1. WTO Law - 4
Non - Discrimination

2. Non Discrimination ND Two aspects
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)

3. MFN Formula Scope of Application Problem of the PTAs
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

4. 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)

5. 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)

6. Higher import duties violate Art. I:1 GATT
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. Banana imports from ACP countries
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

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 according to national origin, but granted to enterprises
Panel & AB: Art. I prohibits formal and indirect discriminations.
Canada grants duty free imports of motor vehicles from certain manufacturers (not: from particular states) under the following conditions
In a “base-year” these manufacturers must have produced in Canada (and still do so now)
The ratio of production in Canada vs. Sales in Canada (i.e. of domestic and imported cars) by the manufacturers must be “equal or higher” than the ratio in the base year
duty free imports require (for keeping the ration stable)
either an increase of production or
exports of cars produced in Canada
And in any way not lower than 75:100
The imported cars sold in Canada must have a “Canadian Value Added” equal or higher than that in the base-year
In 1989 the list of the qualifying manufacturers was closed
Complaint of the EC and Japan: favor only to Cars produced by manufacturers that are affiliated with the Canadian producers in the US
Canada: favor not according to national origin, but granted to enterprises
Panel & AB: Art. I prohibits formal and indirect discriminations.
Practice: Canadian car producers import only their own cars produced in the US or such cars produced by related companies, also in the US.
Effect: System restrains favors to cars from the US (and, furthermore, is a consequence of a canadian-american Auto Pact). Duty free importation not granted to other „like products“ coming from abroad.
No proof of intent necessary
AB: violation of MFN under art. I.1 GATT. Possibly also of Art. II.1 GATS (not decided)
if discrimination is not only concerning goods, but also their trading from the US to Canada (possible according to the Bananas case)

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, 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?)

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
Spain – Tariff Treatment of unroasted coffee (BISD 28S/102)
Until 1997 Spain had one single tariff for unroasted coffee: 22,5 %
After 1979 Spain differentiated 5 classes of coffee: 2 of them were now free of tariffs, three others were subject to 7 %. Brazil exported two of the latter classes to Spain (thus these brands carried now a 7 % tariff rate).
Brazil‘s Claim: Violation of MFN (I.1 GATT)
Different Tariffs now for products from different states, that were treated before equally
„Like Product“?
Organoleptic differences (origin, cultivation, processing, genetics)
But often blended
Coffee in its end-use: „a well-defined and single product intended for drinking“ (4.7)
No other GATT member applies different tariff rates
i.e. a like product is discriminated against
Violation of I.1 > „prima facie nullification or impairment“ under art. XXIII GATT
Unwashed Arabica – 7 %
Unwashed Arabica – 7 %
After 1979:
5 different classifications: no tariff / 7% tariff .
Robusta – 7 %
Other – 7 %

13. No less favorable Treatment Of like services and service providers
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

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
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

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
Achetez francais? Buy british?

17. 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.

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 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

20. 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

21. 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

22. Decisions
Italian discrimination against imported agricultural machinery ( ), 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 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