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15January,2017

The‘likeness’ofe-cigarettesandcigarettesintheWTO

MarinaFolteaandAnnaMarkitanova1

Abstract.........................................................................................................................................................2Introduction................................................................................................................................................31 DiscriminationinWTOlaw...........................................................................................................42 LikenessundertheGATT1994....................................................................................................62.1 Physicalproperties................................................................................................................................72.1.1 ElectronicNicotineDeliverySystems..........................................................................................................72.1.2 ElectronicNon-NicotineDeliverySystems................................................................................................72.1.3 Theharmperspective.........................................................................................................................................8

2.2 End-uses.....................................................................................................................................................92.3 Consumers’tastesandhabits.............................................................................................................92.4 Tariffclassification.............................................................................................................................102.5 TheCross-PriceElasticityofDemand...........................................................................................122.6 Theregulatoryregime.......................................................................................................................13

3 Theroleofcompetitiverelationship.......................................................................................143.1 Commercialinterchangeability......................................................................................................153.2 Alternativeuse.....................................................................................................................................16

4 LikenessundertheTBTAgreement........................................................................................164.1 TraditionalGATT‘likeness’elementsintheTBT.....................................................................174.2 Regulatorypurposevscompetitiverelationship.....................................................................174.2.1 US–CloveCigarettes........................................................................................................................................194.2.2 US–TunaII(Mexico).......................................................................................................................................20

Conclusions...............................................................................................................................................21References................................................................................................................................................22

1DrMarinaFoltea(MILE,PhDUniversityofBern)isManagingDirectorofTradePacts–atradeandinvestmentadvisoryfirmbasedinGeneva,Switzerland.ThisarticleisbasedonapresentationfortheSIELAnnualConference,heldinJohannesburg,SouthAfrica,inJuly2016.Theauthorcanbereachedatmarina.foltea@tradepacts.com.AnnaMarkitanovaisAssociateatWTIAdvisorsandanLL.M.graduatefromtheInternationalEconomicLawandPolicy(IELPO)programme,UniversityofBarcelona,Spain.Theauthorcanbereachedatamarkitanova@ielpo.org.TheseauthorsarehighlyindebtedtoLukaszGruszczynski(PolishAcademyofScience),VitaliyPogoretskyy(ACWL,Geneva),FernandoGonzales-Rojas(MonterreyInstituteofTechnology)andoneanonymousrefereeforveryhelpfulcriticalremarksonpreviousdrafts.

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Abstract

Theregulationofe-cigarettesisarelativelynewtopic.Whilethee-cigarettesectorisfastevolving,the optimal regulation of these products is yet to be fully understood. Some wisdommay beborrowedfromtheregulationofcigarettes,butmanytobaccorelevantpoliciesmaynotbeappliedtothesenewproducts.Evaluationsareunderwayonmanyaspectsofe-cigarettes, forexample:theirsafety,potentialhealthrisks, illicittrade,taxationandadvertising.Thispaperexaminesyetanotherdimension–onewhicharisesat the intersectionof internationalhealthand trade law.Namely; it looks at whether e-cigarettes and cigarettes may be found ‘like’ in aWTO disputechallengingtraderestrictivemeasuresapplyingtoe-cigarettes.Inparticular,theanalysisfocusesonahypotheticalbanontheimportation,distribution,saleandoffering for sale of e-cigarettes (referred to as a general ban) – ameasure that is either beingcontemplatedoralreadyimplementedinsomedomesticjurisdictions.Itfindsthate-cigarettesandcigarettesmay be ‘like’ underWTO law. In the event that a positive finding ismade on otherremainingtestsnecessarytodeterminediscrimination(importantlythe‘lessfavourabletreatment’)andprovidedtheregulatingmemberfindsnosolidevidencetojustifythebanunderGATTArticleXX,ageneralbanone-cigarettesrisksbeingfoundWTOinconsistent.

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Introduction

There are currently three regulatory approacheswhich governments can followwith respect e-cigarettes:i)banningtradeintheseproducts,ii)treatingthemasregulartobaccoproductsoriii)treating them as pharmaceutical products.2 The fact that banning trade in these products is aregulatoryoptionforgovernmentsisevidencedbytheWHOinareportissuedundertheumbrellaoftheFrameworkConventionsonTobaccoControl(FCTC)–aspecialisedtreatydealingwiththecontroloftobacco.TheReport,preparedfortheseventhFCTCConferenceoftheParties(COP7)meeting,refersmorethanoncetobanninge-cigarettes,althoughthepartiesarefreetochooseamongalistofotheroptions.3Todaythereare23countrieswhichhavebannedsalesofalltypesofe-cigarettes, and 11 countries prohibit the sale of nicotine-containing e-cigarettes. Twenty-twocountriesthatpermitthesaleofe-cigarettesregulatetheirmarketingauthorisationrequirementsand/orcross-bordersalerestrictions/regulations.4

Ageneralbanone-cigarettes,asisthecaseinsomecountries,isahighlytraderestrictivemeasuretobeappliedtoaproduct.IninternationaltradeandWTOtermsthisisasrestrictiveasameasurecanget.WhileanimportationbanwouldbeGATTArticleXIinconsistent(aprovisionwhichclearlyprohibits importation bans), a general ban on e-cigarettes as applying to both imported anddomestically produced goods can be challenged under a number of other WTO provisions,prominentlyundertheGeneralAgreementonTariffsandTrade(GATT)andTechnicalBarrierstoTrade(TBT)non-discriminatoryprovisions.TheWTOnon-discriminationhastobeprovenhoweverineachcasebyfollowinganumberoflegaltestsasdiscussedbelow.Ifthesetestsreturnpositive,afindingondiscriminationwouldprovidestrongbasisforameasuretobefoundWTOinconsistent(bytheWTOjudiciary),unlessthedefendantcansuccessfullyinvokeageneralexceptionavailableundertheGATTArticleXX(e.g.onpublichealth).Thus,whetherthemeasureisdiscriminatoryornotundertheWTO(anorganisationof164Memberstodate),ithasimportantimplicationsforthefutureregulationbygovernmentsofe-cigarettes.5Anysuchgovernmentwouldthereforehavetocarefullyassesstheimplicationsofbanninge-cigarettesentirely–byreconcilinghealthobjectiveswiththeirotherinternationalobligations–includingthosecontainedintheWTOAgreements.

Againstthisbackground,thispaperexaminestheconceptof‘likeness’ofcigarettesande-cigarettes–anessentialWTOlegalsteptowardfindingdiscriminationbetweenproducts.Theobjectiveistoshowthat,fromaWTOlawperspective,e-cigarettesmaybe‘like’cigarettes.IfaWTOPanelfinds‘likeness’ofthetwocategories,thelegalityofatrade-restrictivemeasure,likeageneralban,willhave to be further tested under GATT Article III. However, following a positive finding ondiscriminationandprovidedthedefendant’sjustificationunderGATTArticleXX:bhealthexception(whichwillmostlikelybeinvokedbythedefendant)isnotsupportedbysolidevidence,thismeasuremayultimatelybefoundinconsistentwithWTOlaw.Thisisparticularlythecasewiththegrowing

2Decisionof theConferenceof theParties to theWHOFrameworkConventiononTobaccoControl,FCTC/COP6(9)onElectronicnicotine delivery systems and electronic non-nicotine delivery systems dated 18 October 2014,<http://apps.who.int/gb/fctc/PDF/cop6/FCTC_COP6(9)-en.pdf?ua=1>accessedon21August20163ElectronicNicotine-Delivery Systems (ENDS) andElectronicNon-NicotineDelivery Systems,ReportbyWHO,Conferenceof theParties to the WHO Framework Convention on Tobacco Control, FCTC/COP/7/11 at 1, available online at:<http://www.who.int/fctc/cop/cop7/FCTC_COP_7_11_EN.pdf>accessedon24October20164Seehttp://globaltobaccocontrol.org/e-cigarette/policy-domainsaccessedonDecember20165Theglobalmarketfore-cigarettesin2015wasestimatedatalmostUS$10billion.About56%ofthismarketwasaccountedforbytheUnitedStatesofAmericaand12%bytheUnitedKingdom.21%ofthemarketwasdividedbetweenChina,France,Germany,ItalyandPoland(3to5%each).Thestructureofthemarketmayhoweverchangegiventhatalternativenicotinedeliverysystemsthatheat-not-burntobaccohavebeenlaunchedandnicotineinhalertechnologythatdoesnotrequireaheatingmechanismhasbeendeveloped

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evidence that e-cigarettes are less harmful than cigarettes. With that, a general ban may beconsideredasa“disguisedrestrictiononinternationaltrade”asperthechapeauofGATTArticleXXwhichstatesthat:

Subject to the requirement that suchmeasuresarenotapplied inamannerwhichwouldconstituteameansofarbitraryorunjustifiablediscriminationbetweencountrieswherethesame conditions prevail, or a disguised restriction on international trade, nothing in thisAgreementshallbeconstruedtopreventtheadoptionorenforcementbyanycontractingpartyofmeasures:…(b)necessarytoprotecthuman,animalorplantlifeorhealth…

This paper is divided in three parts. Section 1 explains the essence of WTO discriminationobligations.Section2examinesthe‘likeness’betweene-cigarettesandcigarettesundertheGATT1994.ExaminingtherelevantWTOcaselaw,Section3looksattheroleplayedbythecompetitiverelationshipinconductingthisdetermination.Finally,Section4examinestheconceptof‘likeness’undertheWTOTBTAgreement,discussingtherelationshipbetweentraditional‘likeness’elementsandtheregulatorypurposeofthemeasure.ThepaperculminateswithConclusions.

1 DiscriminationinWTOlaw

Non-discriminationisoneofthefundamentalmarketaccessprinciplesoftheGATT/WTOsystem.TheGATT1994non-discriminationobligationsincludenationaltreatment(NT)andmostfavourednation(MFN)treatment.TheNTobligationisfoundinGATTArticleIIIwhereparagraphs2and4ofthisprovisionhavetobetestedbythejudiciaryinordertoestablishdiscriminationoftheproductsbasedonorigin.

