Intro

Question 1

1

Answer 1

If a Member grants a country an advantage (such as a lower tariff on one of its products), it must grant this advantage immediately and unconditionally to all WTO Members.

Question 2

2

Answer 2

for trade in goods, the MFN principle requires each Member to extend to all other WTO Members treatment no less favourable than the treatment it accords to imports from any other country - Member or not of the WTO.

Question 3

3

Answer 3

• Article I (MFN)
• Article III (NT)
• Articles II and XVII of the (GATS)
• Articles 4 and 3 of the TRIPS

Question 4

Article I

Answer 4

MFN

Question 5

The MFN principle works to

Answer 5

Maximize efficiency.
 Minimize transaction costs (related rules for the issuance of certificates of origin, direct shipment requirements and other relevant administrative producers can impose significant costs on both enterprises and governments, but, in accordance with MFN countries apply the same rules to imports from all countries).
 Promote further reciprocal liberalization (this benefits particularly small developing countries, which benefit from the most favoured treatment provided to other Members).
 Minimize costs of trade negotiations (negotiating one multilateral agreement instead of several bilateral agreements).

Question 6

De facto discrimination

Canada-Autos

Answer 6

When the discrimination does not appear on the text or face of the legal instrument, it can still be de facto, or in practice, discriminatory. De facto discrimination occurs when an apparently neutral legal instrument, is in effect or in fact, discriminatory. To establish de facto discrimination, all the facts relating to the application of the measure must be reviewed.

Question 7

De jure discrimination

Answer 7

it is clear from the wording of the legal instrument that it provides an advantage to a product from a Member or non-Member, without extending such advantage to like products from all WTO Members.

Question 8

The MFN Principle: Three-Tier Test

Answer 8

The analysis of inconsistency of a measure with the MFN principle is a three-tier test. One needs to check
these three elements to find an inconsistency:
 Any advantage, favour, privilege or immunity covered by Article I:1 of the GATT 1994;
 Like products; and,
 The advantage at issue is not granted immediately and unconditionally to the like products concerned.

Question 9

Article I:1 covers a broad range of measures in relation to exportation and importation as well as internal measures. Such measures include the following:

Answer 9

 Customs duties;
 any kind of charges imposed on importation or exportation;
 any kind of charges imposed in connection with importation or exportation;
 any charges imposed on the international transfer of payments for imports and exports;
 the method of levying such duties and charges;
 all rules and formalities in connection with importation and exportation;
 internal taxes or other internal charges (covered in Article III.2);
 all laws, regulations and requirements affecting internal sale, offering fore sale, purchase, transportation, distribution or use of any product (covered in Article III.4).

Question 10

Criteria applied in the analysis of “Like Products”

EC – Bananas III,

Answer 10

The four criteria employed by the GATT 1994/WTO adjudicating bodies in determining “like products” under Article I:1 are:

1. The product’s end uses
2. Consumers’ tastes and habits
3. The product’s nature, properties and quality (physical characteristics) 4. The customs classification of the products

Question 11

This means that products which are not “like products” may be treated differently.

Answer 11

1

Question 12

EXCEPTIONS

Answer 12

 General exceptions (Article XX of the GATT 1994);
 Security exceptions (Article XXI of the GATT 1994);
 Balance of payment exceptions and temporary application of quantitative restrictions in a discriminatory manner (Articles XII, XVIII.B, and XIV of the GATT 1994);
 Waivers (Article IX:3 of the Agreement Establishing the WTO); and,

Question 13

Regional Integration

Answer 13

Article XXIV of the GATT 1994 allows a WTO Member to grant more favourable treatment to its trading partners within a customs union or a free trade area without extending such treatment to all WTO Members, subject to certain conditions. This exception will be explained in detail in Module 8 (Exceptions).

Question 14

Enabling Clause

Answer 14

The Enabling Clause also allows WTO Members to depart from the MFN principle. This Clause “enables” developed country Members to derogate from the MFN principle in order to grant preferential tariff treatment to imports from developing country Members under certain conditions. The Enabling Clause also “enables” developing country Members to depart from the MFN principle to negotiate regional agreements among them. The Enabling Clause will be explained in detail in Module 9 (WTO Development Dimension).

Question 15

Ad Note to Article III:2, second sentence

Answer 15

on the one hand, the taxed product and, on the other hand, a directly competitive or substitutable product which was not similarly taxed.

Question 16

MFN

Answer 16

Non-discriminatory treatment between products of WTO Members

Question 17

National Treatment

Answer 17

Non-discriminatory treatment between imported and domestic products.

Question 18

Rationale Behind the National Treatment Principle

Answer 18

he national treatment principle embodied in Article III of the GATT 1994 works to:
 Avoid protectionist measures.
 Maintain equality of competitive conditions.
 Protect tariff bindings.

Question 19

Cases where de facto discrimination was found are

Answer 19

Japan – Alcoholic Beverages II, Korea - Alcoholic Beverages and Chile – Alcoholic Beverages.\

These cases involved internal measures which, although not making an explicit reference to the origins of products, had the effect of affording protection to domestic products vis-à-vis “like” or “directly competitive or substitutable” imported products.

Question 20

In Chile - Alcoholic Beverages

Answer 20

the Appellate Body held that the cumulative consequence of the New Chilean System was that approximately 75 per cent of all domestic production of the distilled alcoholic beverages at issue would be located in the fiscal category with the lowest tax rate, whereas approximately 95 per cent of the directly competitive or substitutable imported products would be found in the fiscal category subject to the highest tax rate

Question 21

Ad Note to Article III

Answer 21

of the GATT 1994 clarifies that an internal measure may nevertheless be applied at the border on imported goods.

