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> General Agreement On Tariffs And Trade 1994
> Article I
> Article II
> Article III
> Article IV
> Article V
> Article VI
> Article VII
> Article VIII
> Article IX
> Article X
> Article XI
> Article XII
> Article XIII
> Article XIV
> Article XV
> Article XVI
> Article XVII
> Article XVIII
> Article XIX
> Article XX
> Article XXI
> Article XXII
> Article XXIII
> Article XXIV
> Article XXV
> Article XXVI
> Article XXVII
> Article XXVIII
> Article XXIX
> Article XXX
> Article XXXI
> Article XXXII
> Article XXXIII
> Article XXXIV
> Article XXXV
> Article XXXVI
> Article XXXVII
> Article XXXVIII
> Analytical Index main page
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4. Article III:4
(a) General
(i) Test under paragraph 4
229. In
Korea — Various Measures on Beef, the Appellate Body
explained the three elements of a violation of Article
III:4:
“For a violation of Article
III:4 to be established, three elements
must be satisfied: that the imported and domestic products at issue are
‘like products’; that the measure at issue is a ‘law, regulation,
or requirement affecting their internal sale, offering for sale,
purchase, transportation, distribution, or use’; and that the imported
products are accorded ‘less favourable’ treatment than that accorded
to like domestic products.”(348)
230. In
EC
— Bananas III, the Appellate Body reviewed the Panel’s
finding that the EC’s allocation method of tariff quota for bananas
was inconsistent with Article III:4. The Appellate Body considered that
an independent consideration of the phrase “so as [to] afford
protection to domestic production” is not necessary under Article
III:4:
“Article III:4 does
not specifically refer to Article III:1.
Therefore, a determination of whether there has been a violation of Article
III:4 does not require a separate consideration of whether a
measure ‘afford[s] protection to domestic production’.”(349)
(ii) Burden of proof
231. In
Japan
— Film, the Panel allocated the burden of proof under
Article III:4 according to the general principle that it is for the
party asserting a fact or claim to bear the burden of proving this fact
or claim:
“As for the burden of proof … we note that it is for the party
asserting a fact, claim or defence to bear the burden of providing proof
thereof. Once that party has put forward sufficient evidence to raise a
presumption that what is claimed is true, the burden of producing
evidence shifts to the other party to rebut the presumption.(350) Thus, in
this case, including the claims under Articles III …, it is for the
United States to bear the burden of proving its claims. Once it has
raised a presumption that what it claims is true, it is for Japan to
adduce sufficient evidence to rebut any such presumption.”(351)
232. The Appellate Body confirmed this approach by the Panel on
Japan
— Film to the allocation of the burden of proof in its report in EC
— Asbestos. In so doing, the Appellate Body referred to its finding on
US — Wool Shirts and Blouses:(352)
“Applying these rules, it is our opinion that Canada, as the
complaining party, should normally provide sufficient evidence to
establish a presumption that there are grounds for each of its claims.
If it does so, it will then be up to the EC to adduce sufficient
evidence to rebut the presumption. When the EC puts forward a particular
method of defence in the affirmative, it is up to them to furnish
sufficient evidence, just as Canada must do for its own claims. If both
parties furnish evidence that meets these requirements, it is the
responsibility of the Panel to assess these elements as a whole. Where
the evidence concerning a claim or a particular form of defence is, in
general, equally balanced, a finding has to be made against the party on
which the burden of proof relating to this claim or this form of defence
is incumbent.”(353)
(iii) Relationship with other paragraphs of Article III
Relationship with paragraph 1
233. With respect to the relationship between
Paragraphs 1 and 4 of
Article III, see paragraphs 140–143
above. Also, in EC — Bananas III, the Appellate Body touched on this issue in discussing whether the
independent consideration of “so as to afford protection to domestic
production” is necessary under Article III:4. See
paragraph 230 above.
Further, this issue was touched upon by the Appellate Body in EC —
Asbestos in relation to the interpretation of the term “like products”
under paragraph 4. See paragraphs 237 and
239 below.
Relationship with paragraph 2
234. In
EC — Asbestos, the Appellate Body considered that Article
III:2 constitutes part of the context of Article
III:4, and examined the
relationship between these paragraphs. However, the Appellate Body
concluded that Article III:1, rather than
Article
III:2, had “particular
contextual significance” for the interpretation of Article
III:4:
“To begin to resolve these [interpretative] issues, we turn to the
relevant context of Article III:4 of the GATT
1994. In that respect, we
observe that Article III:2 of the GATT 1994, which deals with the
internal tax treatment of imported and domestic products, prevents
Members, through its first sentence, from imposing internal taxes on
imported products ‘in excess of those applied … to like domestic
products.’ (emphasis added) In previous Reports, we have held that the
scope of ‘like’ products in this sentence is to be construed ‘narrowly’.(354)
This reading of ‘like’ in Article
III:2 might be taken to suggest a
similarly narrow reading of ‘like’ in Article
III:4, since both
provisions form part of the same Article. However, both of these
paragraphs of Article III constitute specific expressions of the
overarching, ‘general principle’, set forth in Article III:1 of the
GATT 1994.(355) As we have previously said, the ‘general principle’
set forth in Article III:1 ‘informs’ the rest of
Article III and
acts ‘as a guide to understanding and interpreting the specific
obligations contained’ in the other paragraphs of Article
III,
including paragraph 4.(356) Thus, in our view,
Article III:1 has
particular contextual significance in interpreting Article
III:4, as it
sets forth the ‘general principle’ pursued by that provision.
Accordingly, in interpreting the term ‘like products’ in Article
III:4, we must turn, first, to the ‘general principle’ in Article III:1, rather than to the term ‘like products’ in
Article
III:2.”(357)
235. After emphasizing the significance of
Article III:1 for the
interpretation of Article III:4, the Appellate Body in
EC — Asbestos
considered the different respective structures of Articles III:2 and
III:4:
“In addition, we observe that, although the obligations in
Articles III:2 and III:4
both apply to ‘like products’, the text of Article III:2 differs in one important respect from the text of Article III:4. Article III:2 contains two separate sentences, each imposing distinct
obligations: the first lays down obligations in respect of ‘like
products’, while the second lays down obligations in respect of ‘directly
competitive or substitutable’ products.(358) By contrast,
Article III:4 applies only to ‘like products’ and does not include a provision
equivalent to the second sentence of Article III:2. We note that, in
this dispute, the Panel did not examine, at all, the significance of
this textual difference between paragraphs 2 and
4 of Article III.”(359)
236. The Appellate Body on
EC — Asbestos also recalled its report
in Japan — Alcoholic Beverages II, where it had emphasized the need to
interpret the two sentences of Article
III:2 and the separate
obligations contained therein in the light of the structure of Article
III:2:
“For us, this textual difference between paragraphs 2 and
4 of Article III has considerable implications for the meaning of the term
‘like products’ in these two provisions. In Japan — Alcoholic
Beverages, we concluded, in construing Article
III:2, that the two
separate obligations in the two sentences of Article
III:2 must be
interpreted in a harmonious manner that gives meaning to both sentences
in that provision. We observed there that the interpretation of one of
the sentences necessarily affects the interpretation of the other. Thus,
the scope of the term ‘like products’ in the first sentence of Article
III:2 affects, and is affected by, the scope of the phrase ‘directly
competitive or substitutable’ products in the second sentence of that
provision. We said in Japan — Alcoholic Beverages:
‘Because the second sentence of Article
III:2 provides for a
separate and distinctive consideration of the protective aspect of a
measure in examining its application to a broader category of products
that are not ‘like products’ as contemplated by the first sentence,
we agree with the Panel that the first sentence of Article
III:2 must be
construed narrowly so as not to condemn measures that its strict terms
are not meant to condemn. Consequently, we agree with the Panel also
that the definition of ‘like products’ in Article III:2, first
sentence, should be construed narrowly.’(360)
In construing Article III:4, the same interpretive considerations do
not arise, because the ‘general principle’ articulated in Article III:1
is expressed in Article III:4, not through two distinct
obligations, as in the two sentences in Article III:2, but instead
through a single obligation that applies solely to ‘like products’.
Therefore, the harmony that we have attributed to the two sentences of Article III:2 need not and, indeed, cannot be replicated in interpreting
Article III:4. Thus, we conclude that, given the textual difference
between Articles III:2 and III:4, the ‘accordion’ of ‘likeness’
stretches in a different way in Article III:4.”(361)
(b) “like products”
(i) General
Relationship with “like products” under Article III:2, first
sentence
237. In
EC — Asbestos, the Appellate Body interpreted the term “like”
in Article III:4 by comparing the same term as used in
Article
III:2.
The Appellate Body emphasized the need for consistency between the
general principle of Article III, contained in
paragraph
1, and the
interpretation of Article III:4. The Appellate Body then interpreted the
term “like products” to refer to products which are in a competitive
relationship:
“[T]here must be consonance between the objective pursued by
Article III, as enunciated in the ‘general principle’ articulated in
Article III:1, and the interpretation of the specific expression of this
principle in the text of Article III:4. This interpretation must,
therefore, reflect that, in endeavouring to ensure ‘equality of
competitive conditions’, the ‘general principle’ in Article III
seeks to prevent Members from applying internal taxes and regulations in
a manner which affects the competitive relationship, in the marketplace,
between the domestic and imported products involved, ‘so as to afford
protection to domestic production.’
As products that are in a competitive relationship in the marketplace
could be affected through treatment of imports ‘less favourable’
than the treatment accorded to domestic products, it follows that the
word ‘like’ in Article III:4 is to be interpreted to apply to
products that are in such a competitive relationship. Thus, a
determination of ‘likeness’ under Article
III:4 is, fundamentally, a
determination about the nature and extent of a competitive relationship
between and among products. In saying this, we are mindful that there is
a spectrum of degrees of ‘competitiveness’ or ‘substitutability’
of products in the marketplace, and that it is difficult, if not
impossible, in the abstract, to indicate precisely where on this
spectrum the word ‘like’ in Article III:4 of the GATT 1994 falls. We
are not saying that all products which are in some competitive
relationship are ‘like products’ under Article
III:4. In ruling on
the measure at issue, we also do not attempt to define the precise scope
of the word ‘like’ in Article III:4. Nor do we wish to decide if the
scope of ‘like products’ in Article III:4
is co-extensive with the
combined scope of ‘like’ and ‘directly competitive or
substitutable’ products in Article
III:2. However, we recognize that
the relationship between these two provisions is important, because
there is no sharp distinction between fiscal regulation, covered by Article
III:2, and non-fiscal regulation, covered by Article
III:4. Both
forms of regulation can often be used to achieve the same ends. It would
be incongruous if, due to a significant difference in the product scope
of these two provisions, Members were prevented from using one form of
regulation — for instance, fiscal — to protect domestic production
of certain products, but were able to use another form of regulation —
for instance, non-fiscal to achieve those ends. This would frustrate a
consistent application of the ‘general principle’ in Article III:1.
For these reasons, we conclude that the scope of ‘like’ in Article
III:4 is broader than the scope of ‘like’ in Article
III:2, first
sentence. Nonetheless, we note, once more, that Article
III:2 extends
not only to ‘like products’, but also to products which are ‘directly
competitive or substitutable’, and that Article
III:4 extends only to
‘like products’. In view of this different language, and although we
need not rule, and do not rule, on the precise product scope of Article
III:4, we do conclude that the product scope of Article
III:4, although
broader than the first sentence of Article
III:2, is certainly not
broader than the combined product scope of the two sentences of
Article
III:2 of the GATT 1994.”(362)
238. The Appellate Body acknowledged that its interpretation resulted
in giving Article III:4 “a relatively broad product scope”.
Nevertheless the Appellate Body pointed out that mere “likeness” of
products and distinctions between “like products” in and of
themselves would not lead to inconsistency with Article
III:4; rather,
“less favourable treatment” would also have to be established in
order to find a violation of Article III:4:
“We recognize that, by interpreting the term ‘like products’ in
Article III:4 in this way, we give that provision a relatively broad
product scope — although no broader than the product scope of Article
III:2. In so doing, we observe that there is a second element that must
be established before a measure can be held to be inconsistent with Article
III:4. Thus, even if two products are ‘like’, that does not
mean that a measure is inconsistent with Article
III:4. A complaining
Member must still establish that the measure accords to the group of ‘like’
imported products ‘less favourable treatment’ than it accords to the
group of ‘like’ domestic products. The term ‘less favourable
treatment’ expresses the general principle, in Article III:1, that
internal regulations ‘should not be applied … so as to afford
protection to domestic production’. If there is ‘less favourable
treatment’ of the group of ‘like’ imported products, there is,
conversely, ‘protection’ of the group of ‘like’ domestic
products. However, a Member may draw distinctions between products which
have been found to be ‘like’, without, for this reason alone,
according to the group of ‘like’ imported products ‘less
favourable treatment’ than that accorded to the group of ‘like’
domestic products. In this case, we do not examine further the
interpretation of the term ‘treatment no less favourable’ in Article III:4, as the Panel’s findings on this issue have not been appealed
or, indeed, argued before us.”(363)
239. Further, in
EC — Asbestos, the Appellate Body also referred to
the Report of the Working Party on Border Tax Adjustment. It confirmed
that the criteria listed in this Report provide a framework for
analysing the “likeness” of products on a case-by-case basis.
