does not procure nor sell non-grain basic commodities.  Its role
in these commodities is limited to serving as a li nk or guarantor between the suppliers and retailers
under the Enhanced Retail Access for the Poor (ERAP) project in line with the Government’s food
security program.  Under this scheme, there is neither NFA intervention nor competition, but rather
complementation with the private sector to improve the availability of and access to basic food items
by the public.
Marketing Restrictions Affecting Cast Iron Hubless Pipe  (not identified in Secretariat Report)
A June 1998 Order from the Office of the President reaffirmed and October 10, 1994  Decision of the
Office of the President, which provided that "hubless cast-iron pipes and fitting cannot be used until
both the National Plumbing Code and Standard Admi nistrative Order No. 4-1, series of 1974, have
been amended to allow the use of hubless cast iron pipes."  Legal action is pending against the 1994
Decision.  The June 1998 Order occasionally has been use to prevent the importation of cast ironhubless pipe, despite a subsequent communication from the Office of the President stating no
objection to he importation os such pipe, pending th e final outcome of the legal proceeding.  On April
23, 1999, the Department of Interior and Local Government June 1998 Order from the Office of the
President.  While importers of hubless pipe have been negatively affected by these actions, a Filipino
manufacturer of hubless pipe apparently has not inconsistent with Philippine obligations under GATTArticle III.
Please describe the status of:  1) efforts to am end the Plumbing Code to permit the use of cast iron
hubless pipe;  2) the appeal filed by a domestic manuf actures or a competing type of pipe against the
Philippine National Standard for Cast Iron Hubl ess Pipe (PNS 1570:1998);  and 3) action taken to
rescind the April 23 memorandum form the Secretary of Interior and Local Government.  Please also
advise whether the Government plans to issue an Order rescinding the June 3, 1998 Order from the
Office of the President.
To update the background information provided by the US, latest developments indicate that
the Office of the President has reversed its previous decision and now allows the importation of
hubless pipes.  There are several proposals that would amend the Plumbing Code, but there are noWT/TPR/M/59
Page 68
sponsors in Congress.  In any event, amendments to the Plumbing Code are expected to proceed
slowly and in a cautious manner for safety proprietary reasons, especially in an earthquake-pronearchipelago like the Philippines.
Labelling  (WT/TPR/S/59, page 68, para. 129)
The "Generics Act" of 1988 requires that the generic name of a particular pharmaceutical must
appear above is brand name on all packaging.  It has been pointed out that this adds to the cost of
production for imported pharmaceuti cals sold in the Philippines.
Does the Government of the Philippines intend to change this labeling requirement?
In respect of the Generics Act of 1988, the Philippines does not intend to change the labeling
requirement that provides for the placement of the generic name of a particular pharmaceutical above
its brand name on all packaging.
INTELLECTUAL PROPERTY RIGHTS
Plant Variety Protection and In tegrated Circuit Layout Designs  (WT/TPR/S/59, pages 69-70,
para. 136)
What is the status of proposed legislation to implement Philippine obligations under the TRIPS
Agreement to provide intellectual property protection to plant varieties and integrated circuit layout
designs by no later than Jan. 1, 2000?
The Philippines acknowledges that the additional transition period provided for developing
country Members under Article 65.2 of the TRIPs Agreement expires on 31 December 1999.
Immediately thereafter, or as of 1 January 2000, the Philippines must therefore comply with its
relevant obligations under the same Agreement in accordance with the specified terms and conditions.
As early as June 1997, the Philippines had promulgated R.A. 8293, otherwise known as the “
Intellectual Property Code of the Philippines” (the “Code”) which took effect as of 1 January 1998, or
a full two years prior to the end of the additional transition period provided for in Article 65.2 of the
TRIPs Agreement.  The Code consolidates various laws on intellectual property found in various priorlegislation.  It also upgraded those laws in line with the provisions of the TRIPs Agreement.
At present the Congress of the Philippines is considering legislation on protection of layout
designs of integrated circuits and of plant varieties.  It is the policy of the GOP to be in full
compliance with its obligations under the TRIPs Agreement as and when the obligations accrue.
There are two levels of enforcement of IPRs:  (1) administrative through the Intellectual
Property Office (IPO), and (2) judicial, through the regular courts.
TRIPS Article 50  (Provisional Measures)
RA 8293 (the Intellectual Property Code) does not explicitly provide authority for the courts to order
seizure of pirated material and evidence of piratical activities as a provisional measure available
without notice to the suspected infringer.
Please indicate when the Philippines plans to introduce legislation to amend its IP Code, in order to
ensure compliance with Philippine obligations under TRIPS Article 50 on January 1, 2000.WT/TPR/M/59
Page 69
The Philippines acknowledges that the additional transition period provided for developing
country Members under Article 65.2 of the TR IPs Agreement expires on 31 December 1999.
Immediately thereafter, or as of 1 January 2000, the Philippines must therefore comply with its
relevant obligations under the same Agreement in accordance with the specified terms and conditions.