With respect to goods, national treatment means that, once imported products have clearedcustomsand theapplicable tariffordutyhasbeencollected, theymustbe treated thesameasdomesticproducts.Otherwise,discriminatorytreatmentcoulderodethetariffconcessions,whichMembershavenegotiated intheWTO.Thus,theobjectiveofnationaltreatmentprinciple is“toprotectexpectationsof thecontractingpartiesas to thecompetitive relationshipbetween theirproductsandthoseoftheothercontractingparties[,]…toprotectcurrenttrade[and]tocreatethepredictabilityneededtoplanfuturetrade”.6

GATT Article III paragraph 2 is intended to tackle discrimination arising out of fiscalmeasures,whereasparagraph4appliestomeasuresofnon-fiscalnature.UnderGATTArticleIII:2:

Theproductsoftheterritoryofanycontractingpartyimportedintotheterritoryofanyothercontractingpartyshallnotbesubject,directlyorindirectly,tointernaltaxesorotherinternalchargesofanykindinexcessofthoseapplied,directlyorindirectly,tolikedomesticproducts.Moreover,nocontractingpartyshallotherwiseapplyinternaltaxesorotherinternalchargesto imported or domestic products in a manner contrary to the principles set forthinparagraph1.

TheWTOAppellateBodyhasmadeadistinctiononhowtoread‘likeness’underthefirstandsecondsentencesofparagraph2above.Inmakingadeterminationunderthefirstsentence,thetraditional

6UnitedStates-TaxesonPetroleumandCertainImportedSubstances,17June1987,GATTB.I.S.D.(34thSupp.)at136,para.5.2.2.(1988)

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GATT-basedtest,whichmightbecalled the“physicalcharacteristics” test,hasbeenused in thesecond sentence (as complemented by an interpretative note ((Ad Article III)), the term ‘likeproducts’ refers to a “directly competitive or substitutable product”. The second sentencecomprises,normally,abroaderrangeofproductsthanthenarrower‘like’producttestofArticleIII:2,firstsentence.Howbroadthismaybeinanygivencaserestsonthedeterminationofthepanelbasedonalltherelevantfactsofthecase.Theansweron‘likeness’mayalsobedifferentfromthemarketofoneWTOMembertothemarketofanotherWTOMember.

Withmorerelevancetothediscussioninthispaper,ArticleIII:4oftheGATT1994providesthat:

Theproductsoftheterritoryofanycontractingpartyimportedintotheterritoryofanyothercontractingpartyshallbeaccordedtreatmentnolessfavourablethanthataccordedto‘like’productsofnationalorigininrespectofalllaws,regulationsandrequirementsaffectingtheirinternalsale,offeringforsale,purchase,transportation,distributionoruse.

Inthecaseofthisprovision–meanttodealwithdiscriminationthroughinternalregulation–theAppellateBodyprovidedyetanotherapproachtointerpreting‘likeness’,notablyfoundintheEC-Asbestos case. It stated that a determination of likeness under Article III:4 is concerned withdeterminingthenatureandextentofacompetitiverelationshipbetweenandamongproducts.

Completingthecircle,theWTOMFNobligationiscontainedinArticleI:1oftheGATT1994,whichstatesthat:

Withrespecttocustomsdutiesandchargesofanykindimposedonor inconnectionwithimportationorexportationorimposedontheinternationaltransferofpaymentsforimportsor exports, andwith respect to themethodof levying suchdutiesand charges, andwithrespecttoallrulesandformalitiesinconnectionwithimportationandexportation,andwithrespecttoallmattersreferredtoinparagraphs2and4ofArticleIII,anyadvantage,favour,privilege or immunity granted by any contracting party to any product originating in ordestinedforanyothercountryshallbeaccordedimmediatelyandunconditionallytothe‘like’productoriginatinginordestinedfortheterritoriesofallothercontractingparties.

BothWTOnon-discriminationprovisionsapplyonlyto‘likeproducts’.Ameasurewillnotbefounddiscriminatory under WTO law if products are not ‘like’. This makes ‘likeness’ central to theadministrationofGATTnon-discriminationprovisions.

Traditionally, ‘likeness’ in theWTOhasbeendeterminedaccording toa four-tier test,although,occasionally,additionalelementshavebeendiscussed.AstheAppellateBodyputitinEC–Asbestos,theunderlyingconsideration,essentialforthisanalysisandwhichneedstobeappliedwithrespectto each of these criteria, is fundamentally a determination of the nature and the extent of acompetitiverelationshipbetweenandamongtheproductscompared.7

Giventhatageneralbanone-cigarettesmaystemfrom“laws,regulationsandrequirements…”,thelikeness analysis in this paper is rooted in GATT Article III:4. As the WTO Appellate Body hasexplained,ameasureisinconsistentwithArticleIII:4oftheGATT1994whenitsatisfiesthefollowingthree elements: (i) themeasure is a law, regulation or requirement affecting a product’s sale,

7 WTO Appellate Body Report, European Communities – Measures Affecting Asbestos and Products Containing Asbestos,WT/DS135/AB/Radopted12March2011(EC–Asbestos)para.99

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offering for sale, purchase, transportation, distribution or use; (ii) the imported and domesticproductsare“likeproducts”;(iii)theimportedproductsareaccorded“lessfavourabletreatment”.

Intheeventthatalldiscriminationelementsabovearefulfilled,ageneralbanone-cigaretteswillbeconsideredasdiscriminatoryunderWTOlaw.Forthat,allthreeelementsabovewillhavetobemetandsupportedbyGATTArticleXXanalysisontheapplicableexception.

Thefocusofthispaperisonthesecondelement:theanalysisofwhethercigarettesande-cigarettesare‘likeproducts’.Thatbeingsaid,thispaperdoesnotassessthelegalityofageneralbanundertheWTO,but,rather,checksifoneoftheessentialdiscriminationelements(thatis;‘likeness’)willbe met. Also, the authors of this paper do not examine the relative importance of ‘likeness’comparedtootherdiscriminationelementsapplicableundertherelevantprovisions.Theauthorsinadditiondonotlookatwhethere-cigarettesareaccorded‘lessfavourabletreatment’comparedtocigarettesasrequiredinGATTArticleIII:4(whichtheseauthorswillresearchfurther),8nordothey suggest that ‘likeness’ should trump other relevant elements necessary to determinediscrimination.9

2 LikenessundertheGATT1994

A four-tier traditional criteria used in theWTO jurisprudence to evaluate ‘likeness’ are: (i) thephysical properties of the products; (ii) their end-uses; (iii) consumer preferences and (iv) theinternational classification of the products for customs purposes.10These criteria are analysedbelow(Sections2.1-2.4)andcomplementedbyashortoverviewofadditionalcriteriawhichmayinformthepanelregardingthe‘likeness’(Section2.5-2.6).Infact,theAppellateBodystressedthatthe four ‘likeness’ criteria are ‘neither a treaty-mandated nor a closed list of criteria that willdeterminethelegalcharacterisationofproducts.11Thereisnoestablishedhierarchybetweenthe‘likeness’criteria.12Therefore,neithercriteriaof‘likeness’isdeterminativeassuch,andshouldbeassessedinthecontextofallothercriteria.

Justasmanyoftheconsiderationshavetobemadeona‘case-by-casebasis’,the‘likeness’criteriashouldbeevaluatedaccordingtotheweightthateachoftheelementsof‘likeness’bringstotheanalysis.TheWTOanalysisof‘likeness’goesbacktotheearlyyearsoftheWTO’sexistence.Sincethattime,manynewproductshavebeenintroducedtothemarket,anditseemsonlylogicalthatsome‘likeness’criteria,suchastheend-useandconsumer’stasteandpreferences,maybegivenmore consideration than the tariff classification criterion that was primarily used in thedeterminationoftariffdiscrimination.

8Foraverygooddiscussionontherelativeimportanceofthe'likeness'testinestablishingdiscriminationatWTOcomparedtothe'less favourable treatment' test, see JoostPauwelyn,TheUnbearableLightnessofLikeness’ inMarionPanizzon,NicolePohlandPierreSauvé(eds),GATSandtheRegulationofInternationalTradeinServices(CambridgeUniversityPress2008)9Thefactthatthelikenessanalysesisastand-aloneelementofdiscriminationandindependentresearchtopicisconfirmedbytheWTO jurisprudence and academic work, including entire monographs. See for example Nicolas Diebold, Non-Discrimination inInternational Trade in Services‘Likeness'inWTO/GATS(CambridgeUniversityPress2010);Won-MogChoi, 'LikeProducts'inInternationalTradeLaw:TowardsaConsistentGATT/WTOJurisprudence(OxfordUniversityPress2003)10WTOAppellateBodyReport,EC–Asbestos,supra,note6,paras.101-10211WTOAppellateBodyReport,EC–Asbestos,supra,note6,para.10112AndrewMitchell,TaniaVoon,‘RegulatingTobaccoFlavors:ImplicationsofWTOLaw’,BostonUniversityInternationalLawJournal,Vol.29:383,398referringtotheWTOAppellateBodyReport,EC–Asbestos,supra,note6,para.102

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ThisisconsistentwiththeAppellateBody’sapproachinJapan–AlcoholicBeveragesII,accordingtowhich “products that present certain physical differences may still be considered ‘like’ if suchphysical differenceshave a limited impact on the competitive relationshipbetweenand amongproducts”.Aslongasthedifferencesamongtheproducts,includingadifferenceintherawmaterial,leave fundamentally unchanged the competitive relationship among the final products, theexistenceofthesedifferencesdoesnotpreventafindingof‘likeness’.13

2.1 Physicalproperties

Thereareseveralcoexistingtypesofe-cigarettedevicesonthemarket:first-generationorso-calledciga-likes, second-generation tank systems and even larger third-generation or personalvapourisers.Thesedevicescanalsobeclassifiedintoclosedandopensystemsdependingmainlyonthedegreeofcontrol thatusershaveoverthee-liquidused inthee-cigarettes, thevoltageandresistanceappliedtoheatingthee-liquid,andventilationfeatures.14

Oneofthemainfeaturesofe-cigarettesisthattheirusedoesnotentailcombustionoftobacco,asis the case for cigarettes. The new non-combustible products comprise two general classes ofproductsasexplainedbelow.15

2.1.1 ElectronicNicotineDeliverySystems

The first class of e-cigarettes delivers nicotine and is referred to as ElectronicNicotineDeliverySystems (ENDS). These products generate nicotine-containing aerosols by use of an electronicdevice that heats a liquid,which is then inhaled by users (a ritual known as vaping). Themainconstituentsofsuchasolution,inadditiontonicotine,arepropyleneglycolorglycerol,andvariousflavouring agents.16The choice of e-liquid, the user’s puffing style and the device’s capacity toaerosolisethee-liquidatincreasingtemperaturesbymodulatingitswattageandresistancewillalldeterminewhethertheuseofe-cigarettesproducesasatisfactoryexperiencetotheuserintermsofthespeedydeliveryofsufficientnicotinetomimicthesensoryfeelofsmoking.