However, the Appellate Body emphasized that these criteria were not
treaty language nor did they constitute a “closed list” and that “the
adoption of a particular framework to aid in the examination of evidence
does not dissolve the duty or the need to examine, in each case, all of
the pertinent evidence”:
“We turn to consideration of how a treaty interpreter should
proceed in determining whether products are ‘like’ under Article III:4. As in Article
III:2, in this determination, ‘[n]o one approach
… will be appropriate for all cases.’(364) Rather, an assessment
utilizing ‘an unavoidable element of individual, discretionary
judgement’(365) has to be made on a case-by-case basis. The Report of
the Working Party on Border Tax Adjustments outlined an approach for
analyzing ‘likeness’ that has been followed and developed since by
several panels and the Appellate Body.(366) This approach has, in the
main, consisted of employing four general criteria in analyzing ‘likeness’:
(i) the properties, nature and quality of the products; (ii) the
end-uses of the products; (iii) consumers’ tastes and habits — more
comprehensively termed consumers’ perceptions and behaviour — in
respect of the products; and (iv) the tariff classification of the
products.(367) We note that these four criteria comprise four categories
of ‘characteristics’ that the products involved might share: (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.
These general criteria, or groupings of potentially shared
characteristics, provide a framework for analyzing the ‘likeness’ of
particular products on a case-by-case basis. These criteria are, it is
well to bear in mind, simply tools to assist in the task of sorting and
examining the relevant evidence. They are neither a treaty-mandated nor
a closed list of criteria that will determine the legal characterization
of products. More important, the adoption of a particular framework to
aid in the examination of evidence does not dissolve the duty or the
need to examine, in each case, all of the pertinent evidence. In
addition, although each criterion addresses, in principle, a different
aspect of the products involved, which should be examined separately,
the different criteria are interrelated. For instance, the physical
properties of a product shape and limit the end-uses to which the
products can be devoted. Consumer perceptions may similarly influence
— modify or even render obsolete — traditional uses of the products.
Tariff classification clearly reflects the physical properties of a
product.
The kind of evidence to be examined in assessing the ‘likeness’
of products will, necessarily, depend upon the particular products and
the legal provision at issue. When all the relevant evidence has been
examined, panels must determine whether that evidence, as a whole,
indicates that the products in question are ‘like’ in terms of the
legal provision at issue. We have noted that, under Article III:4 of the
GATT 1994, the term ‘like products’ is concerned with competitive
relationships between and among products. Accordingly, whether the
Border Tax Adjustments framework is adopted or not, it is important
under Article III:4 to take account of evidence which indicates whether,
and to what extent, the products involved are — or could be — in a
competitive relationship in the marketplace.”(368)
240. In
Japan — Alcoholic Beverages II, the Appellate Body found
that the term “like product” evoked the image of an accordion whose
width would vary depending on the provision under which the term was
being interpreted. See paragraph 162
above.
Relationship with “like products” in other GATT provisions
241. With respect to the interpretation of “like products” under
GATT Article I, see paragraphs 15–16
above.
(ii) Relevant factors
General
242. In
EC — Asbestos, the Appellate Body reviewed the Panel’s
approach to its “likeness” analysis, and criticised the Panel for
not taking into account all of the relevant criteria:
“It is our view that, having adopted an approach based on the four
criteria set forth in Border Tax Adjustments, the Panel should have
examined the evidence relating to each of those four criteria and, then,
weighed all of that evidence, along with any other relevant evidence, in
making an overall determination of whether the products at issue could
be characterized as ‘like’. Yet, the Panel expressed a ‘conclusion’
that the products were ‘like’ after examining only the first of the
four criteria. The Panel then repeated that conclusion under the second
criterion without further analysis — before dismissing altogether the
relevance of the third criterion and also before rejecting the differing
tariff classifications under the fourth criterion. In our view, it was
inappropriate for the Panel to express a ‘conclusion’ after
examining only one of the four criteria. By reaching a ‘conclusion’
without examining all of the criteria it had decided to examine, the
Panel, in reality, expressed a conclusion after examining only some of
the evidence. Yet, a determination on the ‘likeness’ of products
cannot be made on the basis of a partial analysis of the evidence, after
examination of just one of the criteria the Panel said it would examine.
For this reason, we doubt whether the Panel’s overall approach has
allowed the Panel to make a proper characterization of the ‘likeness’
of the fibres at issue.”(369)
243. In
EC — Asbestos, the Appellate Body also disagreed with the
Panel’s findings with respect to the examination of the first criteria
of likeness — product properties. More specifically, the Appellate
Body held that toxicity was a physical difference to be taken into
account in the determination of “likeness” and linked this criterion
to the criterion of competitive relationship between the products at
issue:
“Panels must examine fully the physical properties of products. In
particular, panels must examine those physical properties of products
that are likely to influence the competitive relationship between
products in the marketplace. …
…
This carcinogenicity, or toxicity, constitutes, as we see it, a
defining aspect of the physical properties of chrysotile asbestos fibres.
The evidence indicates that PCG fibres, in contrast, do not share these
properties, at least to the same extent. We do not see how this highly
significant physical difference cannot be a consideration in examining
the physical properties of a product as part of a determination of “likeness”
under Article III:4 of the GATT 1994.”(370)
244. Also, in
EC — Asbestos, with respect to the criteria of
end-use and consumer tastes and habits, the Appellate Body again
established an explicit link to the criterion of a competitive
relationship between products:
“Before examining the Panel’s findings under the second and third
criteria, we note that these two criteria involve certain of the key
elements relating to the competitive relationship between products:
first, the extent to which products are capable of performing the same,
or similar, functions (end-uses), and, second, the extent to which
consumers are willing to use the products to perform these functions
(consumers’ tastes and habits). Evidence of this type is of particular
importance under Article III of the GATT 1994, precisely because that
provision is concerned with competitive relationships in the
marketplace. If there is — or could be — no competitive relationship
between products, a Member cannot intervene, through internal taxation
or regulation, to protect domestic production. Thus, evidence about the
extent to which products can serve the same end-uses, and the extent to
which consumers are — or would be — willing to choose one product
instead of another to perform those end-uses, is highly relevant
evidence in assessing the ‘likeness’ of those products under Article
III:4 of the GATT 1994.”(371)
245. After having found that the (degree of) toxicity of a product
was a physical characteristic to be taken into account for the
determination of likeness under Article III:4, the Appellate Body
emphasized the significance of the toxicity of a subject product also in
relation to consumers’ behaviour:
“In this case especially, we are also persuaded that evidence
relating to consumers’ tastes and habits would establish that the
health risks associated with chrysotile asbestos fibres influence
consumers’ behaviour with respect to the different fibres at issue.(372)
We observe that, as regards chrysotile asbestos and PCG fibres, the
consumer of the fibres is a manufacturer who incorporates the fibres
into another product, such as cement-based products or brake linings. We
do not wish to speculate on what the evidence regarding these consumers
would have indicated; rather, we wish to highlight that consumers’
tastes and habits regarding fibres, even in the case of commercial
parties, such as manufacturers, are very likely to be shaped by the
health risks associated with a product which is known to be highly
carcinogenic. A manufacturer cannot, for instance, ignore the
preferences of the ultimate consumer of its products. If the risks posed
by a particular product are sufficiently great, the ultimate consumer
may simply cease to buy that product. This would, undoubtedly, affect a
manufacturer’s decisions in the marketplace. Moreover, in the case of
products posing risks to human health, we think it likely that
manufacturers’ decisions will be influenced by other factors, such as
the potential civil liability that might flow from marketing products
posing a health risk to the ultimate consumer, or the additional costs
associated with safety procedures required to use such products in the
manufacturing process.”(373)
246. In
EC — Asbestos, the Appellate Body rejected Canada’s
argument that consumers’ tastes and habits were irrelevant in this
dispute because “the existence of the measure has disturbed normal
conditions of competition between the products”:(374)
“In our Report in Korea — Alcoholic
Beverages, we observed that,
‘[p]articularly in a market where there are regulatory barriers to
trade or to competition, there may well be latent demand’ for a
product.(375) We noted that, in such situations, ‘it may be highly
relevant to examine latent demand’ that is suppressed by regulatory
barriers.(376) In addition, we said that ‘evidence from other markets
may be pertinent to the examination of the market at issue, particularly
when demand on that market has been influenced by regulatory barriers to
trade or to competition.’(377) We, therefore, do not accept Canada’s
contention that, in markets where normal conditions of competition have
been disturbed by regulatory or fiscal barriers, consumers’ tastes and
habits cease to be relevant. In such situations, a Member may submit
evidence of latent, or suppressed, consumer demand in that market, or it
may submit evidence of substitutability from some relevant third market.
In making this point, we do not wish to be taken to suggest that there
is latent demand for chrysotile asbestos fibres. Our point is simply
that the existence of the measure does not render consumers’ tastes
and habits irrelevant, as Canada contends.”(378)
247. Further, in
EC — Asbestos, the Appellate Body acknowledged
that an analysis of the various criteria for establishing “likeness”
can produce “conflicting indications”; however, it emphasized that
the fact that the analysis of a particular criterion may produce an
unclear result does not relieve a panel of its duty to inquire into the
relevant evidence:
“In many cases, the evidence will give conflicting indications,
possibly within each of the four criteria. For instance, there may be
some evidence of similar physical properties and some evidence of
differing physical properties. Or the physical properties may differ
completely, yet there may be strong evidence of similar end-uses and a
high degree of substitutability of the products from the perspective of
the consumer. A panel cannot decline to inquire into relevant evidence
simply because it suspects that evidence may not be ‘clear’ or, for
that matter, because the parties agree that certain evidence is not
relevant. In any event, we have difficulty seeing how the Panel could
conclude that an examination of consumers’ tastes and habits ‘would
not provide clear results’, given that the Panel did not examine any
evidence relating to this criterion.”(379)
“the situation of the parties dealing in [subject products]”
248. In
US — Gasoline, the Panel addressed the respondent’s
argument that with respect to the treatment of the imported and domestic
products, the situation of the parties dealing in gasoline must be taken
into consideration:
“The Panel observed first that the United States did not argue that
imported gasoline and domestic gasoline were not like per se. It had
argued rather that with respect to the treatment of the imported and
domestic products, the situation of the parties dealing in the gasoline
must be taken into consideration. The Panel, recalling its previous
discussion of the factors to be taken into account in the determination
of like product, noted that chemically-identical imported and domestic
gasoline by definition have exactly the same physical characteristics,
end-uses, tariff classification, and are perfectly substitutable. The
Panel found therefore that chemically-identical imported and domestic
gasoline are like products under Article III:4.”(380)
Likeness of products when origin is the sole distinctive criterion
249. In
India — Autos, the Panel declared that, when origin is the
sole distinguishing criterion, it is correct to treat products as “alike”
within the meaning of Article III:4:
“The Panel notes that the only factor of distinction under the ‘indigenization’
condition between products which contribute to fulfilment of the
condition and products which do not, is the origin of the product as
either imported or domestic. India has not disputed the likeness of the
relevant automotive parts and components of domestic or foreign origin
for the purposes of Article III:4 of the GATT
1994. Origin being the
sole criterion distinguishing the products, it is correct to treat such
products as like products within the meaning of Article
III:4.”(381)
250. The Panel on
Canada — Wheat Exports and Grain Imports
confirmed this jurisprudence relying also on the Panel report in
Argentina — Hides and Leather:
“In Argentina — Hides and Leather, in dealing with a claim under
Article III:2 of the GATT 1994, the panel found that where a Member
draws an origin-based distinction in respect of internal taxes, a
comparison of specific products is not required and, consequently, it is
not necessary to examine the various likeness criteria. … While this
finding is pertained to Article
III:2, we consider that the same
reasoning is applicable in this case mutatis mutandi.”(382)
(iii) Reference to GATT practice
251. With respect to GATT practice on this subject-matter, see also
GATT Analytical Index, pages 171–172.
