WTO Law Fernando Piérola Non-Discrimination OUTLINE Overall

WTO Law Fernando Piérola Non-Discrimination

OUTLINE Overall understanding of trade in goods Basic principles and rules of GATT 1994 The Most-Favoured-Nation principle The National Treatment principle

OVERALL UNDERSTANDING OF TRADE IN GOODS Delivery Exporting Country Payment Importing Country

OUTLINE Overall understanding of trade in goods Basic principles and rules of GATT 1994 The Most-Favoured-Nation principle The National Treatment principle

BASIC PRINCIPLES AND RULES OFGATT 1994 NO TRADE BARRIERS OTHER THAN TARIFFS Article XI: 1: No prohibition or restrictions on imports (other than duties, taxes and charges) Delivery Exporting Country Payment Article II: 1(b): No charges or duties other than ordinary customs duties up to a maximum level (bound rate) Importing Country

BASIC PRINCIPLES AND RULES OFGATT 1994 SUMMARY Border measures Internal measures No prohibition or restrictions (Article XI: 1) National treatment on taxes (Article III: 2) No charges or duties other than tariffs (Article II: 1(b)) National treatment on other matters (Article III: 4) MFN principle (Article I: 1)

OUTLINE Overall understanding of trade in goods Basic principles and rules of GATT 1994 The Most-Favoured-Nation principle The National Treatment principle

THE MOST-FAVOURED NATION PRINCIPLE THE PROVISION Article I: 1 General Most-Favoured-Nation Treatment With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.

THE MOST-FAVOURED NATION PRINCIPLE THE MATERIAL ELEMENTS MFN clause Scope of MFN clause • Customs duties • Charges of any kind • Method of levying • Rules and formalities • Matters of Art. III Like products • Physical properties, characteristics • End-uses • Consumers’tastes and habits • Tariff classification Advantage, favour, privilege or immunity • Any distinction? • Only improper or injust distinctions? Extended immediately and unconditionally • Inmediately • Unconditionally

OUTLINE Overall understanding of trade in goods Basic principles and rules of GATT 1994 The Most-Favoured-Nation principle The National Treatment principle

THE NATIONAL TREATMENT PRINCIPLE THE PROVISION Article III National Treatment on Internal Taxation and Regulation 1. 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. * 2. The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1. * … 4. The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.

THE NATIONAL TREATMENT PRINCIPLE THE PROVISION Article III National Treatment on Internal Taxation and Regulation 1. 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. * 2. The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1. * … 4. The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.

THE NATIONAL TREATMENT PRINCIPLE THE MATERIAL ELEMENTS: INTERNAL TAXES Like products The products of the territory of any [Member] imported into the territory of any other [Member] shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Directly competitive or substitutable Moreover, no [Member] shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1. * [so as to afford protection to domestic production] Note Ad Article III - Paragraph 2 A tax conforming to the requirements of the first sentence of paragraph 2 would be considered to be inconsistent with the provisions of the second sentence only in cases where competition was involved between, on the one hand, the taxed product and, on the other hand, a directly competitive or substitutable product which was not similarly taxed.

THE NATIONAL TREATMENT PRINCIPLE THE MATERIAL ELEMENTS: INTERNAL TAXES National Treatment Internal Taxes “Like Products” Art. III: 2, first sentence Internal Taxes Like Products “In excess of” Distinction between border & internal measures 4 criteria (border tax adjustment) Accordion concept No notion of de minimis

THE NATIONAL TREATMENT PRINCIPLE THE MATERIAL ELEMENTS: INTERNAL TAXES National Treatment Internal Taxes “Directly competitive or substitutable products” Art. III: 2, 2 nd sentence Internal Taxes Directly competitive or substitutable products Cross-price elasticity “Not similarly taxed” Similar tax burden So as to afford protection to the domestic industry Design, structure & architecture

THE NATIONAL TREATMENT PRINCIPLE THE MATERIAL ELEMENTS: DOMESTIC REGULATIONS National Treatment Domestic regulations Article III: 4 Laws, regulations and requirements De jure or de facto? Affecting the internal sale, offering for sale, purchase, transportation, distribution or use Internal market Like Products 4 criteria of border tax adjustment Treatment less favourable How to measure it?

THE NATIONAL TREATMENT PRINCIPLE POSSIBILITY OF ENFORCEMENT AT THE BORDER Note Ad Article III 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.

THE NATIONAL TREATMENT PRINCIPLE EXCEPTIONS Article III 8. (a) The provisions of this Article shall not apply to laws, regulations or requirements governing the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale. (b) The provisions of this Article shall not prevent the payment of subsidies exclusively to domestic producers, including payments to domestic producers derived from the proceeds of internal taxes or charges applied consistently with the provisions of this Article and subsidies effected through governmental purchases of domestic products.

THE PRINCIPLE OF NON-DISCRIMINATION OTHER PROVISIONS Article XIII Non-discriminatory Administration of Quantitative Restrictions 1. No prohibition or restriction shall be applied by any [Member] on the importation of any product of the territory of any other [Member] or on the exportation of any product destined for the territory of any other [Member], unless the importation of the like product of all third countries or the exportation of the like product to all third countries is similarly prohibited or restricted.

THE PRINCIPLE OF NON-DISCRIMINATION OTHER PROVISIONS Article XVII: State Trading Enterprises 1. * (a) Each [Member] undertakes that if it establishes or maintains a State enterprise, wherever located, or grants to any enterprise, formally or in effect, exclusive or special privileges, * such enterprise shall, in its purchases or sales involving either imports or exports, act in a manner consistent with the general principles of non-discriminatory treatment prescribed in this Agreement for governmental measures affecting imports or exports by private traders.