Thesecondclassinthiscategoryisheatedproducts–acategorythatalsodeliversnicotine.Theseproductsheataspecialtobaccomaterialbyusinganelectronicdeviceinatemperaturerangebelowcombustiontogenerateanicotine-containingaerosolwithoutcombustionoftobaccomaterial.Thiscategoryshouldnotbeconfusedwithyetanotherheatedtobaccocategory–acigarettethatheatstobaccowithouttheuseofanelectronicdevice(acategorynotexaminedinthispaper).

2.1.2 ElectronicNon-NicotineDeliverySystems

Therearee-cigarettesonthemarketthatdonotdelivernicotine.ThesearereferredtoasElectronicNon-NicotineDeliverySystems(ENNDS).17Thismarketiscomposedofahighnumberofproducts

13WTOAppellateBodyReport,Philippines–TaxesonDistilledSpirits,WT/DS/403/AB/R,adoptedon21December2011(Philippines–DistilledSpirits),para.12514ElectronicNicotine-DeliverySystems(ENDS)andElectronicNon-NicotineDeliverySystems,ReportbyWHO,Conferenceof theParties to the WHO Framework Convention on Tobacco Control, FCTC/COP/7/11 at 1, available online at:<http://www.who.int/fctc/cop/cop7/FCTC_COP_7_11_EN.pdf>accessedon24October201615T. Tabuchi, K.Kiyohara, T.Hoshino,K.Bekki, Y. InabaandN.Kunugita, ‘Awarenessanduseofe-cigarettesandheat-not-burntobaccoproductsinJapan’,NationalCenterforBiotechnology(2016),abstract<http://www.ncbi.nlm.nih.gov/pubmed/26566956>accessedon10August201616 World Health Organization, E-cigarettes or electronic nicotine delivery systems, the revised statement, available online at:<http://www.who.int/tobacco/communications/statements/eletronic_cigarettes/en/>17FCTC/COP/7/11,supra,note8,at1

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presenting different features applying to the device and e-liquid used. Although generallyconsideredpartofthee-cigarettesclass,theseproductsconstituteadiversegroupwithpotentiallysignificantdifferencesinthewaytheyproducetoxicantsanddelivernicotine.

TheUKCenterforTobaccoControlResearchreferstotheseproductsasbeinga‘parentproduct’toe-cigarettes.Theorganisationcomparestherelationshipbetweenthemasbeinglikefullstrengthcoffee and decaffeinate coffee – the latter of which looks, smells and tastes like its originalcounterpart –orCoca-Cola Zero,which aspires tobe indistinguishable fromconventional Coca-Cola. 18 Similarly, there is evidence of these e-cigarettes being designed to look and feel likeconventional cigarettes. The simulated filters, vapour emissions, glowing tips, and tobaccoflavourings,capturetheallureoftheoriginalcigarettes.19

2.1.3 Theharmperspective

E-cigarettesmimicmanyfeaturesofallconventionalcigarettes,butdonotcontainallcigarette-related chemical substances. 20 They offer a similar taste and sensory experience, and somecategoriesphysicallyresembleconventionalcigarettes.Somestudieshaveclaimedthate-cigarettesimitate in shape theveryexperienceof smokingbyprovidingahealthieralternativeofnicotinedelivery,21whileothershavecontestedthesefindings.22

Itisthusclaimedthattheuseofe-cigarettesislessharmfulthanconventionaltobaccosmoking.23Differentscientificstudiesconfirmthatnearlyallthehealthrisksofcigarettescomefromtar,carbondioxideandothersubstancesfoundinthesmoke,notfromnicotine.Productsthatdelivernicotinewithoutcombustionareconsideredtocarrylowerhealthrisksthanconventionalsmoking.24

Inlightoftheabove,somemayarguethate-cigarettesandcigarettesdonottosharemanyphysicalcharacteristicswhichmaybetrueforsomeofthee-cigarettecategories.Whiletheauthorsfullyacknowledgethat,asstatedbytheAppellateBodyinEC-Asbestos,“evidencerelatingtothehealthrisksassociatedwithaproductmaybepertinentinanexaminationof‘likeness’underArticleIII:4”,25thisfactisnotfullydeterminativeofthe‘likeness’analysis.First,thereareotherelementsinthe

18 Cancer Research UK, ‘The Marketing of E-cigarettes in the UK’, 2013, at 9, available online at:<https://www.cancerresearchuk.org/sites/default/files/cruk_marketing_of_electronic_cigs_nov_2013.pdf>19CancerResearchUK,‘TheMarketingofE-cigarettesintheUK’,2013,supra,note15,at920AndrewD.Mitchell,TaniaVoon,TheGlobalTobaccoEpidemicandtheLaw,201421AccordingtoASHBriefing,non-tobacco,non-smokednicotineproductsareconsideredlessharmfulthancigarettes.ASH(Actionon Smoking and Health) Briefing, E-cigarettes (also known as vapourisers), February 2016, available online at:<http://www.ash.org.uk/files/documents/ASH_715.pdf>,at222See for e.g. Prof. StantonGlantzwho claims that e-cigarettes are at least 1/3 as bad as cigarettes or higher. StantonGlantz,Accumulatingevidencesuggestse-cigarettesare1/3to1/2asbadascigarettes(maybehigher),CenterforTobaccoControl,ResearchandEducation,UniversityofCalifornia,SanFrancisco,availableonlineat:<http://tobacco.ucsf.edu/accumulating-evidence-suggests-e-cigs-13-12-bad-cigs-maybe-higher>23KonstantinosE.Farsalinos,RiccardoPolosa,‘Safetyevaluationandriskassessmentofe-cigarettesastobaccocigarettesubstitutes:asystematicreview’,TherapeuticAdvancesinDrugSafety,TheNationalCenterforBiotechnologyInformation,April2014,5(2)67–86, <http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4110871/> accessed on 5 September 2016. According to another study, e-cigarettesappeartobeeffectivewhenusedbysmokersasanaidtoquittingsmokingandthehazardtohealtharisingfromlong-termvapourinhalationfromthee-cigarettesavailabletodayisunlikelytoexceed5%oftheharmfromsmokingtobacco,Reportofthe Tobacco Advisory Group of the Royal College of Physicians “Nicotine without Smoke. Tobacco Harm Reduction”, 2016,<https://www.rcplondon.ac.uk/projects/outputs/nicotine-without-smoke-tobacco-harm-reduction-0>189, accessedon18August201624Daniela Saitta, Giancarlo Antonio Ferro and Ricardo Polosa, ‘Achieving appropriate regulations for e-cigarettes’, TherapeuticAdvances in Chronic Disease, The National Center for Biotechnology Information, March 2014, 5(2) 50-61,<http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3926346/>accessedon24August201625WTOAppellateBodyReport,EC–Asbestos,supra,note6,para.113,wheretheABdisagreeswiththePanelthatdisregardedtheroleofharminestablishinglikenessinphysicalcharacteristics

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‘likeness’analysiswhichpointtothefactthattheseproductsare‘like’.Second,asoutlinedbelow,e-cigarettesandcigarettescanbeconsideredtobeinadirectcompetitiverelationshipwhichwillmakeupfortheweaknessof‘likeness’intheirphysicalcharacteristics.Furthermore,theauthorsnotetheAppellateBody’sapproach inJapan–AlcoholicBeverages,whichstatedthat“productsthatpresentcertainphysicaldifferencesmaystillbeconsidered‘like’ifsuchphysicaldifferenceshave a limited impact on the competitive relationship between and among products”. 26 Thissuggests that the concept of ‘likeness’ has been designed to compare the degree of similaritybetweentheproductsatissue,andnottoestablish‘identity’betweenthem.

2.2 End-uses

Theend-usescriterionisdefinedbytheWTOastheextenttowhichtheproductsarecapableofservingthesameorsimilarend-uses.27ThisdefinitionwasclarifiedbytheAppellateBodyinEC–Asbestos,whichstatedthattheend-usescriterion“referstotheextenttowhichtheproductsarecapabletoperformthesameorsimilarfunctions.”28

Both cigarettes andnicotine e-cigarettes are capableof performing the sameend-use,which isdeliveringnicotineandproducingtheritualexperienceofsmoking,whilethelattercanbeobservedalsowithregardstothenon-nicotinecategory(ENNDS).AccordingtoTheTobaccoAtlasdata, inGreat Britain approximately 2.1 million adults use this category of e-cigarettes. Of these,approximately 700 000 are former smokers,while 1.3million are both users of tobacco and e-cigarettes.29

Themajorityofe-cigaretteconsumersareformersmokers,andanevenagreaterpartusebothtypesofproducts.Thissignalsthate-cigarettes (at least inthenicotinecategory)arecapableofservingasimilar,ifnotthesame,end-useandperformasimilarfunction,whichisdeliveringnicotineand creating the experience of smoking. The end-use criterion is highly connected with theconsumers’tastesandhabitscriteriondescribedbelow.