(c) “laws, regulations or requirements”
(i) Differences from “measures” under Article XXIII:1(b)
252. In
Japan — Film, the Panel examined the relationship between
the term “laws, regulations or requirements” under Article
III:4 and
the term “measures” under Article
XXIII:1(b). The Panel opined that
the concept of “measure” for the purposes of Article
XXIII:1(b) is
“equally applicable to the definitional scope of ‘all laws,
regulations and requirements’ in Article III:4:
“A literal reading of the words all laws, regulations and
requirements in Article III:4 could suggest that they may have a
narrower scope than the word measure in Article
XXIII:1(b). However,
whether or not these words should be given as broad a construction as
the word measure, in view of the broad interpretation assigned to them
in the cases cited above, we shall assume for the purposes of our
present analysis that they should be interpreted as encompassing a
similarly broad range of government action and action by private parties
that may be assimilated to government action. In this connection, we
consider that our previous discussion of GATT cases on administrative
guidance in relation to what may constitute a ‘measure’ under Article
XXIII:1(b), specifically the panel reports on Japan — Semi-conductors and
Japan — Agricultural Products, is equally
applicable to the definitional scope of “all laws, regulations and
requirements” in Article III:4.”(383)
(ii) Non-mandatory measures
253. In
Canada — Autos, the Panel, in a finding subsequently not
addressed by the Appellate Body, held that a measure can be subject to Article
III:4 even if its compliance is not mandatory, and noted as
follows:
“We note that it has not been contested in this dispute that, as
stated by previous GATT and WTO panel and appellate body reports, Article
III:4 applies not only to mandatory measures but also to
conditions that an enterprise accepts in order to receive an advantage,(384) including in cases where the advantage is in the form of a
benefit with respect to the conditions of importation of a product.(385)
The fact that compliance with the CVA requirements is not mandatory but
a condition which must be met in order to obtain an advantage consisting
of the right to import certain products duty-free therefore does not
preclude application of Article III:4.”(386)
254. In
Canada — Wheat Exports and Grain Imports, Canada argued
that the measure at issue could only be found inconsistent if it
mandated or required less favourable treatment. Making reference to the
Appellate Body Report in US — Corrosion-Resistant Steel Sunset Review(387), the Panel made the following finding which was not challenged
on appeal:
“Canada is of the view that since the United States in this case is
challenging Section 57(c), as such, Section 57(c) would, under GATT/WTO
practice, be inconsistent with Article III:4 only if it mandated, or
required, less favourable treatment of foreign grain. Canada is
referring here to the so-called “mandatory/discretionary”
distinction which has been applied by numerous GATT and WTO panels. The
United States did not specifically address this point. We note that the
Appellate Body has not, as yet, expressed a view on whether the
mandatory/discretionary distinction is a legally appropriate analytical
tool for panels to use. In this case, our ultimate conclusion with
respect to the United States’ challenge to Section 57(c) does not
depend on whether or not the mandatory/discretionary distinction is
valid. This said we will continue on the assumption that Section 57(c)
is inconsistent with Article III:4 only if it mandates,
or requires,
less favourable treatment of imported grain.”(388)
(iii) Action of private parties
255. In
Canada — Autos, the Panel examined the GATT-consistency of
commitments undertaken by Canadian motor vehicle manufacturers in their
letters addressed to the Canadian Government to increase Canadian value
added in the production of motor vehicles. Referring to the GATT Panel
Reports on Canada — FIRA and EEC — Parts and Components(389), the
Panel analysed whether the action of private parties is subject to Article
III:4. The Panel found that “[n]either legal enforceability [n]or
the existence of a link between a private action and an advantage
conferred by a government is a necessary condition in order for an
action by a private party to constitute a ‘requirement’”:
“It is evident from the reasoning of the Panel Reports in
Canada
— FIRA and in EEC — Parts and Components that these Reports do not
attempt to state general criteria for determining whether a commitment
by a private party to a particular course of action constitutes a ‘requirement’
for purposes of Article III:4. While these cases are instructive in that
they confirm that both legally enforceable undertakings and undertakings
accepted by a firm to obtain an advantage granted by a government can
constitute ‘requirements’ within the meaning of Article
III:4, we do
not believe that they provide support for the proposition that either
legal enforceability or the existence of a link between a private action
and an advantage conferred by a government is a necessary condition in
order for an action by a private party to constitute a ‘requirement.’
To qualify a private action as a ‘requirement’ within the meaning of
Article III:4 means that in relation to that action a Member is bound by
an international obligation, namely to provide no less favourable
treatment to imported products than to domestic products.
A determination of whether private action amounts to a ‘requirement’
under Article III:4 must therefore necessarily rest on a finding that
there is a nexus between that action and the action of a government such
that the government must be held responsible for that action. We do not
believe that such a nexus can exist only if a government makes
undertakings of private parties legally enforceable, as in the situation
considered by the Panel on Canada — FIRA, or if a government
conditions the grant of an advantage on undertakings made by private
parties, as in the situation considered by the Panel on EEC — Parts
and Components. We note in this respect that the word ‘requirement’
has been defined to mean ‘1. The action of requiring something; a
request. 2. A thing required or needed, a want, a need. Also the action
or an instance of needing or wanting something. 3. Something called for
or demanded; a condition which must be complied with.’ The word ‘requirements’
in its ordinary meaning and in light of its context in Article
III:4 clearly implies government action involving a demand, request or the
imposition of a condition but in our view this term does not carry a
particular connotation with respect to the legal form in which such
government action is taken. In this respect, we consider that, in
applying the concept of ‘requirements’ in Article
III:4 to
situations involving actions by private parties, it is necessary to take
into account that there is a broad variety of forms of government of
action that can be effective in influencing the conduct of private
parties.”(390)
(iv) The term “requirement”
256. In
India — Autos, the Panel analysed the notion of “requirement”
within Article III:4:
“An ordinary meaning of the term ‘requirement’, as articulated
in the New Shorter Oxford Dictionary, is ‘Something called for or
demanded; a condition which must be complied with’. The Canada —
FIRA panel further suggested that there must be a distinction between
‘regulations’ and ‘requirements’ and that requirements could not
be assumed to mean the same, i.e. ‘mandatory rules applying across the
board’.”(391)
257. In
India — Autos, the Panel recalled that GATT jurisprudence
“suggests two distinct situations which would satisfy the term ‘requirement’
in Article III:4: (i) obligations which an enterprise is ‘legally
bound to carry out’; [and (ii)] those which an enterprise voluntarily
accepts in order to obtain an advantage from the government.” It
therefore stated that:
“A binding enforceable condition seems to fall squarely within the
ordinary meaning of the word ‘requirement’, in particular as ‘a
condition which must be complied with’.(392) The enforceability of the
measure in itself, independently of the means actually used or not to
enforce it, is a sufficient basis for a measure to constitute a
requirement under Article III:4 …”(393)
(v) Reference to GATT practice
258. With respect to GATT practice on this subject-matter, see also
GATT Analytical Index, pages 173–174.
(d) “affecting the internal sale, offering for sale, purchase
…”
259. In
EC — Bananas III, the Appellate Body upheld the Panel’s
finding that the EC import licensing requirements concerning import
quotas for bananas were inconsistent with Article
III:4. The Panel had
found that in answering the question whether Article
III:4 was
applicable to the EC import licensing requirements, it was important to
distinguish between, on the one hand, the mere requirement to present a
licence upon importation of a product as such and, on the other hand,
the procedures applied by the European Communities in the context of the
licence allocation. The latter procedures, in the view of the Panel,
were internal laws, regulations and requirements affecting the internal
sale of imported products.(394) In this context, the Panel opined that the
scope of application of Articles I and
III was not necessarily mutually
exclusive.(395) The Appellate Body, in examining whether the measure at
issue was subject to Article III:4, attached significance to the fact
that the measure at issue went beyond “mere import licence
requirements” and that the “intention” of the measure was to “cross-subsidize
distributors of [certain] bananas”:
“At issue in this appeal is not whether any import licensing
requirement, as such, is within the scope of Article
III:4, but whether
the EC procedures and requirements for the distribution of import
licences for imported bananas among eligible operators within the
European Communities are within the scope of this provision. … These
rules go far beyond the mere import licence requirements needed to
administer the tariff quota for third-country and non-traditional ACP
bananas or Lomé Convention requirements for the importation of bananas.
These rules are intended, among other things, to cross-subsidize
distributors of EC (and ACP) bananas and to ensure that EC banana
ripeners obtain a share of the quota rents. As such, these rules affect
‘the internal sale, offering for sale, purchase, …’ within the
meaning of Article III:4, and therefore fall within the scope of this
provision.”(396)
260. In
Canada — Autos, the Panel, in a finding subsequently not
addressed by the Appellate Body, interpreted the term “affecting” as
having a broad scope of application and as referring to measures which
have an effect on imported goods:
“With respect to whether the CVA requirements affect the ‘internal
sale, … or use’ of products, we note that, as stated by the
Appellate Body, the ordinary meaning of the word ‘affecting’ implies
a measure that has ‘an effect on’ and thus indicates a broad scope
of application.(397) The word ‘affecting’ in
Article III:4 of the GATT
has been interpreted to cover not only laws and regulations which
directly govern the conditions of sale or purchase but also any laws or
regulations which might adversely modify the conditions of competition
between domestic and imported products.(398)
…
The idea that a measure which distinguishes between imported and
domestic products can be considered to affect the internal sale or use
of imported products only if such a measure is shown to have an impact
under current circumstances on decisions of private firms with respect
to the sourcing of products is difficult to reconcile with the concept
of the ‘no less favourable treatment’ obligation in Article
III:4 as
an obligation addressed to governments to ensure effective equality of
competitive opportunities between domestic and imported products, and
with the principle that a showing of trade effects is not necessary to
establish a violation of this obligation. In this respect, it should be
emphasized that, contrary to what has been argued by Canada, the present
case does not involve ‘the possibility of a future change in
circumstances creating the potential for discrimination’ or ‘discrimination
that might exist after a change in circumstances that could occur at
some unspecified time in the future.’ Rather, the present case clearly
involves formally different treatment of imported and domestic products
albeit that the actual trade effects of this different treatment may be
minimal under current circumstances. We therefore disagree with Canada’s
assertion that the CVA requirements do not entail a ‘current potential
for discrimination under present circumstances.’ As a consequence,
whether or not in practice motor vehicle manufacturers can easily meet
the CVA requirements of the MVTO 1998 and the SROs on the basis of
labour costs alone does not alter our finding that the CVA requirements
affect the internal sale or use of products. We therefore do not
consider it necessary to examine the factual issues raised by the
parties in support of their different views on this matter.
In light of the foregoing considerations, we find that the CVA
requirements affect the internal sale or use in Canada of imported
parts, materials and non-permanent equipment for use in the production
of motor vehicles. We further consider that the CVA requirements accord
less favourable treatment within the meaning of Article
III:4 to
imported parts, materials and non-permanent equipment than to like
domestic products because, by conferring an advantage upon the use of
domestic products but not upon the use of imported products, they
adversely affect the equality of competitive opportunities of imported
products in relation to like domestic products.”(399)
261. In the
Canada — Autos case, the Panel found that the Canadian
value added requirements, which stipulated that the amount of Canadian
value added in the manufacturer’s local production of motor vehicles
must be equal to or greater than the amount of Canadian value added in
the production of motor vehicles, by the same manufacturer, during an
earlier reference period, were in violation of Article III:4 of GATT
1994. The Panel also addressed another aspect of the Canadian measures,
the so-called “ratio requirements”. Under these measures, the ratio
of the net sales value of the vehicles produced in Canada to the net
sales value of the vehicles sold for consumption in Canada during the
relevant period had to be at least equal to the ratio in a reference
year. The Panel found that the “ratio requirements” did not affect
the sale of imported products:
“For purposes of Article
III, the manner in which the ratio
requirements affect the treatment accorded to motor vehicles with
respect to the conditions of their importation is irrelevant. That there
is a limitation on the net sales value of vehicles which can be imported
duty-free therefore cannot constitute a grounds for finding a violation
of Article III:4. The fact that internal sales of domestic vehicles are
not subject to a ‘similar’ limitation is also without relevance. By
definition, a violation of Article III cannot be established on the
basis of a comparison between the conditions of internal sale of
domestic products with the conditions of importation of imported
products.”(400)
262. In
India — Autos, the Panel considered that, in order to rule
on whether certain “indigenization” requirements were inconsistent
with Article III:4 of GATT 1994, it had to determine,
inter alia,
whether the measures “affected” the “internal sale, purchase,
transportation, distribution or use” of the products concerned. In
that regard, the Panel recalled that the ordinary meaning of the term
“affecting” has been understood to imply “a measure that has an
effect on”. It went on to state that:
“[T]he fact that the measure applies only to imported products need
not [be], in itself, an obstacle to its falling within the purview of
Article III.(401) For example, an internal tax, or a product standard
conditioning the sale of the imported but not of the like domestic
product, could nonetheless ‘affect’ the conditions of the imported
product on the market and could be a source of less favorable treatment.
Similarly, the fact that a requirement is imposed as a condition on
importation is not necessarily in itself an obstacle to its falling
within the scope of Article III:4.(402)”(403)
263. In
US — FSC (Article 21.5 — EC), the Appellate Body shared
the view that the word “affecting” in Article III:4 of the GATT 1994
has a “broad scope of application”:
“We observe that the clause in which the word ‘affecting’
appears — ‘in respect of all laws, regulations and requirements
affecting their internal sale, offering for sale, purchase,
transportation, distribution or use’ — serves to define the scope of
application of Article III:4. (emphasis added) Within this phrase, the
word ‘affecting’ operates as a link between identified types of
government action (‘laws, regulations and requirements’) and
specific transactions, activities and uses relating to products in the
marketplace (‘internal sale, offering for sale, purchase,
transportation, distribution or use’). It is, therefore, not any ‘laws,
regulations and requirements’ which are covered by Article
III:4, but
only those which ‘affect’ the specific transactions, activities and
uses mentioned in that provision. Thus, the word ‘affecting’ assists
in defining the types of measure that must conform to the obligation not
to accord ‘less favourable treatment’ to like imported products,
which is set out in Article III:4.
