WTO Law - 4

1. WTO Law - 4 Non - Discrimination

2. Non Discrimination • ND • Enhancestheefficiency of allocation and use of resources • Avoidseconomicallyunjustifieddistortions of competition • Reducespossibledisputes • Twoaspects • ND betweenforeigngoods, services and serviceproviders -> Most Favored Nation Principle (MFN) • ND betweentheseforeignfactors and domesticcompetitors -> National Treatment Priciple (NT)

3. 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 • Benefitfor all WTO members • Level of MFN relatesto all traderelations of WTO members, even outside the WTO • Problem of the PTAs • Beneficialtreatmentonlybetweenthe PTA members? Code Conditionality? • General MFN in favor of all WTO members? Free riderproblem

4. Art. I GATT • Bordermeasuresorinternalmeasures of a WTO member • Advantageoustreatment of goodsimportedfromorexportedtoanyothercountry • Havetobeaccordedimmediately and unconditionally • Tolikeproductsimportedfromorexportedtoother WTO members • Ifthereisnojustificationunder WTO law (e.g. underart. XX, XI, XXIV, XXV)

5. Bordermeasures • Customsduties and charges of anykind • Indonesia Autos • The method of levying such charges • Rates, valuation, classification, origin • Also: prohibitedself-help (US – Certainproductsfromthe EC) • All rules and formalitiesforimports and exports • E.g. quotas – EC-Bananas III • Discriminationprohibited on thebasis of national origin • De facto or de jure • But: Canada Autos (indirectdiscrimination)

6. 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)

7. 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)

8. 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 certificaterequirementsforimportsfrom Costa Rica, Colombia and Nicaragua: violation of art. I.1 • Tariffpreferencesfor non-traditional ACP Bananasascomparedtothirdcountrybananasviolates Art. I.1 • HoweveritisjustifiedbytheWaiverunderart. XXV givenfortherules of theformerconvention of Lomé

9. 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 accordingto national origin, but grantedtoenterprises • Panel & AB: Art. I prohibits formal and indirectdiscriminations.

10. 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

11. Like Products • See Spain – Unroasted Coffee (GATT Panel) • The Border Tax Adjustment Working Group Criteria (1970, amendedbythe 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?)

12. Spain - Tariff Treatment of unroasted Coffee BISD 28S/102 Until 1997: Unroasted Coffee – single tariff – 22,5 % BRAZIL Columbian mild - 0 Columbian mild - 0 Other mild - 0 Other mild - 0 Unwashed Arabica – 7 % Unwashed Arabica – 7 % After 1979: 5 different classifications: no tariff / 7% tariff . Robusta – 7 % Other – 7 %

13. Art. II: 1 GATS • Noless favorable Treatment • De facto or de jure • Of likeservices and serviceproviders • Nopublicservices (art. I: 3 (b)) • Fourservicemodes (art. I: 2) • Characteristics, tastes and habits of theconsumers and classification in the UN Central Products Classification (CPC) • Bymembers‘ measures • Affectingtrade • Broadnotion • Ifservicesare not exempted in theschedules

14. 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

15. Art. III GATT • Para. 1: the „chapeau“ • Principle and goal • Informingthe operative paragraphs • Para. 2.1: discriminatorytaxation of likeproducts • Para. 2.2: discriminatorytaxation of competitiveproducts • Para 4: all otherforms of discrimination • Not onlybetweengoodsthataresubjectto a concession, but generally

16. 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

17. PertinentMeasures • Internal taxes and othercharges • Even ifadjustedattheborder • 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.

18. 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.“

19. Art. III: 2 Tax discrimination • Internal taxes and charges • Aims and effects of themeasureare not relevant • Formal discrimination (2.1) • Per se prohibited • Of likeproducts (narrow) • Iftaxation in excess (evenifsmallamount) • Factualprotectionistdiscrimination (2.2) • If real protectionism • Of directlycompetitiveorsubstitutableproducts • Iftaxation in excessmorethan de minimis

20. Art. III. 4 – General NT Obligation • Other laws, regulations and requirements • Marketing requirements, but not necessarilyaimingatparticularproducts • 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

21. TRIMS • MTA concerning TRIMS • Violatingarts. III: 4 (internal) or XI (attheborder). Examples in the TRIMS Annex • Art. III: 4 • Localcontentrules • Mandatoryrelationsbetweenimportsorexports • Art. XI • Import performance • Export performance

22. 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)

23. Art. XVII GATS • Measuresaffectingtrade in services (I: 3) • Treatment less favorable of • Likeservicesorserviceproviders • Accordingtothecharacteristics • The classification • The consumers‘ tastes and habits • If a Member commitssomeservicesorsectors in itsscheduleaccordingtotheirmodes (I: 2). Conditions and restrictionsadmissible • I.e. NT in GATS isonlyapplicablewithrestrictions