2.3 Consumers’tastesandhabits

Theconsumers’tastesandhabitscriterionreferstotheextenttowhichconsumersperceiveandtreatproductsasalternativemeansofperformingparticularfunctionsinordertosatisfyaparticularwant.Inotherwords,itrepresentstheoptionofaconsumer’schoiceofoneproductoveranothertoperformthesameend-use.

Somestudiesconsidere-cigarettesatoolforgraduallyquittingsmoking.30Inaddition,e-cigarettesareseenasplayingaroleforpeoplewhodonotwanttoquit,offeringapurportedlysafersubstitute26WTOAppellateBodyReport,Japan–TaxesonAlcoholicBeverages,WT/DS8/AB/R,adopted4October19996,(Japan–AlcoholicBeveragesII)para.12027PeterVandenBossche,WernerZdouc,TheLawandPolicyoftheWorldTradeOrganization(Thirdedition,CambridgeUniversityPress,2014),38928WTOAppellateBodyReport,EC–Asbestos,supra,note6,para.11729TheTobaccoAtlas,‘E-cigarettesshouldberegulatedinsuchawayastoreducesmokingofcombustedtobaccotothegreatestextentpossible,availableonlineat:<http://www.tobaccoatlas.org/topic/e-cigarettes/>accessedon16October,201630Athirdofformersmokerswhohavetriede-cigarettesbutnolongerusethemsaidtheyhadusedthemaspartofaquitattempt.ActiononSmokingandHealth(ASH)FactSheet,“Useofe-cigarettes(vapourisers)amongadultsinGreatBritain”,May2016,<http://www.ash.org.uk/files/documents/ASH_891.pdf.>accessedon8September2016.Moreover,areportone-cigarettescommissionedbyPublicHealthEnglandfindsthatelectroniccigaretteusemightbeeffectiveinrelapsepreventionandsmokingcessation.JohnBritton,IlzeBogdanovica,“AReportonE-cigarettes”,PublicHealthEngland2014,<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/311887/Ecigarettes_report.pdf>18accessedon25August2016

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tocigarettestheywouldotherwisesmoke.31ArecentWHOsurveyonENDS,ofwhiche-cigarettesarethemostcommonprototype,showsthatusersofsuchproductsarealmostalwayssmokerswhointendquittingbyconsumingthenicotinedeliveryproductsandexpecttoreducetherisktotheirhealth.Infact,baronecase,thesurveyshowsthattherearefewexclusiveusersofe-cigarettes–thosewhohaveneversmokedconventionalcigarettes(around1%ofthepopulation).32

Similarly,atleastaccordingtosomeconsumersurveys,thereisasignificantswitchingbyusersofconventionalcigarettestoe-cigarettes.Forexample,almost40%ofadultsmokersinItalyhadtriedan e-cigarette by 2013, and 15%of thosepeople hadpurchased suchproducts on at least oneoccasion.DatapublishedintheBritishMedicineJournalin2014showsthattheuseofe-cigaretteswasespeciallyhighamongsmokers–with32%ofsmokers in2012and50%ofsmokers in2013reportinghavingtriede-cigarettes.33AccordingtoASH2016data,therearecurrently2.8millionadults in Great Britain using electronic cigarettes (6% of the adult population). Of these,approximately1.3million (47%)areex-smokerswhile1.4million (51%)continuetouse tobaccoalongsidetheirelectroniccigaretteuse.34 TestsconductedbythetobaccoindustryinJapanandItalyofheatedtobaccoproducts(anicotinedeliverycategory)showed,respectively,that30%and12%ofadultsmokerswhotriedtheproductsadoptedthem.35

Notonlyaree-cigarettesusedasapossiblealternativetocigarettes,butsomeconsumersareusingboth categories in tandem. Some e-cigarette consumers are focusing on long-term use, as apermanentalternativetotobacco;insituationswheresmokingconventionaltobaccoisnotallowed,or simply as a lifestyle choice. 36 One e-cigarette brand is promoting dual use by selling aconventional cigarette and e-cigarette in one pack. The brand’s ‘smart plastic case’ has been‘designedtofitsnugglyinthepocket,protectthee-cigarette,andevenhouseoneregulartobaccocigaretteforthoseadultsmokerswhochosetovarybetweenthetwo’.37Itisestimatedthatby2025e-cigarettescoulddisplace30%ofcigarettesalesinwealthymarkets.38

Thus,e-cigarettesmaybeperceivedbytheirconsumersasbeingahealthieralternativetosatisfytheirsmokinghabits,andsomeconsumersevenusethetwoproductssimultaneously.Thiswouldseemtoshowahighdegreeofsubstitutabilitybetweentheproductsinordertosatisfythesamehabit,asrequiredundertheconsumers’tastesandhabitscriterionof‘likeness’determination.

2.4 Tariffclassification

From the physical characteristics analysis provided above in Section 2.1, it is obvious that e-cigarettes and cigarettes differ in composition and methodology used in their manufacturing.31MartinMcKee,‘Evidenceaboute-cigarettes:afoundationbuiltonrockorsand’,TheBritishMedicineJournal,BMJ2015;351:h4863,<http://www.bmj.com/content/351/bmj.h4863>accessedon27August201632WHO,FrameworkConventiononTobaccoControl,ReportonElectronicNicotineDeliverySystems,FCTC/COP/6/10dated21July2014,<http://apps.who.int/gb/fctc/PDF/cop6/FCTC_COP6_10-en.pdf>7accessedon7August201633JessicaPepper,SherryL.Emery,KurtRibisl,BrianSouthwell,NoelT.Brewer,‘Effectsofadvertisementsonsmokers’interestintryinge-cigarettes:therolesofproductcomparisonandvisualcues’,TobaccoControl,TheBritishMedicineJournalPublishing,Volume23,2014,<http://tobaccocontrol.bmj.com/content/23/suppl_3/iii31.full#xref-ref-16-1>accessedon23July201634ASHReport,Useofelectroniccigarettes(vapourisers)amongadultsinGreatBritainathttp://www.ash.org.uk/files/documents/ASH_891.pdfaccessedonDecember20,201635PhillipMorrisInternational,InvestorsDay,26June2014,PresentationbyBertrandBonvin,ManuelPeitschandFredericdeWilde,slide92,<http://investors.pmi.com/phoenix.zhtml?c=146476&p=irol-presentations>accessedon9July2016.36CancerResearchUK,‘TheMarketingofE-cigarettesintheUK’,2013,supra,note17,at8<https://www.cancerresearchuk.org/sites/default/files/cruk_marketing_of_electronic_cigs_nov_2013.pdf>at8,accessedon6September201637Ibid.,at838TheEconomist,‘SmokeSignals’,23April2016,<http://www.economist.com/news/business/21697275-philip-morris-health-company-smoke-signals>accessedon10August2016

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Unsurprisingly,e-cigarettesandcigarettesareclassifiedunderdifferenttariffheadingsaccordingtotheHarmonizedCommodityDescriptionandCodingSystem(HarmonizedSystem).

Cigarettes are classified under Harmonized System 2402, 2403.11, and 2403.19 – a Chapterdedicatedtotobaccoproducts.Thereisnounifiedapproachtoclassifyinge-cigarettesundertheHarmonizedSystem.TheymaybeclassifiedunderChapter30–Pharmaceuticalproducts,heading30.04–“Other,includingsaltsandconcentratesobtainedbyevaporatingnaturalmineralwaters”,underChapter85–“ElectricalMachinery,EquipmentandParts,TelecommunicationsEquipment,SoundRecorders,TelevisionRecorders”,withsubsequentclassificationundertheheading8543–“Electrical machinery and apparatus, having individual functions”.39 According to Global TradeSolutions’tariffcommitmentsdatabase,e-cigarettesareclassifiedunderthefollowingsubheadingsbysomeWTOMembers:China–8543.70.9990(Otherunlistedelectricalequipmentanddevices,having independent functions), India – 8543.70.99 (Electrical machines and apparatus, havingindividual functions, not specified or included elsewhere in this chapter), Japan – 8543.70.000(Electrical machines and apparatus, having individual functions), the European Union –8543.70.9099 (Other machines and apparatus), Switzerland – 8543.70.00 (Other machines andapparatus).40

Sparepartsfore-cigarettes,whicharedesignedforeverydayuseandmaintenanceofe-cigarettes,arelikelytobeclassifiedunderaHarmonizedSystemcodedifferenttothatoftheproductitself.Thus,cartridgesfore-cigarettesareclassifiedunderthesubheading3824.90“Other”oftheheading38.24“Preparedbindersforfoundrymouldsorcores;chemicalproductsandpreparationsofthechemical or allied industries (including those consisting of mixtures of natural products), notelsewherespecifiedorincluded”.41

At least one category of nicotine delivery systems, namely heated tobacco products, can beclassified in Tobacco Chapter 24 of the Harmonized System heading 2403.99 as “othermanufacturedtobacco,notforsmoking”.Giventhefactthatthiscategorycontainstobaccoleaf),itstandsahigherchanceofbeingregarded‘like’cigarettescomparedtotheremainingENDS.

Theanalysis above is nothowever to suggest thatothernon-combustiblenicotinedeliveringe-cigaretteswill not be found ‘like’ cigarettes. Even if one argued that no e-cigarette falls underChapter 24, there are good arguments in the WTO jurisprudence suggesting that HarmonizedSystemclassificationcriterionisgoingtobearonlyalimitedimpactonthe‘likeness’analysis.Thisisbecausetheclassificationishighlyimportantincaseswherethedisputearisesfromthewayinwhichcustomsdutiesareapplied.ProvidedhoweverthatWTOMembershavesomediscretioninschedulingtheirtariffcommitments,ahighrelianceontariffclassificationcriterionmakeslesssensewithrespecttocasesinvolvinginternalregulatorymeasures,whererestrictionsmaybeappliedtoaddresshealthrisksarisingfromconsumptionoftheseproducts.