The word ‘affecting’ serves a similar function in
Article I:1 of
the General Agreement on Trade in Services (the ‘GATS’), where it
also defines the types of measure that are subject to the disciplines
set forth elsewhere in the GATS but does not, in itself, impose any
obligation.(404) In
EC — Bananas III, we considered the meaning of the
word ‘affecting’ in that provision of GATS. We stated:
[t]he ordinary meaning of the word ‘affecting’ implies a measure
that has ‘an effect on’, which indicates a broad scope of
application. This interpretation is further reinforced by the
conclusions of previous panels that the term ‘affecting’ in the
context of Article III of the GATT is wider in scope than such terms as
‘regulating’ or ‘governing’.(405) (emphasis added, footnote
omitted).”(406)
(i) Reference to GATT practice
264. With respect to GATT practice on this subject-matter.
(e) “treatment no less favourable”
(i) General
Equality of competitive opportunities
265. In
US — Gasoline, the Panel, in a finding subsequently not
addressed by the Appellate Body, found that the measure in question
afforded to imported products less favourable treatment than that
afforded to domestic products because sellers of domestic gasoline were
authorized to use an individual baseline, while sellers of imported
gasoline had to use the more onerous statutory baseline:
“The Panel observed that domestic gasoline benefited
in general
from the fact that the seller who is a refiner used an individual
baseline, while imported gasoline did not. This resulted in less
favourable treatment to the imported product, as illustrated by the case
of a batch of imported gasoline which was chemically-identical to a
batch of domestic gasoline that met its refiner’s individual baseline,
but not the statutory baseline levels. In this case, sale of the
imported batch of gasoline on the first day of an annual period would
require the importer over the rest of the period to sell on the whole
cleaner gasoline in order to remain in conformity with the Gasoline
Rule. On the other hand, sale of the chemically-identical batch of
domestic gasoline on the first day of an annual period would not require
a domestic refiner to sell on the whole cleaner gasoline over the period
in order to remain in conformity with the Gasoline Rule. The Panel also
noted that this less favourable treatment of imported gasoline induced
the gasoline importer, in the case of a batch of imported gasoline not
meeting the statutory baseline, to import that batch at a lower price.
This reflected the fact that the importer would have to make cost and
price allowances because of its need to import other gasoline with which
the batch could be averaged so as to meet the statutory baseline.
Moreover, the Panel recalled an earlier panel report which stated that
‘the words “treatment no less favourable” in paragraph 4 call for
effective equality of opportunities for imported products in respect of
laws, regulations and requirements affecting the internal sale, offering
for sale, purchase, transportation, distribution or use of products.’(407)
The Panel found therefore that since, under the baseline establishment
methods, imported gasoline was effectively prevented from benefitting
from as favourable sales conditions as were afforded domestic gasoline
by an individual baseline tied to the producer of a product, imported
gasoline was treated less favourably than domestic gasoline.”(408)
266. In
Japan — Film, the Panel reiterated the standard of equality
of competitive conditions as a benchmark for establishing “no less
favourable treatment”:
“Recalling the statement of the Appellate Body in
Japan — Alcoholic Beverages that ‘Article III obliges Members of the WTO to
provide equality of competitive conditions for imported products in
relation to domestic products’(409), we consider that this standard of
effective equality of competitive conditions on the internal market is
the standard of national treatment that is required, not only with
regard to Article III generally, but also more particularly with regard
to the ‘no less favourable treatment’ standard in Article
III:4. We
note in this regard that the interpretation of equal treatment in terms
of effective equality of competitive opportunities, first clearly
enunciated by the panel on US — Section 337(410), has been followed
consistently in subsequent GATT and WTO panel reports.(411) The panel
report on US — Section 337 explains the test in very clear terms,
noting that
‘the “no less favourable” treatment requirement set out in
Article III:4, is unqualified. These words are to be found throughout
the General Agreement and later Agreements negotiated in the GATT
framework as an expression of the underlying principle of equality of
treatment of imported products as compared to the treatment given either
to other foreign products, under the most favoured nation standard, or
to domestic products, under the national treatment standard of Article
III. The words “treatment no less favourable” in paragraph 4 call
for effective equality of opportunities for imported products in respect
of the application of laws, regulations and requirements affecting the
internal sale, offering for sale, purchase transportation, distribution
or use of products. This clearly sets a minimum permissible standard as
a basis’ (emphasis added).(412)”(413)
267. In
Korea — Various Measures on Beef, the measure at issue
established a dual retail distribution system for the sale of beef.
Inter alia, imported beef was to be sold either in specialized stores
selling only imported beef or, in the case of larger department stores,
in separate sales. The Appellate Body first held that such different
treatment of imported products did not necessarily lead to less
favourable treatment:
“We observe … that Article
III:4 requires only that a measure
accord treatment to imported products that is ‘no less favourable’
than that accorded to like domestic products. A measure that provides
treatment to imported products that is different from that accorded to
like domestic products is not necessarily inconsistent with Article III:4, as long as the treatment provided by the measure is ‘no less
favourable’. According ‘treatment no less favourable’ means, as we
have previously said, according conditions of competition no less
favourable to the imported product than to the like domestic product.(414)
This interpretation, which focuses on the conditions of competition
between imported and domestic like products, implies that a measure
according formally different treatment to imported products does not
per se, that is, necessarily, violate Article III:4. In
United States — Section 337, this point was persuasively made. In that case, the panel
had to determine whether United States patent enforcement procedures,
which were formally different for imported and for domestic products,
violated Article III:4. That panel said:
‘On the one hand, contracting parties may apply to imported
products different formal legal requirements if doing so would accord
imported products more favourable treatment. On the other hand, it also
has to be recognised that there may be cases where the application of
formally identical legal provisions would in practice accord less
favourable treatment to imported products and a contracting party might
thus have to apply different legal provisions to imported products to
ensure that the treatment accorded them is in fact no less favourable.
For these reasons, the mere fact that imported products are subject
under Section 337 to legal provisions that are different from those
applying to products of national origin is in itself not conclusive in
establishing inconsistency with Article III:4.’(415) (emphasis added)
A formal difference in treatment between imported and like domestic
products is thus neither necessary, nor sufficient, to show a violation
of Article III:4. Whether or not imported products are treated ‘less
favourably’ than like domestic products should be assessed instead by
examining whether a measure modifies the conditions of competition in
the relevant market to the detriment of imported products.”(416)
268. In
EC — Asbestos, the Appellate Body interpreted the term “no
less favourable treatment” as requiring that the group of imported
products not be accorded less favourable treatment than that accorded to
the group of domestic like products:
“A complaining Member must still establish that the measure accords
to the group of ‘like’ imported products ‘less favourable
treatment’ than it accords to the group of ‘like’ domestic
products. The term ‘less favourable treatment’ expresses the general
principle, in Article III:1, that internal regulations ‘should not be
applied … so as to afford protection to domestic production’. If
there is ‘less favourable treatment’ of the group of ‘like’
imported products, there is, conversely, ‘protection’ of the group
of ‘like’ domestic products. However, a Member may draw distinctions
between products which have been found to be ‘like’, without, for
this reason alone, according to the group of ‘like’ imported
products ‘less favourable treatment’ than that accorded to the group
of ‘like’ domestic products. In this case, we do not examine further
the interpretation of the term ‘treatment no less favourable’ in Article III:4, as the Panel’s findings on this issue have not been
appealed or, indeed, argued before us.”(417)
Relationship with “upsetting the competitive relationship” under
Article XXIII:1(b)
269. In
Japan — Film, the Panel equated the standards of “upsetting
effective equality of competitive opportunities” under Article
III:4 and “upsetting the competitive relationship” under Article
XXIII:1(b).
(ii) Methodology of comparison
Relevance of formal differences between imported and domestic
products in legal requirements
270. In
Korea — Various Measures on Beef, the Appellate Body
addressed the relevance of formal regulatory differences between
domestic and imported products and held that formally different
treatment of imported and domestic goods did not, in and of itself,
necessarily lead to less favourable treatment. See paragraph 267
above.
271. The Panel on
US — Gasoline examined the consistency with
Article III:4 of a United States environmental regulation on gasoline
and its potential to result in formally different regulation for
imported and domestic products. The Panel stated as follows:
“Although such a scheme could result in formally different
regulation for imported and domestic products, the Panel noted that
previous panels had accepted that this could be consistent with Article
III:4.(418) The requirement under
Article III:4 to treat an imported
product no less favourably than the like domestic product is met by
granting formally different treatment to the imported product, if that
treatment results in maintaining conditions of competition for the
imported product no less favourable than those of the like domestic
product.”(419)
272. In
EC — Bananas III, the Appellate Body agreed with the Panel’s
finding that the EC allocation method of tariff quota for bananas was
inconsistent with Article III:4. The Appellate Body addressed, among
other things, so-called hurricane licences, which authorize operators
who include or represent European Communities’ and African, Caribbean
and Pacific (ACP) producers, or producer organizations “to import in
compensation third-country bananas and non-traditional ACP bananas for
the benefit of the operators who directly suffered damage as a result of
the impossibility of the supplying the Community market with bananas
originating in affected producer regions”(420) because of the impact of
tropical storms:
“Although [the] issuance [of subject import licences] results in
increased exports from those countries, we note that hurricane licences
are issued exclusively to EC producers and producer organizations, or to
operators including or directly representing them. We also note that, as
a result of the EC practice relating to hurricane licences, these
producers, producer organizations or operators can expect, in the event
of a hurricane, to be compensated for their losses in the form of ‘quota
rents’ generated by hurricane licences. Thus, the practice of issuing
hurricane licences constitutes an incentive for operators to market EC
bananas to the exclusion of third-country and nontraditional ACP
bananas. This practice therefore affects the competitive conditions in
the market in favour of EC bananas. We do not dispute the right of WTO
Members to mitigate or remedy the consequences of natural disasters.
However, Members should do so in a manner consistent with their
obligations under the GATT 1994 and the other covered agreements.”(421)
273. In
US — FSC (Article 21.5 — EC), the Appellate Body declared
that the examination of whether a measure involves “less favourable
treatment” of imported products within the meaning of Article
III:4 cannot rest on simple assertion, but must be founded on a careful
analysis of the contested measure and of its implications in the
marketplace:
“The examination of whether a measure involves ‘less favourable
treatment’ of imported products within the meaning of Article
III:4 of
the GATT 1994 must be grounded in close scrutiny of the ‘fundamental
thrust and effect of the measure itself’.(422) This examination cannot
rest on simple assertion, but must be founded on a careful analysis of
the contested measure and of its implications in the marketplace. At the
same time, however, the examination need not be based on the actual
effects of the contested measure in the marketplace.(423)
…
In our view, the above conclusion is not nullified by the fact that
the fair market value rule will not give rise to less favourable
treatment for like imported products in each and every case … Even so,
the fact remains that in an indefinite number of other cases, the fair
market value rule operates, by its terms, as a significant constraint
upon the use of imported input products. We are not entitled to
disregard that fact.”(424)
Relevance of “treatment accorded to similarly situated domestic
parties”
274. In
US — Gasoline, the Panel, in a finding subsequently not
addressed by the Appellate Body, “rejected the US argument that the
requirements of Article III:4 are met because imported gasoline is
treated similarly to domestic gasoline from similarly situated domestic
parties”.(425) In addition to pointing out that “[the] wording [of
Article III:4] does not allow less favourable treatment dependent on the
characteristics of the producer and the nature of the data held by it”(426),
the Panel held that even if the approach of the United States were
followed, there would be great uncertainty and indeterminacy of the
basis of treatment:
“Apart from being contrary to the ordinary meaning of the terms of
Article III:4, any interpretation of Article
III:4 in this manner would
mean that the treatment of imported and domestic goods concerned could
no longer be assured on the objective basis of their likeness as
products. Rather, imported goods would be exposed to a highly subjective
and variable treatment according to extraneous factors. This would
thereby create great instability and uncertainty in the conditions of
competition as between domestic and imported goods in a manner
fundamentally inconsistent with the object and purpose of Article
III.
[E]ven if the US approach were to be followed, under any approach
based on similarly situated parties’ the comparison could just as
readily focus on whether imported gasoline from an identifiable foreign
refiner was treated more or less favourably than gasoline from an
identifiable US refiner. There were … many key respects in which these
refineries could be deemed to be the relevant similarly situated
parties, and the Panel could find no inherently objective criteria by
means of which to distinguish which of the many factors were relevant in
making a determination that any particular parties were ‘similarly
situated’. Thus, although these refineries were similarly situated,
the Gasoline Rule treated the products of these refineries differently
by allowing only gasoline produced by the domestic entity to benefit
from the advantages of an individual baseline. This consequential
uncertainty and indeterminacy of the basis of treatment underlined …
the rationale of remaining within the terms of the clear language,
object and purpose of Article III:4 as outlined above …”.(427)
Relevance of “more favourable treatment of some imported products”
275. In
US — Gasoline, the Panel rejected the US argument that the
subject regulation treated imported products “equally overall”(428),
stating as follows:
“The Panel noted that, in these circumstances, the argument that on
average the treatment provided was equivalent amounted to arguing that
less favourable treatment in one instance could be offset provided that
there was correspondingly more favourable treatment in another. This
amounted to claiming that less favourable treatment of particular
imported products in some instances would be balanced by more favourable
treatment of particular products in others.”(429)
Relationship with other methodologies of comparison
276. With respect to the methodology of comparison for “in excess
of those applied” under the first sentence of Article
III:2, see
paragraphs 175–186 above. With respect to the methodology of
comparison in identifying “directly competitive or substitutable
products” under the second sentence of Article
III:2, see paragraph
209 above. With respect to the methodology of comparison in examining
the “dissimilar taxation” under the second sentence of Article
III:2, see paragraphs 217–218
above.
