WTO Law - 4

Non - Discrimination

Non Discrimination

• ND– Enhances the efficiency of allocation and use of

resources– Avoids economically unjustified distortions of

competition– Reduces possible disputes

• Two aspects– ND between foreign goods, services and service

providers -> Most Favored Nation Principle (MFN)– ND between these foreign factors and domestic

competitors -> National Treatment Priciple (NT)

MFN

• Formula– Positive: I.1 GATT, 4 TRIPS– Negative: II.1 GATS– See also: III.7, IV (d), XVII and XX GATT, TBT, SPS,

Import Licensing Agreement• Scope of Application

– Benefit for all WTO members– Level of MFN relates to all trade relations of WTO

members, even outside the WTO• Problem of the PTAs

– Beneficial treatment only between the PTA members? Code Conditionality?

– General MFN in favor of all WTO members? Free rider problem

Art. I GATT

• Border measures or internal measures of a WTO member

• Advantageous treatment of goods imported from or exported to any other country

• Have to be accorded immediately and unconditionally

• To like products imported from or exported to other WTO members

• If there is no justification under WTO law (e.g. under art. XX, XI, XXIV, XXV)

Border measures

• Customs duties and charges of any kind– Indonesia Autos

• The method of levying such charges– Rates, valuation, classification, origin– Also: prohibited self-help (US – Certain products

from the EC)• All rules and formalities for imports and

exports– E.g. quotas – EC-Bananas III

• Discrimination prohibited on the basis of national origin– De facto or de jure– But: Canada Autos (indirect discrimination)

Indonesia Autos Case

• Indonesia - Certain Measures Affecting the Automobile Industry(WT/DS 54,55,59,64/R)

• National Car Companies (in reality only one) are exempted from the luxury tax on sales of their cars and from import duties on parts and components– qualifiying cars made in

Indonesia by Indonesians with Indonesian content and Indonesian technology under an indonesian trademark

• Same treatment for cars produced abroad by Indonesians with 20 % Indonesian content

• Higher import duties violate Art. I:1 GATT

• Higher tax on other imported “like” cars violates III:2 GATT (national treatment)

Tariff bonding

• United States - Import Measures on Certain Products from the European Communities (WT/DS165/R)

• Expecting the authorization for retaliation in the Bananas case the US introduced an increased bonding requirement for certain imports from the EU (now based on the „entered value“)

• Imports became thereby considerably more expensive than for goods from other countries

• The authorization was given about two weeks after the entry into force of the new bonding rules

• The American measure violated Art. I:1 GATT

• No justification by the DSU (see 23)

Bananas

• European Communities - Regime for the Importation, Sale and Distribution of Bananas (WT/DS27/AB/R)

• Banana imports from ACP countries– Traditional imports– Non-traditional Imports– Third-Country Imports

• Third – country imports were restricted by tariff quotas (art. XI)

• Export certificate requirements for imports from Costa Rica, Colombia and Nicaragua: violation of art. I.1

• Tariff preferences for non-traditional ACP Bananas as compared to third country bananas violates Art. I.1– However it is justified by the Waiver under art. XXV

given for the rules of the former convention of Lomé

Canadian Automotive Case

Canada - Certain Measures Affecting the Automotive Industry(WT/DS139,142/AB/R)

• Duty free imports for cars produced by affiliates of Canadian car producers from abroad

• De facto: only imports from US affiliates were favored

• The List of eligible enterprises was completely closed in 1989

• Canada: favor not according to national origin, but granted to enterprises

• Panel & AB: Art. I prohibits formal and indirect discriminations.

Internal measures

• “all matters referred to in paragraphs 2 and 4 of Article III”, – i.e. internal taxes or other internal charges – as well as “all laws, regulations and requirements

affecting their internal sale, offering for sale, purchase, transportation, distribution or use”

• Example: EC-Bananas III – internal distribution of licenses

Like Products

• See Spain – Unroasted Coffee (GATT Panel)• The Border Tax Adjustment Working Group

Criteria (1970, amended by the AB in Asbestos):– (i) the physical properties of the products; – (ii) the extent to which the products are capable of

serving the same or similar end-uses; – (iii) the extent to which consumers perceive and treat

the products as alternative means of performing particular functions in order to satisfy a particular want or demand; and

– (iv) the international classification of the products for tariff purposes.”