As early as June 1997, the Philippines had promulgated R.A. 8293, otherwise known as the
“Intellectual Property Code of the Philippines” (the “Code”) which took effect as of 1 January 1998,
or a full two years prior to the end of the additi onal transition period provided for in Article 65.2 of
the TRIPs Agreement.  The Code consolidates various laws on intellectual property found in various
prior legislation.  It also upgraded those laws in line with the provisions of the TRIPs Agreement.
At present the Congress of the Philippines is considering legislation on protection of layout
designs of integrated circuits and of plant varieties.  It is the policy of the GOP to be in full
compliance with its obligations under the TRIPs Agreement as and when the obligations accrue.
There are two levels of enforcement of IPRs:  (1) administrative through the Intellectual
Property Office (IPO), and (2) judicial, through the regular courts.
Trade Secrets  (WT/TPR/S/59, page 73, para. 152)
Trade secrets do not appear to be protected under existing Philippine law.  Please advise if the
Philippines plans to introduce legislation to provide protection for trade secrets, in order to ensure
compliance with its TRIPS obligations.
At present, it is the view of the Government of the Philippines that certain provisions on
Philippine laws on human relations and torts are sufficient to provide the protection required under the
TRIPs Agreement.
Administrative Complaints  (WT/TPR/S/59, page 73, para. 153)
Although RA 8293 took effect on January 1, 1998, some provisions have not been implemented.  Most
troubling is a long delay in implementing the provision which provides for the Bureau of Legal Affairs
of the Intellectual Property Office to exercise original jurisdiction in administrative complaintsregarding violations of laws involving intellectual property rights.
Please advise whether the Bureau of Legal Affai rs is now accepting the filing of administrative
complaints, pursuant to the provisions of Section 10.2 of RA 8293.
No.  More lawyers have to be hired first.
Enforcement  (WT/TPR/S/59, pages 74-75, paras. 154-158)
We applaud initiatives by the Bureau of Customs to address smuggling of pirated optical media,
though raids on retailer and to intensify efforts to target imports of counterfeit products.
We also recognize the good cooperation between some government agencies, especially the
Department of Trade and Industry, Customs, and the National Bureau of Investigation, and private
sector IP groups.  However, we remain concerned that the level of resources given to IP enforcement
agencies, including Customs, the National Bureau of Investigation, and the Videogram RegulatoryWT/TPR/M/59
Page 70
Board is insufficient to sustain efforts.  The bigge st hurdle to effective enforcement remains a severely
overburdened judicial system.
Please describe the Philippines' efforts to  address shortcomings in IPR enforcement.
Unlike in other countries where enforcement is undertaken mainly via private sector efforts,
in the Philippines this is undertaken almost exclusively by the Government, which exacts a heavydemand on budgetary and personnel resources. Nonethel ess, strong enforcement of IPR protection is a
continuing effort of the Philippine Government.
Earlier, the Inter-agency Committee on Intellectual Property Rights (IAC-IPR) had been
established precisely to coordinate the efforts of various government agencies in the enforcement ofIPRs.
Among other efforts, seminars have been held in various regions of the country to ensure that
information on IPRs is widely disseminated, an indispensable element in enforcement.
The authority to issue search warrants has always been part of the Philippine judicial system.
At the same time, there are current efforts to further enhance the geographical coverage of warrants
issued by courts, in light of the specific circumstances obtaining in the enforcement of IPRs.
The Intellectual Property Office (the “Office”) is also seeking additional budgetary outlays to
enable it to effectively enforce IPRs.
Adequate fines and criminal penalties are imposed for violations.  In addition, there is
corresponding civil liability.
Cable Piracy of Copyrighted Works (not specified in report)
We are very concerned with the growth in piracy of satellite signals and the transmission of pirated
cinemagraphic works by cable operators in the Philippines.  Despite statements by government
telecommunications regulators that they take the problem seriously, few cable operators have been
penalized.  There was some discussion about the National Telecommunications Commission plats to
require cable operators to submit affidavits outlining compliance with copyright laws.
Are such affidavits now being required?  Please explain what steps the National Telecommunications
Commission is taking to revoke the operating authority and/or licenses of cable operators found to be
engaged in piracy.
In coordination with the private sector, the Office recently issued a widely-disseminated
warning against cable piracy, particularly through the use of “direct-to-home boxes”.  The National
Telecommunications Commission has stepped up its operations against cable operators using such
boxes.
Software piracy of Copyrighted Works  (not specified in report)
We also are concerned that software piracy remains a serious problem, including within government
agencies.  There has been some progress in "legitimizing" software in Government offices, but a 1995
Memorandum Circular (MC 115) mandating that gov ernment agencies and state-owned entities use
only licensed, legitimate software has not been consistently enforced, and lacks procedures to audit
compliance.WT/TPR/M/59
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What steps are being taken to audit agencies and government-owned corporations' compliance with
MC 115?  Does the Government intend to reissu e MC 115 with enhanced enforcement procedures?