(f) Relationship with other GATT provisions
(i) Relationship with Article XX
277. In
US — Gasoline, the Appellate Body discussed the
relationship between Article III:4 and
Article XX in interpreting
Article XX(g). The Appellate Body stated:
“Article XX(g) and its phrase, ‘relating to the conservation of
exhaustible natural resources,’ need to be read in context and in such
a manner as to give effect to the purposes and objects of the General
Agreement. The context of Article XX(g) includes the provisions of the
rest of the General Agreement, including in particular Articles
I, III
and XI; conversely, the context of
Articles I and III and
XI includes
Article XX. Accordingly, the phrase ‘relating to the conservation of
exhaustible natural resources’ may not be read so expansively as
seriously to subvert the purpose and object of Article
III:4. Nor may Article III:4 be given so broad a reach as effectively to emasculate
Article XX(g) and the policies and interests it embodies. The
relationship between the affirmative commitments set out in, e.g., Articles
I, III
and XI, and the policies and interests embodied in the
‘General Exceptions’ listed in Article
XX, can be given meaning
within the framework of the General Agreement and its object and purpose
by a treaty interpreter only on a case-to-case basis, by careful
scrutiny of the factual and legal context in a given dispute, without
disregarding the words actually used by the WTO Members themselves to
express their intent and purpose.”(430)
278. In
EC — Asbestos, the Appellate Body found that “carcinogenicity,
or toxicity, constitutes … a defining aspect of the physical
properties of [the subject products]”. See paragraph 243
above. The
Appellate Body disagreed with the Panel’s finding that considering the
health risks associated with a product under Article
III:4 would negate
the effect of Article XX(b):
“We do not agree with the Panel that considering evidence relating
to the health risks associated with a product, under Article
III:4,
nullifies the effect of Article XX(b) of the GATT
1994. Article XX(b)
allows a Member to ‘adopt and enforce’ a measure, inter alia,
necessary to protect human life or health, even though that measure is
inconsistent with another provision of the GATT 1994. Article
III:4 and
Article XX(b) are distinct and independent provisions of the GATT 1994
each to be interpreted on its own. The scope and meaning of Article
III:4 should not be broadened or restricted beyond what is required by
the normal customary international law rules of treaty interpretation,
simply because Article XX(b) exists and may be available to justify
measures inconsistent with Article III:4. The fact that an
interpretation of Article III:4, under those rules, implies a less
frequent recourse to Article XX(b) does not deprive the exception in
Article XX(b) of effet utile. Article XX(b) would only be deprived of
effet utile if that provision could not serve to allow a Member to ‘adopt
and enforce’ measures ‘necessary to protect human … life or health’.
Evaluating evidence relating to the health risks arising from the
physical properties of a product does not prevent a measure which is
inconsistent with Article III:4 from being justified under
Article XX(b).
We note, in this regard, that, different inquiries occur under these two
very different Articles. Under Article III:4, evidence relating to
health risks may be relevant in assessing the competitive relationship
in the marketplace between allegedly ‘like’ products. The same, or
similar, evidence serves a different purpose under Article
XX(b),
namely, that of assessing whether a Member has a sufficient basis for
‘adopting or enforcing’ a WTO-inconsistent measure on the grounds of
human health.”(431)
(ii) Relationship with Article XXIII:1(b)
279. In
Japan — Film, the Panel did not find a significant
distinction between the standard it had set out for Article XXIII:1(b)
and the standard of “upsetting effective equality of competitive
opportunities” under Article III:4:
“We recall our earlier findings that none of the eight distribution
‘measures’ cited by the United States had been shown to discriminate
against imported products, either in terms of a de jure discrimination
(a measure that discriminates on its face as to the origin of products)
or in terms of a de facto discrimination (a measure that in its
application upsets the relative competitive position between domestic
and imported products, as it existed at the time when a relevant tariff
concession was granted). In this connection, it could be argued that the
standard we enunciated and applied under Article
XXIII:1(b) — that of
‘upsetting the competitive relationship’— may be different from
the standard of ‘upsetting effective equality of competitive
opportunities’ applicable to Article III:4. However, we do not see any
significant distinction between the two standards apart from the fact
that this Article III:4 standard calls for no less favourable treatment
for imported products in general, whereas the Article
XXIII:1(b) standard calls for a comparison of the competitive relationship between
foreign and domestic products at two specific points in time, i.e., when
the concession was granted and currently.”(432)
(g) Reference to GATT practice
280. With respect to GATT practice on this subject-matter, see GATT
Analytical Index, pages 162–171.
5. Article III:8
(a) Item (b)
(i) “the payment of subsidies exclusively to domestic producers”
281. In the
Canada — Periodicals dispute, one of the measures at
issue related to postal rates charged by the Canadian Post Corporation,
a Crown Corporation controlled by the Canadian Government. Canada Post
applied reduced postal rates to Canadian-owned and
Canadian-controlled periodicals meeting certain requirements. These
lower postal rates were funded by the Department of Canadian Heritage,
which provided funds to Canada Post so that this agency could in turn
offer the reduced postal rates to eligible Canadian periodicals. Canada
argued that the reduced postal rate was exempted from the strictures of Article
III:4 by virtue of Article III:8(b), because the reduced postal
rate represented “payment of subsidies exclusively to domestic
producers”. The Panel agreed with Canada and found that the funds
provided by the Department of Canadian Heritage passed through Canada
Post directly to the eligible Canadian publishers and that therefore,
Canada’s funded rate scheme on periodicals qualified under Article
III:8(b). The Appellate Body reversed the Panel’s finding and found
that Article III:8(b) applied only to the payment of subsidies which
involves the expenditure of revenue by a government:
“In examining the text of Article
III:8(b), we believe that the
phrase, ‘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’ helps to elucidate the types of
subsidies covered by Article III:8(b) of the GATT
1994. It is not an
exhaustive list of the kinds of programmes that would qualify as ‘the
payment of subsidies exclusively to domestic producers’, but those
words exemplify the kinds of programmes which are exempted from the
obligations of Articles III:2
and III:4
of the GATT 1994.
Our textual interpretation is supported by the context of
Article
III:8(b) examined in relation to Articles III:2
and III:4 of the GATT 1994. Furthermore, the object and purpose of
Article III:8(b) is
confirmed by the drafting history of Article
III. In this context, we
refer to the following discussion in the Reports of the Committees and
Principal Sub-Committees of the Interim Commission for the International
Trade Organization concerning the provision of the Havana Charter for an
International Trade Organization that corresponds to Article III:8(b) of
the GATT 1994:
‘This sub-paragraph was redrafted in order to make it clear that
nothing in Article 18 could be construed to sanction the exemption of
domestic products from internal taxes imposed on like imported products
or the remission of such taxes. At the same time the Sub-Committee
recorded its view that nothing in this subparagraph or elsewhere in
Article 18 would override the provisions of Section C of Chapter IV.’(433)
We do not see a reason to distinguish a reduction of tax rates on a
product from a reduction in transportation or postal rates. Indeed, an
examination of the text, context, and object and purpose of Article
III:8(b) suggests that it was intended to exempt from the obligations of
Article III only the payment of subsidies which involves the expenditure
of revenue by a government.”(434)
282. In
Indonesia — Autos, the Panel examined the consistency of
certain tax exemption to domestically produced automobiles. The Panel
rejected Indonesia’s argument that tax exemptions are excluded from
the scope of Article III by virtue of
Article III:8(b), stating:
“In line with its two previous arguments, Indonesia maintains the
view that ‘the payment of subsidies’ in Article III:8(b) of GATT
must refer to all subsidies identified in Article 1 of the SCM
Agreement, not merely to the subset of ‘direct’ subsidies. Under
this approach, any measure which constitutes a subsidy within the
meaning of the SCM Agreement would not be subject to Article III of
GATT. In Indonesia’s view, only this interpretation avoids rendering
the SCM Agreement meaningless.
…
We consider that the purpose of Article III:8(b) is to confirm that
subsidies to producers do not violate Article
III, so long as they do
not have any component that introduces discrimination between imported
and domestic products. In our view the wording ‘payment of subsidies
exclusively to domestic producers’ exists so as to ensure that only
subsidies provided to producers, and not tax or other forms of
discrimination on products, be considered subsidies for the purpose of
Article III:8(b) of GATT. This is in line with previous GATT panels(435)
and WTO Appellate Body(436) reports.
We recall also that the type of interpretation sought by Indonesia
was explicitly excluded by the drafters of Article III:8(b) when they
rejected
a proposal by Cuba at the Havana Conference to amend the Article so as
to read:
‘The provisions of this Article shall not preclude the exemption of
domestic products from internal taxes as a means of indirect
subsidization in the cases covered under Article [XVI]’.(437)
The arguments submitted by Indonesia that its measures are only
governed by the SCM Agreement clearly do not find any support in the
wording of Article III:8(b) of
GATT. On the contrary, Article III:8(b)
confirms that the obligations of Article III and those of
Article XVI
(and the SCM Agreement) are different and complementary: subsidies to
producers are subject to the national treatment provisions of Article
III when they discriminate between imported and domestic products.”(438)
(b) Reference to GATT practice
283. With respect to GATT practice on this subject-matter.
D. Relationship with other Articles
1. Article I
284.
The Panel on US — Gasoline did not examine a claim under
GATT
Article I, considering that it was unnecessary in view of the findings
it had reached on the violation of Article III:4
for the subject
measure.(439)
2. Article II
285. In
EC — Bananas III, the Appellate Body found the EC import
licensing system for bananas inconsistent with Article
III:4. The
European Communities claimed that Article III:4
was not applicable to
the import licensing system because it was a border measure. The
Appellate Body noted the existence of the “operator category rules”
and the “activity function rules”, which both affected the
allocation of licences. The Appellate Body held that “these rules go
far beyond the mere import licence requirements needed to administer the
tariff quota … and therefore fall within the scope of [Article
III:4]”.
See paragraph 125 above.
286. Exercising judicial economy, the Panel on
Korea — Various Measures on Beef did not examine claims regarding a certain practice of
the Korean state trading agency for beef under Articles III:4 and
XVII
after having found a violation of Articles XI and
II:1(a) for that
practice. See paragraph 477 below.
(a) Reference to GATT practice
287. With respect to GATT practice on this subject.
3. Article VI
288. In
US — 1916 Act (EC), exercising judicial economy, the Panel
found that the subject United States act was inconsistent with GATT
Article VI and did not examine the EC claim that it was also
inconsistent with GATT Article III. The Appellate Body did not address
the issue upon appeal. The Panel first stated that Article VI was, with
respect to the 1916 Act, the more specific provision, such that it had
to be addressed first:
“It is a general principle of international law that, when applying
a body of norms to a given factual situation, one should consider that
factual situation under the norm which most specifically addresses it.(440) As a result, one way to reply to the question above is to
determine which article more specifically addresses the 1916 Act. We
agree that this will require us to touch upon the substance of the case,
but we recall that this test is used here for purely procedural reasons,
that is to determine the order of our review. Such a prima facie
analysis is, of course, without prejudice to the final findings on the
issue of the applicability of Articles III:4 and
VI, to be reached after
a more detailed review of the scope of each provision, as necessary.
As mentioned above, our understanding is that Article
III:4 and Article VI are based on two different premises. The applicability of Article
III:4 seems to depend primarily on whether the measure applied
pursuant to the law at issue is an internal measure or not. In contrast,
the applicability of Article VI seems to be based on the nature of the
trade practice which is addressed. Under Article
VI, the type of
sanction eventually applied does not seem to be relevant for a measure
to be considered as an anti-dumping measure, or not. We note in this
respect that, for the EC, the fact that the 1916 Act imposes other
sanctions than duties is insufficient to make that law fall outside the
scope of Article VI and, for the United States, under
Article VI,
dumping does not have to be counteracted exclusively with duties.
Consequently, it seems to us that the fact that a law imposes measures
that can be qualified as ‘internal measures’, such as fines, damages
or imprisonment, does not appear to be sufficient to conclude that
Article VI is not applicable to that law.