39SeeGlobalTradeSolutions,<http://www.dutycalculator.com/hs-lookup/1072756/hs-tariff-code-for-electronic-cigarette/>accessedon3August201640Ibid.41WorldCustomsOrganizationHarmonizedSystemCommittee,AmendmentstotheCompendiumoftheClassificationOpinions,<http://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/hs_classification-decisions/~/media/DBBA67A8D4A44E318508231A9F688BEA.ashx>VI,accessedon28August2016

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2.5 TheCross-PriceElasticityofDemand

Thecross-priceelasticityofdemand(CPED)measurestherateofresponseofquantitydemandedofoneproduct,duetoapricechangeofanotherproduct.42Inotherwords,itmeasureshowthedemandononeproductchangesifthepriceforitssubstituteproductincreasesordecreases.Ineconomictheory,iftwoproductsaresubstitutable,oneshouldexpecttoseeconsumerspurchasemore of one product when the price of its substitute increases. The CPED is calculated byproportionating the percentage of change in quantity of demand for one product with thepercentage of change in price of another product. If the coefficient of CPED obtained by suchcalculationismorethanzero,thenthetwoproductsareconsideredsubstitutes.Ifitequalszero,thenthetwoproductsareindependent,but,iftheCPEDislessthanzerothenthetwoproductsareconsideredcomplements.43

AlthoughthetesthasbeenusedintheWTOtodeterminethelikenessbetweenproducts,themereeconomicanalysisoftheCPEDfortheproductsatissuewillnotsufficetodeterminewhethertheseproductsare‘like’.Theoutcomeofthisexercisewouldhavetobereadtogetherwiththeanalysisof other tests referred in this Section, the ‘likeness’ remaining a matter of qualitative andquantitativejudgment.Asperotherlikenesscriteria,thisissimplyatooltoassistwithsortingandexaminingtherelevantevidence.44

In a 2014 survey on estimating cross-price elasticity of e-cigarettes using a simulated demandprocedure,210NewZealandsmokersparticipatedinacigarettepurchasesurveytoindicatetheirdemandfortobaccoatarangeofprices.Participantsindicatedhowmanye-cigarettesandregularcigarettestheywouldpurchaseatthecurrentmarketpriceforregularcigarettes,halfthepriceofconventionalcigarettes,andatdoubletheprice,assumingthatthepriceofe-cigarettesremainedconstant.45TheCPEDinthiscasewasestimatedtobe0.16,indicatingthate-cigarettesareperceivedassubstitutestocigarettes.AnotherstudyconductedintheEuropeanUnionshowssimilarresults.46TheWHO confirms substitutability by acknowledging that (although limited) available empiricalresearchshowsthat:

22. b. ENDS/ENNDS and cigarettes are substitutes, with higher cigarette prices being associated with increased ENDS/ENNDS sales [fn ommitted];….47

IntheWTOjurisprudence,theconceptofCPEDwasmainlyaddressedinJapan–AlcoholicBeveragesII.48TheAppellateBodynoted that cross-priceelasticity,whilenotbeingadecisive criterion fordeterminingthattwoproductsaredirectlycompetitiveorsubstitutable,maybeusedasoneofthe

42Economics.about.com,<http://economics.about.com/cs/micfrohelp/a/cross_price_d.htm>accessedon5September201643Ibid.44WTOAppellateBodyReport,EC-Asbestos,supra,note6,para10245RondolphGrace,BronwynKivellandMurrayLaugessen,'Estimatingcross-priceelasticityofe-cigarettesusingasimulateddemandprocedure’,NicotineTobaccoResearch,May2015,17(5)592-598,abstract<http://www.ncbi.nlm.nih.gov/pubmed/25548256>accessedon11September2016.MichalStoklosa,JeffreyDrope,FrankJ.Chaloupka,'PricesandE-CigaretteDemand:EvidenceFromtheEuropeanUnion',NicotineTobaccoResearch(April16,2016)accessedon10September201646MichalStoklosa,JeffreyDrope,FrankJ.Chaloupka,'PricesandE-CigaretteDemand:EvidenceFromtheEuropeanUnion',NicotineTobaccoResearch(April16,2016)accessedon10September201647SeetheFCTCReportpreparedfortheCOP7meetingtitled'ElectronicNicotineDeliverySystemsandElectronicNon-NicotineDeliverySystems(ENDS/ENNDS)',DocFCTC/COP/7/11August2016,availableathttp://www.who.int/fctc/cop/cop7/FCTC_COP_7_11_EN.pdf,visitedonNovember20,201648TheCross-PriceElasticityisalsomentionedinWTOAppellateBodyReport,Korea–TaxesonAlcoholicBeverages,WT/DS75/AB/R,adoptedon11January1999,(Korea–AlcoholicBeverages),paras.109,121,134and152

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criteriatobeconsidered.49TheAppellateBodyagreedwiththepanel’sfindingthattheanalysisof‘likeness’ includeslookingnotonlyatsuchmattersasphysicalcharacteristics,commonend-usesand tariff classifications, but also at the “market place”. 50 The Appellate Body considered itappropriatetolookatcompetitionintherelevantmarketsasoneamonganumberofmeansofidentifyingthebroadercategoryofproductsthatmightbedescribedas“directlycompetitiveorsubstitutable” and also to examine elasticity of substitution as one means of examining thoserelevantmarkets.51Thisisre-enforcedbyEC–Asbestos,wheretheAppellateBodynotedthatthelistofcriteriafordetermining‘likeness’isnotexhaustive,andaWTOPanelexaminingachallengedmeasurewouldneedtoexamineallrelevantevidenceinassessingwhethertherelevantproductswere‘like’.52

Theaboveindicatesthatnotonlyshouldthefourtraditional‘likeness’criteriabeexaminedinordertodeterminethe‘likeproducts’,butthatallrelevantcriteriabetakenintoaccount.Thus,theCPEDshowingthatthetwoproductsaresubstitutes,whilenotbeingadecisivecriterion,canbetakenintoaccountasanadditionalcriterionwhichspeaksinfavouroflikenessbetweenthetwoproducts.

2.6 Theregulatoryregime

Inadditiontotheaforementionedconventionalargumentson ‘likeness’, thereareother factorswhichmaysuggestthate-cigarettesandcigarettesmayberegardedas‘like’.Intheend,thelikenesscriteriaaretheretohelpthepanelmakeanobjectiveassessmentofthematterbeforeit.Logicallythislistcannotbeconfinedtothefourcriteria.Apartytothecasemayargueforexamplethatthe‘likeness’shouldalsobeassessedbasedonhowtheregulatorseesthemeasure.Inthecaseofe-cigarettessuchconsiderationwouldneedtotakeintoaccountwhethere-cigarettesandcigarettesareplacedunderthesameregulatoryregime,thatis,asituationwherebotharecoveredbythesamesetoflawsandadministrativeinstitution.53

ItisinstructivetonotetheUSapproachontheissuewheretheUSFoodandDrugAdministration(FDA)announcedinMay2016itsdecisiontoregulatee-cigarettesandothertobaccoproducts(likepremiumcigarsandhookahs)inthesamewayitregulatesconventionalcigarettesandsmokelesstobacco. The relevant rule, referred to as thedeeming regulations,54broadens thedefinitionoftobaccoproductstoincludee-cigarettes,hookahs,pipetobacco,premiumcigars,littlecigarsandotherproducts.

Another example of approaching the two categories through the same legislation is the newlyintroducedchangestotherevisedEUTobaccoProductsDirective(whichcoversbothcigarettesande-cigarettes). Among other rules regarding tobacco products, this instrument focuses onharmonising the quality and safety of the products by introducing, among other things,comprehensivepackagingand labellingrequirements,maximumconcentrationofnicotineanda

49WTOAppellateBodyReport,Japan–AlcoholicBeveragesII,supra,note25,at650Ibid.,at2551Ibid.,at2552AndrewMitchell,TaniaVoon,supra,note11,398referringtotheWTOAppellateBodyReport,EC–Asbestos,supra,note6,para.10253TobenotedthattheFCTCtreatsthetwocategoriesasseparatetypesofgoods54SeeFDAannouncementathttp://www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm394909.htmaccessedonDecember2016

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ban on advertising e-cigarettes.55 Unlike the US deeming regulation however, the EU TPD stillapproachesthetwocategoriesinadifferent–usuallylighter–manner.

AlthoughthisgivesanideaofStatepracticeconcerningtheregulationofe-cigarettes,inlightoftheanalysesemergingfromthelatestWTOjurisprudencedescribedbelow,intheviewoftheseauthorsthiscriterionbearsonlylimitedweightonthe‘likeness’determinationoftwoproducts.Asshownbelow,thereason ispreciselytheconsistentrejectionbytheWTOadjudicatoroftheregulatorypurposeindetermining‘likeness’underboththeGATT(alsoknownasthe‘aims-and-effect’test)andTBTAgreement(knownasregulatorypurposeordistinction).56

3 Theroleofcompetitiverelationship

Thecompetitiverelationshipamongproducts isnota listedcriterionof‘likeness’determination;butitisthequintessenceofthisanalysis.TheimportanceofdeterminingwhethertwoproductsareinacompetitiverelationshipemergedfirstinEC–Asbestos,wheretheAppellateBodycameupwithitsfamousinterpretationthat“adeterminationof‘likeness’underArticleIII:4oftheGATT1994is,fundamentally,adeterminationaboutthenatureandextentofacompetitiverelationshipbetweenandamongproducts.”57TheAppellateBodyemphasisedthat,ineachcase,allpertinentevidence,whether related or not to one of the traditional criteria of ‘likeness’, must be examined andconsidered to determine whether the products are, and, more importantly, could be in acompetitiverelationshipinaparticularmarketplace.58Intheabsenceofacompetitiverelationshipbetweendomesticandimportedproducts,theinternalregulationatissuecannotbeappliedastoaffordprotectiontodomesticproductsandthuscannotdiscriminateagainstimportedanddomesticproducts.59Therefore,acompetitiverelationshipisafundamentalpillarof‘likeness’andthereforeanessentialelementofnon-discriminationobligationofWTOMembers.