• PPMs (Process or Production Methods) influencing likeness? (Tuna/Dolphin vs. Asbestos?)

Spain - Tariff Treatment of unroasted Coffee

Until 1997:

Unroasted Coffee – single tariff – 22,5 %

After 1979:

5 different classifications: no tariff / 7% tariff .

Columbian mild - 0

Other mild - 0

Unwashed Arabica – 7 %

Robusta – 7 %

BISD 28S/102

Other – 7 %

BRAZILColumbian mild - 0

Other mild - 0

Unwashed Arabica – 7 %

Art. II: 1 GATS

• No less favorable Treatment– De facto or de jure

• Of like services and service providers– No public services (art. I: 3 (b))– Four service modes (art. I: 2)– Characteristics, tastes and habits of the

consumers and classification in the UN Central Products Classification (CPC)

• By members‘ measures• Affecting trade

– Broad notion• If services are not exempted in the schedules

National Treatment

• Art. III GATT• TRIMS Agreement (Trade Related

Investment)• Art. XVII GATS

• Equal Treatment between foreign products, services and service providers and their national counterparts (and competitors)

• Obligation corroborating the tariff bindings under art. II GATT– All the arguments against discrimination are also

valid here

Art. III GATT

• Para. 1: the „chapeau“– Principle and goal– Informing the operative paragraphs

• Para. 2.1: discriminatory taxation of like products

• Para. 2.2: discriminatory taxation of competitive products

• Para 4: all other forms of discrimination• Not only between goods that are subject to a

concession, but generally

Art. III.1 GATT

• “The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.*

• -> Only binding measures

Pertinent Measures

• Internal taxes and other charges– Even if adjusted at the border

• Marketing requirements (sale, offering for sale, purchase, transportation, distribution or use of products

• Content requirements (internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions)

• Not: public procurement (8 a, see the PTA) and subsidies (8 b, see Art. XVI GATT and the SCMA)

• Etc.

Note to III:1 – Border Tax adjustment

• “Any internal tax or other internal charge, or any law, regulation or requirement of the kind referred to in paragraph 1 which applies to an imported product and to the like domestic product and is collected or enforced in the case of the imported product at the time or point of importation, is nevertheless to be regarded as an internal tax or other internal charge, or a law, regulation or requirement of the kind referred to in paragraph 1, and is accordingly subject to the provisions of Article III.“

Art. III: 2 Tax discrimination

• Internal taxes and charges• Aims and effects of the measure are not

relevant• Formal discrimination (2.1)

– Per se prohibited– Of like products (narrow)– If taxation in excess (even if small amount)

• Factual protectionist discrimination (2.2)– If real protectionism– Of directly competitive or substitutable products– If taxation in excess more than de minimis

Art. III. 4 – General NT Obligation

• Other laws, regulations and requirements– Marketing requirements, but not necessarily

aiming at particular products• treat imported like products as identified by

– the properties, nature and quality of the products– the end-uses of the products– consumers' tastes and habits– tariff classification of the product

• less favorable than domestic products– Protective effects have not to be proven by the

claimant

TRIMS

• MTA concerning TRIMS• Violating arts. III: 4 (internal) or XI (at the

border). Examples in the TRIMS Annex– Art. III: 4

• Local content rules• Mandatory relations between imports or exports

– Art. XI• Import performance• Export performance

Decisions

• Italian discrimination against imported agricultural machinery (23.10.1958), L/833, BISD 7S/60

• United States - Standards for Reformulated and Conventional Gasoline (WT/DS2/R)

• United States - section 337 of the Tariff act of 1930, decided by a GATT panel in 1989 L/6439, BISD 36S/345

• European Communities - Measures Affecting Asbestos and Asbestos-Containing Products (WT/DS135/AB/R)

• Korea -- Measures affecting imports of fresh, chilled and frozen beef, that was decided by the Appellate Body in 2001 (Korea – Beef (WT/DS161,169/AB/R)

Art. XVII GATS

• Measures affecting trade in services (I: 3)• Treatment less favorable of • Like services or service providers

– According to the characteristics– The classification– The consumers‘ tastes and habits

• If a Member commits some services or sectors in its schedule according to their modes (I: 2). Conditions and restrictions admissible

• I.e. NT in GATS is only applicable with restrictions