We also note that the parties agree that the 1916 Act deals with
transnational price discrimination. Furthermore, the United States
argues that it does not merely address dumping, and that other
requirements under the 1916 Act make that law fall outside the scope of
Article VI. We note that Article III:4 states that imported products
‘shall be accorded treatment no less favourable than that accorded
to like products of national origin in respect of laws, regulations and
requirements affecting their internal sale, offering for sale, purchase,
transportation, distribution or use.’”(441)
289. The Panel held that damages, fines or imprisonment could
theoretically accord less favourable treatment to imported products, but
opined that the terms of Article III:4 were less specific than
Article
VI with respect to the case before it:
“Determining that damages, fines or imprisonment, which are imposed
on persons, may accord less favourable treatment to imported products
with respect to their internal sale, offering for sale, purchase,
transportation, distribution or use, is not a priori impossible and has
actually been done by previous panels. However, a preliminary
examination of the scope of application of Article
III:4 (i.e. internal
sale, offering for sale, purchase, transportation, distribution or use)
would tend to show that the terms of Article
III:4 are less specific
than those of Article VI when it comes to the notion of transnational
price discrimination.
In application of the principle recalled by the Appellate Body in
European Communities — Bananas and by the Permanent Court of
International Justice in the Serbian Loans case, there would be reasons
to reach the preliminary conclusion that we should review the
applicability of Article VI to the 1916 Act in priority, as that article
apparently applies to the facts at issue more specifically. This
preliminary conclusion is based on our understanding of the arguments of
the parties and on a preliminary review of the terms of Articles III:4
and VI. Since the fact that the 1916 Act provides for the imposition of
internal measures does not seem to be sufficient as such to
differentiate the scope of application of Article
III:4 and that of
Article VI, we had to consider the other terms of these articles.”(442)
290. The Panel on
US — 1916 Act (EC) then held, after finding that
the 1916 Act fell under the scope, and was in violation of, Article
VI,
that it was no longer necessary to consider whether some elements of the
1916 Act could also be subject to Article III:4:
“We recall that we decided to proceed first with a review of
whether Article VI applied to the 1916 Act because
Article VI seemed to
address more specifically the terms of the 1916 Act. We found that the
1916 Act, because it targets ‘dumping’ within the meaning of Article
VI of the GATT 1994, was fully subject to the provisions of Article VI
of the GATT 1994 and the Anti-Dumping Agreement and could not evade the
disciplines of Article VI by the mere fact that it had anti-trust
objectives or included requirements of an anti-trust nature. We
therefore find it unnecessary to determine whether some elements of the
1916 Act could be subject to Article III:4.
We also found that the 1916 Act violates the provisions of
Article VI
and certain provisions of the Anti-Dumping Agreement. We consider these
findings sufficiently complete to enable the DSB to make sufficiently
precise recommendations and rulings so as to allow for prompt compliance
‘in order to ensure effective resolution of disputes to the benefit of
all Members.’(443) Therefore, we are entitled to exercise judicial
economy in accordance with WTO panel and Appellate Body practice and
decide not to review the EC claims under Article
III:4.”(444)
291. The Panel on
US — 1916 Act (Japan) further elaborated on the
precise relationship between Article VI and
Article III:
“When we considered the relationship between Article VI and
Article III:4 of the GATT 1994, we noted that Article VI seemed to address the
basic feature of the 1916 Act (i.e. transnational price discrimination)
more directly than Article III:4. In our findings, we concluded that
Article VI applies to a measure whenever that measure objectively
addresses a situation of transnational price discrimination, as defined
in Article VI:1. Thus, we found that the 1916 Act was
fully subject to
the provisions of Article VI of the GATT 1994 and the Anti-Dumping
Agreement and could not escape the disciplines of Article VI by the mere
fact that it had anti-trust objectives, did not address injurious
dumping as such, included additional requirements of an anti-trust
nature or led to the imposition of measures other than anti-dumping
duties that were not border adjustment measures.
However, even though we considered that Article VI deals specifically
with the type of price discrimination at issue, we did not address the
question whether Article VI applied to the 1916 Act
to the exclusion of Article
III:4. In this regard, we recall that, in its report on European
Communities — Bananas, the Appellate Body noted that:
‘Although Article X:3(a) of the GATT 1994 and
Article 1.3 of the
Licensing Agreement both apply, the Panel, in our view, should have
applied the Licensing Agreement first, since this agreement deals
specifically, and in detail, with the administration of import licensing
procedures. If the Panel had done so, then there would have been no need
for it to address the alleged inconsistency with Article X:3(a) of the
GATT 1994.’(445)”(446)
292. After recalling the findings of the Appellate Body in
EC — Bananas III, the Panel on US — 1916 Act went on to distinguish the
subject-matter at issue in that case from the case before it. The
Appellate Body did not address the finding of the Panel that it was
entitled to exercise judicial economy with respect to the claims under Article
III:4:
“We are mindful of the fact that Article X:3(a) of the
GATT 1994 deals with the way domestic trade laws in general should be applied,
whereas Article 1.3 of the Agreement on Import Licensing Procedures
deals with the way rules should be applied in the specific sector of
import licensing. In contrast, it may be said that Articles III:4 and
VI
do not share the same purpose. However, we view the Appellate Body
statement as applying the general principle of international law lex
specialis derogat legi generali. This is particularly clear from its
remark that the Agreement on Import Licensing Procedures ‘deals
specifically, and in detail, with the administration of import licensing
procedures’. In our opinion, Article VI and the Anti-Dumping Agreement
‘deals specifically, and in detail, with the administration of’
anti-dumping. In the present case, the question of the applicability of Article
III:4 was essentially raised by the type of measures imposed
under the 1916 Act. On the basis of the reasoning of the Appellate Body,
we conclude that, even assuming that Article
III:4 is applicable, in
light of our findings under Article VI and the Anti-Dumping Agreement,
we do not need to make findings under Article III:4 of the GATT
1994.
We nevertheless recall that, as stated by the Appellate Body in its
report on Australia — Measures Affecting Importation of Salmon,(447) our
findings must be complete enough to enable the DSB to make sufficiently
precise recommendations and rulings so as to allow for prompt compliance
‘in order to ensure effective resolution of disputes to the benefit of
all Members.’
Having regard to our findings under Article VI and the Anti-Dumping
Agreement, and keeping in mind that, in our view, Article VI and the
Anti-Dumping Agreement deal specifically and in detail with laws
addressing dumping as such, we do not consider that making additional
findings under Article III:4 is necessary in order to enable the DSB to
make sufficiently precise recommendations and rulings so as to allow
prompt compliance by the United States in order to ensure an effective
resolution of this dispute.
Therefore, we find that we are entitled to exercise judicial economy
and decide not to review the claims of Japan under Article III:4 of the
GATT 1994.”(448)
4. Article XI
293. Exercising judicial economy, the Panel on
Korea — Various Measures on Beef did not examine claims regarding a certain practice of
the Korean state trading agency for beef under Articles III:4 and
XVII
after having found a violation of Articles XI and
II:1(a) for that
practice. See paragraph 477 below.
294. In
EC — Asbestos, the Panel rejected Canada’s argument that
the French ban on the manufacture, imports and exports, and domestic
sales and transfer of certain asbestos and asbestos-containing products
was not covered by Note Ad Article
III, and thus, subject to Article
XI:1 as well as Article III:4.(449) See
paragraphs 401–402
below.
295. In
India — Autos, the Panel recalled the Panel Report on
Canada — FIRA when it stated that Articles III and
XI of GATT 1994
have distinct scopes of application. It quoted from that Panel that “the
General Agreement distinguishes between measures affecting the ‘importation’
of products, which are regulated in Article
XI:1, and those affecting
‘imported products’, which are dealt with in Article
III. If Article
XI:1 were interpreted broadly to cover also internal requirements,
Article III would be partly superfluous.(450)”(451)
296. In
India — Autos, the Panel did, however, consider that under
certain circumstances, specific measures may have an impact upon both
the importation of products (Article
XI) and the competitive conditions
of imported products on the internal market (Article
III):
“[I]t therefore cannot be excluded a priori that different aspects
of a measure may affect the competitive opportunities of imports in
different ways, making them fall within the scope either of Article III (where competitive opportunities on the domestic market are affected) or
of Article XI (where the opportunities for importation itself, i.e.
entering the market, are affected), or even that there may be, in
perhaps exceptional circumstances, a potential for overlap between the
two provisions, as was suggested in the case of state trading…
…
… there may be circumstances in which specific measures may have a
range of effects. In appropriate circumstances they may have an impact
both in relation to the conditions of importation of a product and in
respect of the competitive conditions of imported products on the
internal market within the meaning of Article
III:4.(452) This is also in
keeping with the well established notion that different aspects of the
same measure may be covered by different provisions of the covered
Agreements.”(453)
(a) Reference to GATT practice
297. With respect to GATT practice on this subject-matter.
5. Article XVII
298. The Panel on
Korea — Various Measures on Beef discussed the
relationship between GATT Articles III and
XVII. See paragraphs 138
above and 477 below.
(a) Reference to GATT practice
299. With respect to GATT practice.
E. Relationship with other WTO Agreements
1. General
300. In
Japan — Alcoholic Beverages II, in discussing the purpose
of Article III, the Appellate Body stated:
“The broad purpose of Article III of avoiding protectionism must be
remembered when considering the relationship between Article III and
other provisions of the WTO Agreement.”(454)
2. SPS Agreement
301. In
EC — Hormones (US), the Panel examined the consistency of
certain sanitary measures of the European Communities with Articles I
and III of the GATT 1994 and certain provisions of the
SPS Agreement.
With respect to the relationship between Article III of the
GATT 1994
and SPS Agreement, the Panel, in a finding subsequently not addressed by
the Appellate Body, stated as follows:
“Since we have found that the EC measures in dispute are
inconsistent with the requirements of the SPS Agreement, we see no need
to further examine whether the EC measures in dispute are also
inconsistent with Article I or
III of GATT.
As noted above in paragraph 8.42, if we were to find an inconsistency
with Article I or III of
GATT, we would then need to examine whether
this inconsistency could be justified, as argued by the European
Communities, under
Article XX(b) of GATT and would thus necessarily need
to revert to the SPS Agreement under which we have already found
inconsistencies. Since the European Communities has not invoked any
defence under GATT other than Article
XX(b), an inconsistency with Article I or
III of GATT would, therefore, in any event, not be
justifiable.”(455)
3. TBT Agreement
302. In
EC — Sardines, the Panel considered that, in this case, the
analysis of the claims under the TBT Agreement would precede any
examination of the claims under Article III:4 of
GATT
1994. In doing so,
the Panel recalled the Appellate Body’s statement in EC — Bananas III which declared “that the panel ‘should’ have
applied the Licensing Agreement first because this agreement deals ‘specifically,
and in detail’ with the administration of import licensing procedures”.
In the Panel’s view, the Appellate Body is suggesting that where two
agreements apply simultaneously, a panel should normally consider the
more specific agreement before the more general agreement.”(456) Using
that same rationale, the Panel concluded that since “[a]rguably, the
TBT Agreement deals ‘specifically, and in detail’ with technical
regulations”, and considering the parties claims, “then the analysis
under the TBT Agreement would precede any examination under [Article
III:4 of] the GATT 1994.”(457)
4. SCM Agreement
303. In
Indonesia — Autos, the Panel examined the consistency with
Article III of measures contained in the Indonesian National Car
Programme, including a luxury tax exemptions given to certain
domestically produced cars. Indonesia argued that the challenged
measures were subsidies, which were exclusively governed by Article XVI
of GATT and the SCM
Agreement. Referring to the finding of the Appellate
Body in Japan — Alcoholic Beverages II referenced in paragraph 300
above(458), the Panel concluded that there is no general conflict between
Article III and the SCM Agreement for the following reasons:
“[W]e think that Article III of GATT 1994 and the WTO rules on
subsidies remain focused on different problems. Article III continues to
prohibit discrimination between domestic and imported products in
respect of internal taxes and other domestic regulations, including
local content requirements. It does not ‘proscribe’ nor does it ‘prohibit’
the provision of any subsidy per se. By contrast, the SCM Agreement
prohibits subsidies which are conditional on export performance and on
meeting local content requirements, provides remedies with respect to
certain subsidies where they cause adverse effects to the interests of
another Member and exempts certain subsidies from actionability under
the SCM Agreement. In short, Article III prohibits discrimination
between domestic and imported products while the SCM Agreement regulates
the provision of subsidies to enterprises.
Contrary to what Indonesia claims, the fact that a government gives a
subsidy to a firm does not imply that the subsidy itself will
necessarily discriminate between imported and domestic products in
contravention of Article III of
GATT. Article III:8(b) of GATT makes
clear that a government may use the proceeds of taxes collected equally
on all imported and domestic products in order to provide a subsidy to
domestic producers (to the exclusion of producers abroad).
Finally, the fact that, as a result of the Uruguay Round, the SCM
Agreement to some extent covers subject matters that were already
covered by other GATT disciplines is not unique. This situation is
similar to the relationship between GATT 1994 and GATS. In Periodicals
and in Bananas III, the defending parties argued that since a set of
rules on services exists now in GATS, the provisions of Article III:4 of
GATT on distribution and transportation have ceased to apply. Twice the
Appellate Body has ruled that the scope of Article
III:4 was not reduced
by the fact that rules on trade in services are found in GATS: ‘The
entry into force of the GATS, as Annex 1B of the WTO
Agreement, does not
diminish the scope of application of the GATT 1994.’