Acompetitiverelationshipisespeciallyimportantinestablishing‘likeness’betweenproductsthatpossessphysicalcharacteristics,whicharenotidentical(aswithcigarettesande-cigarettes).TheAppellate Body acknowledged that health risk inevitably influences the definition of physicalpropertiesoftheproductsbystatingthat“[this]carcinogenicity,ortoxicity,constitutes,asweseeit,adefiningaspectof thephysicalpropertiesofchrysotileasbestos fibres”.60This tells that thedifferent risks to health posed by these products will have some bearing on the likenessdetermination (apparently under the physical characteristics). This statement however doesnothingmore than placing a higher burden on the complainants to establish that, despite thepronouncedphysicaldifferences,thereisacompetitiverelationshipbetweentheproductsanddoesnototherwisedetractfromthepre-eminenceofthecompetitiverelationshipapproach.55SeetheEUTobaccoDirectivecontainingrequirementsofintroducinglabellingandtechnicalstandardsfore-cigarettes,EuropeanCommission,<http://europa.eu/rapid/press-release_IP-16-1762_en.htm>accessedon25August2016,Directive2014/40/EUoftheEuropeanParliamentAndoftheCouncilof3April2014ontheapproximationofthelaws,regulationsandadministrativeprovisionsoftheMemberStatesconcerningthemanufacture,presentationandsaleoftobaccoandrelatedproductsandrepealingDirective2001/37/EC,<http://ec.europa.eu/health/tobacco/docs/dir_201440_en.pdf>accessedon30August201656OntheaimandeffecttestseeRobertE.Hudec,‘GATT/WTOConstraintsonNationalRegulation:Requiemforan"AimandEffects"Test’,TheInternationalLawyer",Vol.32,No.3,1998,at619-649.SeealsoAmeliaPorgesandJoelP.Trachtman,‘RobertHudecandDomesticRegulation:TheResurrectionofAimandEffects’,JournalofWorldTrade,Vol.37,No.4,p.783-799,2003,whoadvocateinfavourof‘aimandeffects’testandclaimthat‘aimandeffects’approachcanbeconsideredbothincomparingtheproductsthemselves,orincomparingthetreatmentoftheproducts’. 57WTOAppellateBodyReport,EC–Asbestos,supra,note6,para.9958WTOAppellateBodyReport,EC–Asbestos,supra,note6,para.10359PeterVandenBossche,WernerZdouc,supra,note26,38860WTOAppellateBodyReport,EC–Asbestos,supra,note6,para.114

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AccordingtotheAppellateBody’sfindingsinUS–CottonYarn,whatisdecisiveinunderstandingiftwo products are in competitive relationship iswhether the “two products… are commerciallyinterchangeable,oriftheyofferalternativewaysofsatisfyingthesameconsumerdemandinthemarketplace.”61Weexamineeachofthetwocriteriabelow.

3.1 Commercialinterchangeability

Thenatureofacompetitiverelationshipisattachedtothecommercial interchangeabilityoftwoproductsorthecapacityoftheproductsatissuetosatisfythesameconsumerwant.TheAppellateBodyinPhilippines–DistilledSpiritsclarifiedthat“therequisitedegreeofcompetitionismetwherethe imported and domestic products are characterised by a high, but imperfect, degree ofsubstitutability. This will be the case where the imported and domestic products are“interchangeable”oroffer“alternativewaysofsatisfyingaparticularneedortaste.”62

As discussed above, e-cigarettes and cigarettes share somephysical characteristics, such as thesimilarityindesign(forsomecategories)andtheabilitytodelivernicotineasinthecaseofENDS.Moreover, both categories are capable of performing the same end-use, which is to satisfyconsumers’want fornicotineandprovideanexperienceofsmoking.Theconsumers’ tastesandhabitsanalysesshowedthate-cigarettesareconsideredbyconsumersasanalternativetosatisfytheirsmokinghabits.

In addition, the Appellate Body in US – Cotton Yarn further clarified that ‘competitive’ is acharacteristicattachedtoaproductanddenotesitscapacitytocompetewithanotherproductbothin a current or future situation. Theword ‘competitive’must be distinguished from thewords‘competing’or ‘being in actual competition’,with these termshavingawider connotation than‘actuallycompeting’andincludesalsothenotionofapotentialtocompete.Itisnotnecessarythatthe twoproducts competeor that theyare inactual competition in themarketplaceatagivenmomentinorderforthoseproductstoberegardedascompetitive.”63E-cigarettesarearelativelynew invention compared to cigarettes, which have a long history. It is clear that consumerawarenessofaproductdoesnotappearinstantly,andthisiswhyacertainamountoftimewillbeneededforconsumerstobecomeacquaintedwiththeproductandregarditasasubstitute.

Theawarenessanduseofe-cigaretteshasincreasedexponentiallyinrecentyears.DataobtainedfromaHealthStylessurveyshowedthattheawarenessofe-cigarettesintheUSrosefrom40.9%in2010to57.9%in2011.Theuseofe-cigaretteshasalsoincreasedfrom3.3%to6.2%overthesameperiod.IntheUnitedKingdom,theuseofe-cigarettesbyregularsmokersincreasedfrom2.7%in2010to6.7%in2012.SimilarfindingswereobtainedfromtheInternationalTobaccoControlFour-CountrySurvey.64

The statistics above show that some regular smokers switch toe-cigarettes in a relatively shortperiodoftime:2.9%inoneyearintheUSand4%intwoyearsintheUK–andthistendencypersists.Asmentioned,somesurveysestimatethatby2025e-cigarettescoulddisplace30%ofcigarettesales

61WTOAppellateBodyReport,UnitedStates–TransitionalSafeguardMeasuresonCombedCottonYarnfromPakistan,WT/DS/192/AB/R,adoptedon8October2001,(US–CottonYarn)para.9662WTOAppellateBodyReport,Philippines–DistilledSpirits,supra,note12,para.20563WTOAppellateBodyReport,Philippines–DistilledSpirits,supra,note12,para.9664KonstantinosE.Farsalinos,RiccardoPolosa,‘Safetyevaluationandriskassessmentofe-cigarettesastobaccocigarettesubstitutes:asystematicreview’,supra,note22,at67–86,

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inrichmarkets.65Therefore,theawarenessofe-cigarettesasasubstitutetocigarettesisgrowing,withanincreasingnumberofconsumersswitchingfromcigarettestoe-cigarettes.

3.2 Alternativeuse

Ascited,e-cigarettesofferanalternativemeanstosatisfyingaparticularneedortaste,whichistheconsumers’needtoreceivenicotineandthesmokingexperience.AUK2015studyshowsthatsalesofnicotinereplacementssuchaspatchesandgumfellforthefirsttimeinyearsasconsumersturnedtovapingdevicestokickthehabit.66Althoughthisdoesnotnecessarilyshowthate-cigarettesandregularcigarettesaresubstitutable,itdoesshowthatconsumersconsidere-cigarettesasubstitutetoproductssatisfyingtheirnicotineintake.

The conclusion following from the analyses above is that e-cigarettes and cigarettes arecommerciallyinterchangeableandofferanalternativewaytosatisfythesameconsumerdemand.Inaddition,evenifitcouldbearguedthatthepercentageofconsumersofe-cigarettesislowerthanthose of cigarettes, the studies show a clear tendency of an increasing number of consumersswitching from cigarettes to e-cigarettes. This indicates that e-cigarettes and cigarettes couldcompetemoreinthefuture.

Thus,inspiteofcertaindifferenceswithcigarettespointedabove,thetwoproducts(i)sharesomephysical characteristics, (ii) serve the same end-uses (at least in respect of ENDS), and (iii) areperceivedasbeingalternativebytheconsumer(at least inrespectofENDS).The ‘likeness’withcigarettesishigherincertaine-cigarettesegmentsthaninothers.Inparticular,thereisaverygood‘likeness’casetobemadefortheentirenicotinedeliverycategory(ENDS)segment,withanevenhigherchanceforheatedtobaccoproducts,which,unlikeotherENDS,areclassifiableundertheHS24TobaccoChapter.67

We also argue that cigarettes and e-cigarettes on the ENDS segment are in a “competitiverelationship”whichisthedeterminantfactorinthe‘likeness’analysisoftwoproducts.Therefore,e-cigarettesandcigarettesmaybeconsidered‘like’forthepurposesofArticleI:1(MFN)andIII:4(NT)oftheGATT1994.

4 LikenessundertheTBTAgreement

TheNationalTreatment(NT)andMostFavouredNation(MFN)treatmentobligationsarecontainedinArticle2.1oftheTBTAgreement,accordingtowhich:

Members shall ensure that in respectof technical regulations,products imported from theterritoryofanyMembershallbeaccordedtreatmentnolessfavourablethanthataccordedto‘like’productsofnationaloriginandto‘like’productsoriginatinginanyothercountry.

65TheEconomist,‘SmokeSignals’,supra,note3766LaurenDavidson,'Vapingtakesoffase-cigarettesalesbreakthrough$6bn’,TheTelegraph,23June2015,<http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11692435/Vaping-takes-off-as-e-cigarette-sales-break-through-6bn.html>accessedon3July201667Itismoredifficulttoargue‘likeness’onnon-nicotinedeliverysystems(ENNDS)–currentlyamuchsmallermarket,whichwouldrequiremoredataandresearch.