Question 22

ARTICLE III:1

Answer 22

The general principle set out in Article III:1 informs the rest of Article III and serves as a guide to understanding and interpreting the specific obligations contained in the other paragraphs of Article III.

Question 23

ARTICLE III:2

Answer 23

In this respect, the first sentence of paragraph 2 deals with the internal taxation of “like products” while the second sentence (by cross reference with the relevant Ad Note) deals with the internal taxation of “directly competitive or substitutable products”

Question 24

Two - tier test under Article III:2 - First Sentence

Answer 24

The analysis of consistency of a measure with the first sentence of Article III:2 constitutes a two-tier test.
One needs to check the following two elements to find an inconsistency:
 The imported and domestic products are like products; and,
 The imported products are taxed in excess of the domestic products.

Question 25

Criteria used for the determination of “Like Products”

Answer 25

The four criteria employed by the GATT/WTO jurisprudence in determining “likeness” under Article III:2 first sentence are the following:

1. The product’s end uses
2. Consumer tastes and habits
3. The product’s properties, nature and quality 4. The customs classification of the product

Question 26

The imported products are taxed “in excess of” the domestic products

Answer 26

even the smallest amount of “excess” would be too much. The prohibition of discriminatory taxes in Article III:2, first sentence, is not conditional on a “trade effects test’” nor is it qualified by a de minimis standard. Thus, the slightest margin of excessive taxing will constitute an infringement, even if the margin is de minimis

Question 27

ARTICLE III:2 - SECOND SENTENCE

Answer 27

if a product does not meet the narrow definition of “like product”, it may still be “directly competitive or substitutable”.
Therefore, if there is no violation of Article III:2, first sentence, one must still consider if there is an infringement of Article III:2, second sentence.

Question 28

the term “like product” under the first sentence of ArticleIII:2 should be construed narrowly

Answer 28

1

Question 29

The imported and domestic products are “directly competitive or substitutable”

Answer 29

his is a much broader concept than likeness in the first sentence: whereas the first sentence applies only to products that are perfectly substitutable, the second sentence is broad enough to include products that are imperfectly substitutable.

Question 30

The domestic and imported products are “not similarly taxed”

Answer 30

In the first sentence, even the slightest difference in tax between imported and domestic products will lead to inconsistency with the national treatment obligation. This is not the case with regard to the second sentence where the requirement is that the product must be “similarly taxed”. the difference in tax must be more than de minimis to constitute an infringement of the national treatment obligation in Article III:2 second sentence

Question 31

Three-tier test under Article III:4

Answer 31

The analysis of consistency of a measure with Article III:4 constitutes a three-tier test. One needs to check
the following three elements to find an inconsistency:
 The imported and domestic products at issue are like products;
 The measure at issue is a law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution, or use; and,
 The imported products are afforded less favourable treatment than like domestic products.

Question 32

The imported and domestic products are “like products”

Answer 32

The scope of likeness in Article III:4 has been found by the Appellate Body to be somewhat wider than that in the first sentence of Article III:2. This is because the scope of the first sentence of Article III:2 must be read in light of its relationship with the second sentence of Article III:2, something that does not apply to Article III.4.

In EC-Asbestos, the Appellate Body ruled that the scope of likeness in Article III:4, although broader than the first sentence of Article III:2, is certainly not broader than the combined products scope of the two sentences of Article III:2.

Question 33

The dissimilar taxation is applied “so as to afford protection” to domestic production

Answer 33

1

Question 34

Art III:4 Like product

Answer 34

Basic Criteria + Competitive Relationship

Question 35

Art III:2, 2nd sentence “Dir. Competitive Products”

Answer 35

Basic Criteria + Conditions of Competition

Question 36

EXCEPTIONS TO THE PROVISIONS CONTAINED IN THE WTO AGREEMENTS – INCLUDING THE NATIONAL TREATMENT PRINCIPLE

Answer 36

General exceptions (Article XX of the GATT 1994);
 Security exceptions (Article XXI of the GATT 1994);
 Balance of payment exceptions and temporary application of quantitative restrictions in a discriminatory manner (Articles XII, XVIII.B, and XIV of the GATT 1994);
 Waivers (Article IX:3 of the Agreement Establishing the WTO); and,
 A number of provisions on special and differential treatment, which can be found
throughout the WTO Agreements.

Question 37

Conditions for the Application of Anti-dumping Measures

Answer 37

The Anti-Dumping Agreement provides that an anti-dumping measure shall be applied only after determining, pursuant to an investigation initiated and conducted in conformity with the provisions of the Agreement, the three following cumulative conditions:
 Dumped imports;
 injury to the domestic industry producing the like product; and,
 causal link between the dumped imports and the injury.

Question 38

What is Dumping?

Answer 38

Dumping is a form of price discrimination, which takes place when the price of a product when exported to another country is less than the price of that same product when sold in the market of the exporting country (Article VI of the GATT and Article 2.1 of the Anti-Dumping Agreement).

Question 39

How dumping is calculated ?

Answer 39

dumping is calculated on the basis of a fair comparison between the normal value (the price of the imported product in the “ordinary course of trade” in the country of origin or export) and the export price (the price of the product in the importing country).