Accordingly, we consider that Article III and the SCM Agreement have,
generally, different coverage and do not impose the same type of
obligations.(459) Thus there is no general conflict between these two sets
of provisions.”(460)
304. The Panel on
Indonesia — Autos, in the context of discussing
the relationship between Article III and the
SCM Agreement, considered
in which manner “direct” taxes (taxes on individuals and economic
entities) and “indirect” taxes (taxes on products) are covered by
Article III of GATT 1994:
“When subsidies to producers result from exemptions or reductions
of indirect taxes on products, Article III:2 of GATT is relevant. In
contrast, subsidies granted in respect of direct taxes are generally not
covered by Article
III:2, but may infringe Article
III:4 to the extent
that they are linked to other conditions which favour the use, purchase,
etc. of domestic products.”(461)
305. The Panel on
Indonesia — Autos also rejected Indonesia’s
argument that if Article III applied to the subject measures, the
SCM
Agreement would be reduced to “inutility”:
“This is to say that the only subsidies that would be affected by
the provisions of Article III are those that would involve
discrimination between domestic and imported products. While Article III
of GATT and the SCM Agreement may appear to overlap in respect of
certain measures, the two sets of provisions have different purposes and
different coverage. Indeed, they also offer different remedies,
different dispute settlement time limits and different implementation
requirements. Thus, we reject Indonesia’s argument that the
application of Article III to subsidies would reduce the SCM Agreement
to ‘inutility’.
We note further that Indonesia’s argument would imply that every
time a measure involves tax discrimination in respect of products, that
measure should be considered a subsidy governed exclusively by the SCM
Agreement to the exclusion of Article
III:2. It appears to us that this
line of argument would reduce Article
III:2 to ‘inutility’, since
the very explicit (and arguably only) purpose of Article
III:2 is to
deal with tax discrimination in respect of products.”(462)
306. In
Indonesia — Autos, the Panel also addressed the
significance of Article III:8(b) in the context of the relationship
between Article III and the SCM
Agreement. See paragraph 282
above.
5. TRIMs Agreement
307. The Panel on
Indonesia — Autos addressed claims that certain
Indonesian local content requirements for import duty exemptions to
automobiles and their parts and components were inconsistent with the
TRIMs Agreement and Article III:4 of the
GATT
1994:
“The complainants have claimed that the local content requirements
under examination, and which we find are inconsistent with the TRIMs
Agreement, also violate the provisions of Article III:4 of
GATT. Under
the principle of judicial economy,(463) a panel only has to address the
claims that must be addressed to resolve a dispute or which may help a
losing party in bringing its measures into conformity with the WTO
Agreement. The local content requirement aspects of the measures at
issue have been addressed pursuant to the claims of the complainants
under the TRIMs Agreement. We consider therefore that action to remedy
the inconsistencies that we have found with Indonesia’s obligations
under the TRIMs Agreement would necessarily remedy any inconsistency
that we might find with the provisions of Article III:4 of
GATT. We
recall our conclusion that non applicability of Article III would not
affect as such the application of the TRIMs Agreement. We consider
therefore that we do not have to address the claims under Article
III:4,
nor any claim of conflict between Article III:4 of GATT and the
provisions of the SCM Agreement.”(464)
308. In
Canada — Autos, following the finding of a violation of
Article III:4, the Panel opined that a finding under the
TRIMs Agreement
was not necessary. The Appellate Body did not address this issue:
“[W]e do not consider it necessary to make a specific ruling on
whether the CVA requirements provided for in the MVTO 1998 and the SROs
are inconsistent with Article 2.1 of the TRIMs
Agreement. We believe
that the Panel’s reasoning in EC — Bananas III as to why it did not
make a finding under the TRIMs Agreement after it had found that certain
aspects of the EC’ licensing procedures were inconsistent with Article
III:4 of the GATT also applies to the present case.(465) Thus, on the one
hand, a finding in the present case that the CVA requirements are not
trade-related investment measures for the purposes of the TRIMs
Agreement would not affect our finding in respect of the inconsistency
of these requirements with Article III:4 of the GATT since the scope of
that provision is not limited to trade-related investment measures. On
the other hand, steps taken by Canada to bring these measures into
conformity with Article III:4 would also eliminate the alleged
inconsistency with obligations under the TRIMs Agreement.”(466)
309. In
India — Autos, the Panel was dealing with separate claims
under both the GATT 1994 and the TRIMs Agreement. It noted that previous
panels confronted with concurrent claims concerning these two agreements
had taken differing approaches to the choice of order of analysis of
such claims. The Panel recognized that, in some circumstances, there may
be a practical significance in determining a particular order for the
examination of claims based on the TRIMS and GATT 1994; for example if a
party claimed as a defence that a measure had been notified under the
TRIMs Agreement. Since that was not the case in this dispute, the Panel
did not find any particular reason to start its examination on any
particular order, nor did it consider that the end result would be
affected by either determination of order of analysis. In fact, the
Panel was not persuaded that, as a general matter, the TRIMs Agreement
could inherently be characterized as more specific than the relevant
GATT provisions, and stated:
“As a general matter, even if there was some guiding principle to
the effect that a specific covered Agreement might appropriately be
examined before a general one where both may apply to the same measure,
it might be difficult to characterize the TRIMs Agreement as necessarily
more ‘specific’ than the relevant GATT provisions. Although the
TRIMS Agreement ‘has an autonomous legal existence’, independent
from the relevant GATT provisions, as noted by the Indonesia — Autos
panel,(467) the substance of its obligations refers directly to
Articles
III and XI of the GATT, and clarifies their meaning,
inter alia, through
an Illustrative list. On one view, it simply provides additional
guidance as to the identification of certain measures considered to be
inconsistent with Articles III:4 and
XI:1 of the GATT 1994. On the other
hand, the TRIMs Agreement also introduces rights and obligations that
are specific to it, through its notification mechanism and related
provisions. An interpretative question also arises in relation to the
TRIMs Agreement as to whether a complainant must separately prove that
the measure in issue is a ‘trade-related investment measure’. For
either of these reasons, the TRIMs Agreement might be arguably more
specific in that it provides additional rules concerning the specific
measures it covers.(468) The Panel is therefore not convinced that, as a
general matter, the TRIMs Agreement could inherently be characterized as
more specific than the relevant GATT provisions.”(469)
310. The Panel on
India — Autos ultimately decided to examine the
GATT claims first, since both complainants had addressed their claims
under GATT 1994 prior to their claims under the TRIMS Agreement, and the
order selected for examination of the claims could have an impact on the
potential to apply judicial economy. In effect, the Panel stated:
“It seems that an examination of the GATT provisions in this case
would be likely to make it unnecessary to address the TRIMs claims, but
not vice-versa. If a violation of the GATT claims was found, it would be
justifiable to refrain from examining the TRIMs claims under the
principle of judicial economy. Even if no violation was found under the
GATT claims, that also seems an efficient starting point since it would
be difficult to imagine that if no violation has been found of Articles III or XI, a violation could be found of
Article 2 of the TRIMs Agreement, which refers to the same provisions. Conversely, if no
violation of the TRIMs Agreement were found, this would not necessarily
preclude the existence of a violation of GATT Articles III:4 or
XI:1
because the scope of the GATT provisions is arguably broader if India’s
argument was accepted that there is a need to prove that a measure is an
investment measure and its assertion that this is not the case with the
measures before this Panel.”(470)
6. GATS
311. In
Canada — Periodicals, the Appellate Body examined the Panel’s
finding that Canada was in violation of Article
III:2 in imposing an
excise tax on split-run editions of periodicals, i.e. those editions
which “contain[…] an advertisement that is primarily directed to a
market in Canada and that does not appear in identical form in all
editions of that issue of the periodical[s] that were distributed in the
periodical[s’] country of origin.”(471) Canada claimed that the excise
tax was subject to the GATS, and thus, not subject to Article III:2 of
the GATT 1994.(472) Rejecting this argument, the Appellate Body stated:
“The entry into force of the GATS, as Annex 1B of the
WTO Agreement, does not diminish the scope of application of the GATT 1994.
…
We agree with the Panel’s statement:
‘The ordinary meaning of the texts of GATT 1994 and GATS as well as
Article II:2 of the WTO Agreement, taken together, indicates that
obligations under GATT 1994 and GATS can co-exist and that one does not
override the other.’”(473)
312. In
EC — Bananas III, the Appellate Body also addressed the
question of “whether the GATS and the GATT 1994 are mutually exclusive
agreements”, as follows:
“The GATS was not intended to deal with the same subject matter as
the GATT 1994. The GATS was intended to deal with a subject matter not
covered by the GATT 1994, that is, with trade in services. Thus, the
GATS applies to the supply of services. It provides, inter alia, for
both MFN treatment and national treatment for services and service
suppliers. Given the respective scope of application of the two
agreements, they may or may not overlap, depending on the nature of the
measures at issue. Certain measures could be found to fall exclusively
within the scope of the GATT 1994, when they affect trade in goods as
goods. Certain measures could be found to fall exclusively within the
scope of the GATS, when they affect the supply of services as services.
There is yet a third category of measures that could be found to fall
within the scope of both the GATT 1994 and the GATS. These are measures
that involve a service relating to a particular good or a service
supplied in conjunction with a particular good. In all such cases in
this third category, the measure in question could be scrutinized under
both the GATT 1994 and the GATS. However, while the same measure could
be scrutinized under both agreements, the specific aspects of that
measure examined under each agreement could be different. Under the GATT
1994, the focus is on how the measure affects the goods involved. Under
the GATS, the focus is on how the measure affects the supply of the
service or the service suppliers involved. Whether a certain measure
affecting the supply of a service related to a particular good is
scrutinized under the GATT 1994 or the GATS, or both, is a matter that
can only be determined on a case-by-case basis. This was also our
conclusion in the Appellate Body Report in Canada — Periodicals.(474)”(475)
313. The finding that the scope of application of
GATT and GATS,
respectively, may or may not overlap, was reiterated by the Appellate
Body in Canada — Autos.(476)
Footnotes:
348. Appellate Body Report on
Korea — Various Measures on Beef,
para.
133. back to text
349. Appellate Body Report on EC — Bananas III,
para. 216. In this
regard, see Panel Report on
Canada — Periodicals, para. 5.38, where
the Panel examined whether a measure at issue “afford[ed] protection
to domestic production.” back to text
350. (footnote original) Appellate Body Report
on US — Wool Shirts and Blouses, p. 14. back to text
351. Panel Report on
Japan — Film, para. 10.372. back to text
352. Panel Report on
EC — Asbestos, para. 8.78. back to text
353. Panel Report on
EC — Asbestos, para. 8.79. With respect to
burden of proof in general, see Chapter on the DSU, Section
XXXVI.D. back to text
354. (footnote original) Appellate Body Report on
Japan — Alcoholic
Beverages II, pp. 112 and 113. See, also, Appellate Body Report on Canada —
Periodicals, p. 473. back to text
355. (footnote original) Appellate Body Report on
Japan — Alcoholic
Beverages II, p. 111. back to text
356. (footnote original) Appellate Body Report on
Japan — Alcoholic
Beverages II, p. 111. back to text
357. Appellate Body Report on EC — Asbestos,
para. 94. back to text
358. (footnote original) The meaning of the second sentence of
Article III:2 is elaborated upon in the Interpretative Note to that
provision. This note indicates that the second sentence of
Article III:2 applies to “directly competitive or substitutable product[s]”. back to text
359. Appellate Body Report on EC — Asbestos,
para. 94. back to text
360. (footnote original) Appellate Body Report on
Japan — Alcoholic
Beverages II, pp. 112 and 113. back to text
361. Appellate Body Report on EC — Asbestos,
paras. 95–96. back to text
362. Appellate Body Report on EC — Asbestos,
paras. 98–99. back to text
363. Appellate Body Report on EC — Asbestos,
para. 100. back to text
364. (footnote original) Appellate Body Report on
Japan — Alcoholic
Beverages II, p. 114. back to text
365. (footnote original) Appellate Body Report on
Japan — Alcoholic
Beverages II, p. 113. back to text
366. (footnote original) See, further, Appellate Body Report on
Japan — Alcoholic
Beverages II, p. 113 and, in particular, fn. 46 See, also, Panel Report on US — Gasoline, para. 6.8, where the
approach set forth in the Border Tax Adjustment case was adopted in a
dispute concerning Article III:4 of the GATT 1994 by a panel. This point
was not appealed in that case. back to text
367. (footnote original) The fourth criterion, tariff
classification, was not mentioned by the Working Party on Border Tax
Adjustments, but was included by subsequent panels (see, for instance,
[Panel Reports on] EEC — Animal Proteins, para. 4.2, and Japan
— Alcoholic Beverages I, para. 5.6). back to text
368. Appellate Body Report on EC — Asbestos,
paras. 101–103. back to text
369. Appellate Body Report on EC — Asbestos,
para. 109. back to text
370. Appellate Body Report on EC — Asbestos,
para. 114. In this
regard, see also para. 278 of this Chapter. With respect to the minority’s
opinion on this point, see Appellate Body Report on EC — Asbestos,
paras. 151–154. back to text
371. Appellate Body Report on EC — Asbestos,
para. 117. back to text
372. (footnote original) We have already noted the health risks
associated with chrysotile asbestos fibres in our consideration of
properties (supra, para. 114). back to text
373. Appellate Body Report on EC — Asbestos,
para. 122. back to text
374. Appellate Body Report on EC — Asbestos,
para. 123. back to text
375. (footnote original) Appellate Body Report on Korea — Alcoholic
Beverages, para. 115. back to text
376. (footnote original) Appellate Body Report on Korea — Alcoholic
Beverages, para. 120. We added that “studies of cross-price
elasticity … involve an assessment of latent demand” (para. 121). back to text
377. (footnote original) Appellate Body Report on Korea — Alcoholic
Beverages, para. 137. back to text
378. Appellate Body Report on EC — Asbestos,
para. 123. back to text
379. Appellate Body Report on EC — Asbestos,
para. 120. back to text
380. Panel Report on US — Gasoline, para. 6.9.
back to text
381.