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Asunder theGATT1994, theTBTAgreement’snon-discriminationobligationsapplyonly to ‘likeproducts’, thereforetheconcept isanessentialelement intheanalysisofwhetherameasure isdiscriminatory.68

4.1 TraditionalGATT‘likeness’elementsintheTBT

Just as the ‘likeness’ criteria is not provided in the text of theGATT 1994, the text of the TBTAgreementdoesnotexplicitlyspecifywhichcriteriashouldbeusedinordertodeterminewhetherthe products at issue are ‘like products’. Therefore, the question arises: should the concept of‘likeness’ established under GATT Article III:4 WTO jurisprudence be considered for thedeterminationof‘likeness’underArticle2.1oftheTBTAgreement?

The Appellate Body first responded to this question inUS – Clove Cigarettes, stating that “theinterpretationoftheconceptof‘likeness’inArticle2.1hastobebasedonthetextofthatprovisionasreadinthecontextoftheTBTAgreementandofArticleIII:4oftheGATT1994(NT),whichalsocontainsasimilarlywordednationaltreatmentobligationthatappliesto“technicalregulations”oftheWTO importingMembers.69Thus, itwasexplicitlynotedthat thedeterminationof ‘likeness’undertheTBTAgreementhastobemadeamongothers,inthecontextofArticleIII:4oftheGATT,whichincludesanon-discriminationobligationapplicabletotechnicalregulations(inspiteofthefactthatthisprovisionaddressesabroaderscopeofmeasures).Therefore,thetraditionalelementsofthe‘likeness’analysisunderArticleIII:4oftheGATT1994,suchas(i)physicalcharacteristicsofthe product, (ii) end-uses of the product, (iii) consumers’ tastes and habits, and (iv) tariffclassificationoftheproducts,areinprinciplerelevantfordetermining‘likeness’underArticle2.1oftheTBTAgreement.

TheAppellateBodyinUS-CloveCigarettesalsotransferredthe‘competitiverelationship’testfromArticleIII:4oftheGATT1994jurisprudencetodetermining‘likeness’underArticle2.1oftheTBTAgreementbystatingthat:

InthelightofthiscontextandoftheobjectandpurposeoftheTBTAgreement,asexpressedinitspreamble,weconsiderthatthedeterminationof‘likeness’underArticle2.1oftheTBTAgreement, aswell asunderArticle III:4of theGATT1994, is adeterminationabout thenatureandextentofacompetitiverelationshipbetweenandamongtheproductsatissue.70

Thus, the relevance of determining whether the two products at issue are in a ‘competitiverelationship’wasemphasisedintheWTOjurisprudenceonTBTArticle2.1.Thismakesalotofsensegiventhattheproducts,whichareinacompetitiverelationship,arepreciselytheoneswhichcanbediscriminatedagainstthroughtechnicalregulations.

4.2 Regulatorypurposevscompetitiverelationship

Theanalysisofameasure’sinconsistencywithArticle2.1oftheTBTAgreementincludesfindingsof(i)whetherthemeasureatissueisa‘technicalregulation’withinthemeaningofAnnex1.1ofthe

68AsestablishedbytheWTOAppellateBodyReport,UnitedStates–MeasuresAffectingtheProductionandSaleofCloveCigarettes,WT/DS406/AB/Radoptedon4April2012,(US–CloveCigarettes),para.87,otherelementsoftheanalysisincludethefindingson(i)whetherthemeasureatissueisa‘technicalregulation’,and(ii)whethertheimportedproductsareaccorded‘treatmentnolessfavourable’thanlikedomesticproducts.Theseelementsarenotfallingwithinthepurviewofthispaperandaresubjecttofurtherresearch.69WTOAppellateBodyReport,US–CloveCigarettes,supra,note69,para.12070WTOAppellateBodyReport,US–CloveCigarettes,supra,note69,para.120

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TBTAgreement,(ii)whethertheimportedanddomesticproductsatissueare‘likeproducts’and(iii)whethertheimportedproductsareaccorded‘treatmentnolessfavourable’than‘like’domesticproductsand‘likeproducts’originatinginanyothercountry.

Followingthisapproach,first it isnecessarytoestablishthatthemeasureat issueisa ‘technicalregulation’.Ifso,thenthepanelneedstoestablishthattheproductsatissueare‘likeproducts’.Finally,thepanelwillhavetodeterminewhetherthetreatmentaccordedtothe‘like’productunderexaminationisnolessfavourable.

WhileasshownintheEC-Asbestos,itisnotobviousthatageneralbanwillbecoveredbytheTBTAgreement71, for thesakeofamorecomprehensivediscussionthemeasure isassumedtobea‘technicalregulation’undertheTBTAgreement.Thatageneralbanmayfallunderthisnotionisconfirmedbythesamepanel,whichnotedthat:

…itsfindingsregardingthescopeoftheconceptoftechnicalregulationinthecontextoftheTBT Agreement are linked to the specificities of themeasure in question and in nowayprejudgetheconclusionsthatanyotherpanelmightreachconcerningthesameprovisionsoftheTBTAgreementinotherfactualcircumstances.72

Thismeansthatananalysiswouldhavetobeundertakenbyapaneloncase-by-casebasisinordertocheckwhetherabaniscoveredbytheTBTnotionoftechnicalregulation.

Sincea technical regulation isameasurewhichusuallyhasaparticular regulatorypurpose (e.g.ensuring thequalityof itsexports;protectinghuman,animalorplant lifeorhealth), itbegs thequestionofwhethertheconceptof‘likeness’undertheTBTAgreementshouldbeevaluatedusingthe traditionalGATT ‘likeness’ criteriaor shouldbepremisedon the regulatorypurposeof thatmeasure.

AnumberofWTOcasesdiscussedbelowarerelevantforaddressingthisquestion,includingtheEC–Asbestos, Japan–AlcoholicBeverages,US–CloveCigarettesandUS–Tuna II (Mexico)cases,whichgenerallyconcludethatthetraditionallikenesscriteriaapproachwillprevail.Thisapproachhas been criticised, however, by Prof PetrosMavroidis who claims that the three panels haveappliedthe‘likeness’intheTBT(thatisUS–CloveCigarettes,US–Tuna,andUS–COOL)inawrongmanner.73Inhisview, itshouldnothavebeenfortheconsumers(asusedinthethreecases)todecidewhethertwogoodsare ‘like’undertheTBT(describedas ‘market-likeness’). Instead, thepanelsshouldhaveunderstoodtheterm‘likeness’intheTBTasdenotingpolicy-likeness,meaningthattheconceptshouldhavebeenassessedthroughtheeyesoftheregulator,whointervenesandcorrectsaspecificmarketoutcome.74

Theseauthorsdonotobjecttothisreasoningbyanymeansbelievingthattheargumenthasalotofmerit.Thispaper’staskhoweverisonlyassessingthelawasitstands,notthedirectioninwhich

71WTOAppellateBodyReport,EC–Asbestos,supra,note6,para.2472WTO Panel Report, European Communities –Measures Affecting Asbestos and Asbestos Containing Products,WT/DS/135/Radoptedon18September2000(EC-Asbestos),para8.35ForadetailedanalysisonwhetherameasurequalifiesasatechnicalregulationundertheTBTAgreementseeLukaszGruszczynski,‘TheTBTAgreementandTobaccoControlRegulations’,AsianJ.WTO&Int'lHealthL&Policy,115(2013)73PetrosMavroidis,‘DriftingTooFarfromtheShore-WhytheTestforCompliancewiththeTBTAgreementDevelopedbytheWTOAppellateBodyisWrong,andWhatShouldtheABHaveDoneInstead’,WorldTradeReview,Vol.2,No.3,2013,at509–531;SeealsoRobertHowseandPhillipI.Levy,‘TheTBTPanels:US–CloveCigarettes,US–Tuna,andUS–COOL’,inChadP.BownandPetrosMavroidis(eds.),TheWTOCaseLawof2011,TheAmericanLawInstitute,201274Ibid.,529

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theinterpretationof‘likeness’underTBTshouldevolve.Intheabsenceofsuchpurpose,theauthorsaretaskedratherwithunderstandinghowtheTBT‘likeness’shouldbeassessedbasedonexistingcaselawandfairlyassumethattheTBTcasespointtoanapproachwhichis likelytobewitnessagaininthenearfuture.

4.2.1 US–CloveCigarettes

In fact,wesawthat thepanel inUS–CloveCigarettesopted for the interpretationof ‘likeness’under Article 2.1 of the TBTAgreement based on the objectives and purposes of the technicalregulation (whichallegedlyoverlapswith theaims-and-effect testofGATT).Thepanel reasonedthattheweighingofthetraditionalevidencerelatingto‘likeness’shouldhavebeeninfluencedbythe fact that themeasureat issuewasa technical regulation,having the immediatepurposeofregulatingflavouredcigarettesforpublichealthreasons.75Itfoundthatmentholcigarettesare‘like’clove cigarettes not so much because they compete, but because they both raise the same“regulatoryconcern”invokedbytheUnitedStates,namely;theyarebothflavouredcigarettesthatareparticularlyattractivetoyouth.76

ButtheAppellateBodydidnotsupportthisapproach.Itdidnotbelievethat“theconceptof‘likeproducts’inArticle2.1oftheTBTAgreementlendsitselftodistinctionsbetweenproductsbasedonthe regulatory objectives of a measure.” 77 Otherwise, in the view of the Appellate Body, theoutcome would have allowed for the ‘likeness’ analysis to include the products covered by aregulatorypurposebutexcludedthosewhicharenot.Insuchacase,thefindingon‘likeness’wouldbequestionable,asitwouldhaveinevitablydistortedthelessfavourabletreatmentcomparison.Accordingly,itconsideredthattheveryconceptof“treatmentnolessfavourable”influencesthedetermination of ‘likeness’ “to the extent they have an impact on the competitive relationshipbetweenandamongtheproductsconcerned.”78Thismeansthatregulatoryconcernsunderlyingtechnical regulations (e.g.health risks)mayplaya role in thedeterminationof ‘likeness’ to theextent that they are relevant to the examination of other ‘likeness’ criteria (e.g. productcharacteristics and consumer preferences) and are reflected in the products’ competitiverelationship.