The MC 115 Committee continues its work.  At the same time, the Inter-Agency Committee
on Intellectual Property Rights (IAC-IPR) conti nues to closely coordinates with the National
Information Technology Council on the implementation of MC 115.  The IAC-IPR is re-openingdiscussions on the re-issuance of MC 115, as proposed by the U.S., in light of the issuance of
Memorandum Order No. 125, which removed the a udit function of the National Computer Center
over government software and hardware.
Optical Disk Piracy (not specified in report)
The Philippines does not appear to have laws or regulations in place that would enable the
Government to regulate optical disk production in the country and ensure compliance with IPR laws.
We urge the Government to implement the necessary  legal framework to deter optical disk piracy.
This is especially urgent given recent reports indicating new investment in optical disk production ina special economic zone in the Philippines, despite a severe overcapacity in optical disk production
globally.
Please indicate what steps are being taken to address this form of copyright piracy.
The Philippines is carefully studying the measures proposed by the U.S.  One initial concern
is that such measures may have adverse effects on legitimate trade.  In the meantime, the Bureau ofCustoms is taking further steps to prevent unauthorized importation of optical disk equipment and
supplies.
INDIA
Export of meat and meat products to Philippines
We understand that pursuant to a request by the Philippines Hong Producers' Organization and the
Philippines Cattle Raisers' Organization, the Government of the Philippines has introduced Bills inthe Senate and the Congress and draft Implementing Rules and Regulation (IRRS), or, inter alia,
adopting a new approach for assessing risk from im ports of meat.  We understand that the Bills have
been approved at the Committee level of both the Houses.  We would request to know the scientific
basis for the proposed change in approach for risk assessment, in particular for bovine meat.  It may
also be explained as to how it would be consis tent with the provisions of the SPS Agreement.
Philippine quarantine takes a prudent approach to quarantine security in particular with regard
to FMD, in view of the Philippine aim to achieve FMD-free status.  To date, ASEAN has declared
Regions IX and X, the islands of Palawan and Batanes as FMD-free zones.  The Philippines also has
an application for OIE accreditation as an FMD-free country.  The Philippines is fast approaching“FMD-freehood” and it would like to maintain cauti on so as not derail this trend.  There is evidence
which reveal that importing fresh and frozen meat from FMD-afflicted areas increases the risk of
FMD contamination.  Thus, the pending bill in Congress and the draft meat and meat product
importation guidelines are considering the importation of fresh and frozen beef only from FMD-free
zones.WT/TPR/M/59
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The Philippines is aware of the concerns by the Indian Government with respect to the draft
bill. These concerns are being considered by Philippine authorities. The Philippines will ensure thatquarantine measures that will be adopted would be consistent with the provisions of the SPS
Agreement. 
Import of antibiotics to Philippines
Noting that the Board of Investments has recommended the repealing of Executive Order 776 of 1982,
which restricts the import of antibiotics like ampi cillin and amoxycillin  to those where the landed
cost of the consignment is lower than the loca l cost by 20% and banned the importation of 6 Indian
APA derivatives during the last 16 years, we would request to know when the Philippines authorities
propose to remove the restrictions ton such import from India.
EO 776 of 1972 is currently being reviewed by the Philippine Government. Likewise, in view
of concerns expressed by India and other trading partners.
NORWAY
(Questions received after the replies had been fo rmulated by the Government of the Philippines)
With reference to para. 110, and in light of the great number of Philippine nationals on ships from
many countries, including Norwegian ships, we have some problems in seeing the justification for the
strict rules for employment of foreign seafarers on Philippine-registered vessels.  This situation
combined with the strict rules regarding employment of foreign nationals in Philippine shippingcompanies might in an international industry like shipping serve as a hindrance for development of
business opportunities in the Philippine maritime sector instead of creating and promoting
opportunities of employment and growth.  For an island state like the Philippines, maritime transport
is of crucial importance for the economy.  Do th e Philippine authorities consider involvement by
foreign companies in this industry as a policy op tion in order to promote, accelerate and facilitate
development and growth in this industry?
We would also like to know how many the total number of Philippine seafarers of employed on
foreign ships?
With regard to transport of government cargoes (para. 108) it would be of interest to know the share
of these cargoes in the total trade to and from the Philippines?  How often is the possibility to use
foreign flag vessels to transport government cargoes used?
With reference to para. 106 could you elaborate on the rules for foreign ownership of vessels in the
Philippine register?  Do these rules for foreign ownership also apply for ships engaged in cabotage?
In para. 113 it is stated that all Philippine-owned or registered vessels must be repaired or dry-
docked at domestic shipyards or shipyards registered with MARINA.  Does this imply that it is
possible for foreign yards/dry-docks to register with MARINA, if so is the case, under which terms?
We would also like to have confirmation that the Philippines is not party to bilateral or plurilateral
agreements containing cargo sharing agreements.
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