Having rejected the regulatorypurposeof themeasureapproach fordetermining ‘likeness’, theAppellateBody inUS–CloveCigarettes unambiguously expressed its commonopinion that thedeterminationof‘likeness’underbothGATT1994andtheTBTAgreementisaboutthe“natureandextent of a competitive relationship between and among products”. 79 It instructed panels to“discountanydistortiveeffectsthatthemeasureatissueanditsregulatorypurposemayhaveonthecompetitiverelationship,andreservetheconsiderationofsucheffectsfortheanalysisoflessfavourabletreatment”whichispartofanadditionallegaltest.Therefore,theregulatorypurposeofthemeasureatissuemayinfluencethefindingonwhetherornotthetreatmentaccordedislessfavourable, but the finding of ‘likeness’ remains a finding about the nature and extent of acompetitiverelationshipbetweentheproductsconcerned.

75WTOPanelReport,UnitedStates–MeasuresAffectingtheProductionandSaleofCloveCigarettes,WT/DS406/Radoptedon2September2011,(US–CloveCigarettes)para.7.11976Ibid.,paras.7.231and7.24777WTOAppellateBodyReport,US–CloveCigarettes,supra,note69,para.11678WTOAppellateBodyReport,US–CloveCigarettes,supra,note69,para.156.SeealsoArthurE.Appleton,‘NationalTreatmentundertheTBTAgreement.ThePrincipleofNationalTreatmentinInternationalEconomicLaw’(2014),11079WTOAppellateBodyReport,US–CloveCigarettes,supra,note69,para.111

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4.2.2 US–TunaII(Mexico)

AnothergoodexamplehereisUS–TunaII(Mexico)–acasedealingwithameasureintendedtoprotectdolphinswhiletunaisbeingfished.ThepanelfoundthatArticle2.1oftheTBTAgreementcontributestoavoidingunnecessaryobstaclestotradearisingfromtechnicalregulationsasitseekstopreservethecompetitiveopportunitiesofproductsoriginatinginanyMember.Thus,theterm“likeproducts”underArticle2.1oftheTBTAgreementmaybesimilarlyunderstoodasrelatingto“thenatureandextentofacompetitiverelationshipbetweenandamongproducts.”80

While in this case the conceptof ‘likeproducts’ is not the central part of the analysis, the twocategoriesoftunaarefound‘like’andthedisputefocuseslargelyonotheraspectsoftheGATT1994andtheTBTAgreement.Hadtheregulatorypurposeofthemeasureatissue–thedolphins’welfare–beentakenasastartingpointofthe‘likeness’analysis,the‘dolphin-safe’tunaandthetunawhichwasnot ‘dolphin-safe’,wouldhaveautomaticallybeen considered ‘unlike’ products. ThiswouldhaverendereditsenselesstoarguefurtherondiscriminationandinconsistencywiththeprovisionsoftheGATT1994andtheTBTAgreement.

This would be a rather strange finding given both types of tuna share the same productcharacteristics, identicalend-uses,thesameconsumertastesandhabits(onetypeoftunacouldeasily substitute another) and are classified under that same tariff subheading. This theoreticalexampleshowshowdistortivetheregulatorypurposecriterionmightbefor‘likeness’analysiswhenconsideredasitsprimary,ratherthancomplimentary,part.

Letusassumethataregulatorymeasureaimsatreducingtheriskofadolescentstryinge-cigarettesandthenswitchingtocigarettesmoking;andthatthismeasureisappliedonlytoe-cigarettesandnotcigarettes.Underthepre-eminenceoftheregulatorypurposelogic,theexclusionofcigarettesfromthescopeofthemeasurewouldhaveresultedintheirnon-inclusioninthe‘likeness’analysis.This would have undermined the fact that cigarettes are in a competitive relationship with e-cigarettes,andthattheyarepotentiallyperceivedbyconsumersassubstitutes.Theexclusionofcigarettesfromthe‘likeness’analysiswouldmakeitnearimpossibleinfindingdiscrimination,astherewouldbeno‘likeproducts’beingdiscriminatedagainst.

Inpractice,regulationsthatdistinguishbetweendifferenttypesofproductsandaccordoneofthemlessfavourabletreatmentaretypicallyadoptedpreciselybecausethemarketdoesnotmakethedistinctionthattheregulatorconsidersnecessary.Manyregulations,ifnotmost,areconsequentlyappliedtocompetingproductsandprohibittheplacingonthemarketofoneofthem.81Itisoftenthecasethatthemeasureisappliedtoaparticularproductoragroupofproducts,anddoesnotcover their direct competitors, explaining such distinction by its very regulatory purpose. 82

80WTO Panel Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products,WT/DS381/R,adoptedon15July2011,(US—TunaII(Mexico)),paras.7.223–7.225andWTOAppellateBodyReport,UnitedStates–MeasuresConcerningtheImportation,MarketingandSaleofTunaandTunaProducts,WT/DS381/AB/R,adoptedon16May2012,(US–TunaII(Mexico)),para.23581FriederRoessler,’TheScopeofRegulatoryAutonomyofWTOMembersunderArticleIII:4oftheGATT:ACriticalAnalysisoftheJurisprudenceoftheWTOAppellateBody’,EuropeanUniversityInstitute,RSCASPP2015/04,RobertSchumanCentreforAdvancedStudiesGlobalGovernanceProgramme,182Unlike the exhaustive list of legitimate exceptions underArticle XX of theGATT 1994, the scopeof themeasures’ regulatorypurposesthatareconsideredlegitimateundertheTBTAgreement isnotveryclearandtherefore,theregulatorypowerofWTOMembersundertheTBTAgreementsispotentiallywider.

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Therefore,placingthemeasure’sregulatorypurposeinthecentreofthe‘likeness’analysiswouldeliminatethepotentially‘likeproducts’fromtheanalysisupfront.

Conclusions

Giventhenoveltyofe-cigarettes,theirregulationwillhavetobeaddressedfromvariousangles.Thispaperexaminestheimplicationsofageneralbanone-cigarettesundertheWTOdiscriminationprovisions,inparticularwhetherthetwoproductsare‘like’.

AmajorfunctionoftheWTOistopreservethefundamentalprinciplesoffreetrade,whileatthesametimerespondingtochangesinthecontemporaryworld.TheWTOmaynotbesufficientlyagileto introducenorms todealwithnovelties,but its judicial standardsare sufficiently fit toassessdiscrimination.Theconceptof‘likeness’isoneofthekeyWTOjudicialstandards,which,alongwithothercriteria,isessentialinfindingwhetheraregulationisdiscriminatoryandultimatelylegalundertheWTOAgreements.Thisfirststepwouldeitherpaveawayforthepaneltolookatotherelements(likewhethere-cigarettesaregrantedlessfavourabletreatmentcomparedtocigarettes)oritwouldstoptheinquiryintodiscriminationalltogether.

TheWTOjurisprudenceshowstheimportanceinthisexerciseofestablishingwhethertwoproductscompete. Competition therefore is at the heart of the ‘likeness’ analysis, meaning that if twoproductsarenotincompetition,theyshouldnotbeconsidered‘like’.Surely,competitionisnottheonlyfactortobeconsideredinthisanalysis.‘Likeness’cannotbeassumedwithoutlookingintothetraditionalfour-tiertestoradditionalrelevantcriteria,includingriskstopublichealth.However,asconfirmed by the Appellate Body, the regulatory concerns underlying a measure may only berelevanttoa‘likeness’analysis(underboththeGATTandTBTAgreement)totheextentthattheyhaveanimpactonthecompetitiverelationshipbetweenandamongtheproductsconcerned.

Following this approach, the fact that products may pose different risks to health does notnecessarilymeanthattheyarenot‘like’productsintheWTO.Thus,theregulatorypurposeoftheregulation shouldbe consideredwithout altering the algorithmof the ‘likeness’ analysisper se.Otherwisethismayresultintheexclusionfromtheanalysisofproductsthatarenotcoveredbythesameregulationbutwouldotherwisebefound‘like’.Indeed,itishardtoimaginethataproductcanbetreatedlessfavourablycomparedtoanotherproductunlessthetwoproductsareinsomesortofcompetitiverelationship.

This paper shows that there are good legal grounds inWTO to conclude that cigarettes and e-cigarettesmaybefound‘like’,atleastonthenicotinedeliverysystems(ENDS)segment.Anevenstrongercase is tobemadeforheatedtobaccoproducts (anevaluationof ‘likeness’ofothere-cigaretteclassesandcigaretteswouldrequireadditionalresearch).ThiswouldclearthewayfortheWTO adjudicator formoving to the next step in the discrimination analysis, that is to examinewhetherthegeneralbantreatse-cigaretteslessfavourablycomparedtocigarettes.Shouldthisbeaccurate,andgiventheabsenceofsolidevidencebytheregulatorto justify themeasureunderGATT Article XX, a general ban on e-cigarettes risks being found inconsistent with the WTOAgreements.

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Tobeon thesafe side indetermining their regulationofe-cigarettes,governmentswillhave toregard and apply international health and trade norms in a way that avoids tension andinconsistenciesbetweenthem.

Thispaper’sconclusions,whichareonlyapplicabletothe‘likeness’analysis intheWTO,arenotmeanttosuggestthate-cigaretteshavetobegenerallyregulatedinthesamewayascigarettes.Thesenewproductspresenttheirownriskstohealthandsafety,differenttocigaretteswhichhaveundergonedecadesofregulationsonthisfront.Theregulatoryoptionstoaddresstheseandotherissueswillhavetobeconsideredbearinginmindtheobjectivesofthepolicy,thespecificproductatissueaswellastheavailabilityofsoundscientificevidencetosupportchosenpolicies.

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