Panel Report on India — Autos, para. 7.174.
back to text
382. Panel Report on
Canada — Wheat Exports and Grain Imports,
footnote 246 to para. 6.164. back to text
383. Panel Report on
Japan — Film, para. 10.376. back to text
384. The footnote to this sentence refers to, as an example, Panel
Report on EEC — Parts and Components, para. 5.21. back to text
385. (footnote original) See, e.g., Appellate Body Report on EC — Bananas III, para. 211.
back to text
386.
Panel Report on Canada — Autos, para. 10.73.
back to text
387. In US — Corrosion-Resistant Steel Sunset
Review, the Appellate
Body, in the context of an anti-dumping dispute, had expressly abstained
from pronouncing generally on the continuing relevance or significance
of the mandatory/ discretionary distinction. Appellate Body Report on
US
— Corrosion-Resistant Steel Sunset Review, para. 93. back to text
388. Panel Report on
Canada — Wheat Exports and Grain Imports, para
6.184. back to text
389. GATT Panel Reports on Canada —
FIRA,
para. 5.4 and EEC — Parts and Components, para. 5.21. back to text
390.
Panel Report on Canada — Autos, paras. 10.106–10.107.
back to text
391.
Panel Report on India — Autos, para. 7.174.
back to text
392. (footnote original) New Oxford English Dictionary, as cited
above. back to text
393.
Panel Report on India — Autos, paras. 7.190–7.191.
back to text
394. Panel Report on EC — Bananas III,
para. 7.181. back to text
395. Panel Report on EC — Bananas III,
para. 7.176. back to text
396. Appellate Body Report on EC — Bananas III,
para. 211. back to text
397. (footnote original) Appellate Body Report on EC — Bananas III, para. 220.
back to text
398. (footnote original) Panel Report on
Italy — Agricultural Machinery, para. 12. back to text
399.
Panel Report on Canada — Autos, paras. 10.80 and 10.84–10.85.
back to text
400.
Panel Report on Canada — Autos, para. 10.149.
back to text
401. (footnote original) Article III:1
refers to the application of
measures “to imported or domestic products”, which suggests that
application to both is not necessary. back to text
402. (footnote original) Thus, the “advantage” to be obtained
could consist in a right to import a product. See for instance, the
Report of the second GATT panel on EC — Bananas II as cited and
endorsed in EC — Bananas III, WT/DS27/R/USA, adopted on 25 September
1997, as modified by the Appellate Body Report, para. 4.385 (DSR
1997:II, 943:
“The Panel further noted that previous panels had found
consistently that this obligation applies to any requirement imposed by
a contracting party, including requirements ‘which an enterprise
voluntarily accepts to obtain an advantage from the government.’ In
the view of the Panel, a requirement to purchase a domestic product in
order to obtain the right to import a product at a lower rate of duty
under a tariff quota is therefore a requirement affecting the purchase
of a product within the meaning of Article
III:4.” back to text
403.
Panel Report on India — Autos, para. 7.306.
back to text
404. (footnote original) Article I:1 of the GATS provides that “[t]his
Agreement applies to measures by Members affecting trade in services.”
(emphasis added) back to text
405. (footnote original) Appellate Body Report,
supra, footnote 47,
para. 220. We made the same statement regarding the word “affecting”
in Article I:1 of the GATS in our Report in
Canada — Autos, supra,
footnote 56, para. 150. back to text
406. Appellate Body Report on US — FSC (Article 21.5 —
EC),
para.
208. back to text
407. (footnote original) Panel Report on
US — Section 337,
para.
5.11. back to text
408. Panel Report on US — Gasoline, para. 6.10.
back to text
409. (footnote original) Appellate Body Report on
Japan — Alcoholic
Beverages II, p. 16, citing Panel Reports on US —
Superfund,
para. 5.1.9 and Japan — Alcoholic Beverages I, para. 5.5(b). back to text
410. (footnote original) Panel Report on
US — Section 337,
para.
5.11. back to text
411. (footnote original) See e.g. Panel Report on
Canada
— Provincial Liquor Boards, paras. 5.12–5.14 and 5.30–5.31; and Panel
Report on US — Malt Beverages, para. 5.30; Panel Report on US — Gasoline,
para. 6.10; Panel Report on
Canada — Periodicals, p. 75; and
Panel Report on EC — Bananas III, paras. 7.179–7.180. back to text
412. (footnote original) Panel Report on
US — Section 337,
paras.
5.11. back to text
413. Panel Report on
Japan — Film, para. 10.379. back to text
414. This statement of the Appellate Body was made with respect to the
following finding of the Panel:
“Any regulatory distinction that is based exclusively on criteria
relating to the nationality or the origin of the products is
incompatible with Article III and this conclusion can be reached even in
the absence of any imports (as hypothetical imports can be used to reach
this conclusion) confirming that there is no need to demonstrate the
actual and specific trade effects of a measure for it to be found in
violation of Article III. The object of
Article III:4 is, thus, to
guarantee effective market access to imported products and to ensure
that the latter are offered the same market opportunities as domestic
products.”
Panel Report on Korea — Various Measures on Beef, para. 627.
back to text
415. (footnote original) Panel Report on
US — Section 337,
para.
5.11. back to text
416. Appellate Body Report on
Korea — Various Measures on Beef,
paras. 135–137. back to text
417. Appellate Body Report on EC — Asbestos,
para. 100. back to text
418. (footnote original) Panel Report on
US — Section 337,
para.
5.11. back to text
419. Panel Report on US — Gasoline, para. 6.25.
back to text
420. Panel Report on EC — Bananas III,
para. 7.243. back to text
421. Appellate Body Report on EC — Bananas III,
para. 213. back to text
422. (footnote original) Appellate Body Report,
Korea — Various
Measures on Beef, supra, footnote
44, para. 142. back to text
423. (footnote original) Appellate Body Report,
Japan — Alcoholic
Beverages II, supra, footnote
116, at 110. back to text
424. Appellate Body Report on US — FSC (Article 21.5 —
EC),
para.
215, 221. back to text
425. Panel Report on US — Gasoline, para. 6.11.
back to text
426. Panel Report on US — Gasoline, para. 6.11.
back to text
427. Panel Report on US — Gasoline, paras. 6.12–6.13.
back to text
428. Panel Report on US — Gasoline, para. 6.14.
back to text
429. Panel Report on US — Gasoline, para. 6.14. In support of its
proposition, the Panel cited GATT Panel Report on US — Section 337,
BISD 36S/345, para. 5.14. back to text
430. Appellate Body Report on
US — Gasoline, p. 18.
back to text
431. Appellate Body Report on EC — Asbestos,
para. 115. back to text
432. Panel Report on
Japan — Film, para. 10.380. back to text
433. (footnote original) The Appellate Body cited Interim Commission
for the International Trade Organization, Reports of the Committees and
Principal Sub-Committees: ICITO I/8, Geneva, September 1948, p. 66.
Article 18 and Section C of Chapter IV of the Havana Charter for an
International Trade Organization correspond, respectively, to Article
III and Article XVI of the GATT
1947. back to text
434. Appellate Body Report on Canada —
Periodicals, pp. 33–34. back to text
435. (footnote original) Panel Reports on
EEC — Oilseeds; Italy
— Agriculture Machinery ; and US — Malt Beverages. back to text
436. (footnote original) Appellate Body Report on Canada —
Periodicals. back to text
437. (footnote original) E/CONF.2/C.3/6, page 17; E/CONF.2/C.3/A/
W.32, page 2. back to text
438. Panel
Report on Indonesia — Autos,
paras. 14.41–14.45. Also,
the Panel referred to the finding of the Appellate Body
in Japan — Alcoholic
Beverages II referenced in para. 300 of this
Chapter. Panel
Report on Indonesia — Autos, para. 14.28. back to text
439. Panel Report on US — Gasoline, para. 6.19.
back to text
440. (footnote original) See Appellate Body Report on EC — Bananas III, para. 204, and the judgement of the Permanent Court of
International Justice in the Serbian Loans case (1929), where the PCIJ
stated that “the special words, according to elementary principles of
interpretation, control the general expression” (PCIJ, Series A, No.
20/21, at p. 30). See also György Haraszti, Some Fundamental Problems
of the Law of Treaties (1973), p. 191. back to text
441. Panel Report on
US — 1916 Act (EC),
paras. 6.76–6.78;
Panel
Report on US — 1916 Act (Japan), paras. 6.75–6.76. back to text
442. Panel Report on
US — 1916 Act (EC), paras. 6.78–6.79;
Panel
Report on US — 1916 Act (Japan), paras. 6.76–6.77. With respect to
judicial economy in general, see Chapter on DSU, Section
XXXVI.F. back to text
443. (footnote original) See Appellate Body Report on
Australia — Salmon, para. 223. back to text
444. Panel Report on
US — 1916 Act (EC), paras. 6.219–6.220. back to text
445. (footnote original) Appellate Body Report on EC — Bananas III, para. 204. back to text
446.
Panel
Report on US — 1916 Act (Japan), paras. 6.268–6.269; Panel Report on
US — 1916 Act (EC), para. 6.219. back to text
447. (footnote original) Appellate Body Report on
Australia — Salmon, para. 223. back to text
448.
Panel
Report on US — 1916 Act (Japan), paras. 6.269–6.272. back to text
449. Panel Report on
EC — Asbestos, para. 8.91. back to text
450. (footnote original) Panel Report, L/5504, adopted on 7 February
1987, para. 5.14. back to text
451.
Panel Report on India — Autos, para. 7.220. back to text
452. (footnote original) The Panel notes that the TRIMS Agreement
Illustrative List envisages measures relating to export requirements
both in the context of Article
XI:1, as noted above in the context of
our analysis under Article
XI:1, and in the context of Article III:4 of
the GATT 1994, by listing as inconsistent with that provision measures
which require “that an enterprise’s purchases or use of imported
products be limited to an amount related to the volume or value of local
products that it exports” TRIMS Illustrative List, Item 1 (b). back to text
453.
Panel Report on India — Autos, paras. 7.224 and 7.296. back to text
454. Appellate Body Report on
Japan — Alcoholic
Beverages II, p. 16. back to text
455. Panel Report on
EC — Hormones (US), paras. 8.272–8.273;
Panel Report on EC — Hormones (Canada), paras. 8.275–8.276. back to text
456.
Panel Report on EC — Sardines, para. 7.15. back to text
457.
Panel Report on EC — Sardines, para. 7.16. back to text
458. Panel
Report on Indonesia — Autos,
para. 14.28. back to text
459. (footnote original) This conclusion is confirmed, amongst other
provisions, by the footnote to Article 32.1 of the SCM Agreement which
recognizes that actions against subsidies remain possible under GATT
1994. Article 32.1 of the SCM Agreement
reads as follows: “No specific
action against a subsidy of another Member can be taken except in
accordance with the provisions of GATT 1994, as interpreted by this
Agreement”. The footnote 56 to this Article reads as follows: “This
paragraph is not intended to preclude action under other relevant
provisions of GATT 1994, where appropriate”. back to text
460. Panel
Report on Indonesia — Autos,
paras. 14.33–14.36. back to text
461. Panel
Report on Indonesia — Autos,
para. 14.38. As to the
context of this paragraph, see paras. 303–306 of this
Chapter. back to text
462. Panel
Report on Indonesia — Autos,
paras. 14.39–14.40. back to text
463. (footnote original)
Appellate Body Report on
US — Shirts and Blouses, pp. 17–20. back to text
464. Panel
Report on Indonesia — Autos,
para. 14.93. back to text
465. (footnote original) Panel Report on
EC — Bananas III,
para.
7.186. back to text
466.
Panel Report on Canada — Autos, para. 10.91. back to text
467. (footnote original) Panel
Report on Indonesia — Autos,
WT/DS54/R, WT/DS55/R,
WT/DS59/R,
WT/DS64/R,
para. 14.63 (DSR 1998:VI,
2201). back to text
468. (footnote original) To say, for instance, that the TRIMs
Agreement is more specific because it contains a specific criterion of
the presence or absence of a trade-related investment measure depends
upon whether that is a distinct criterion and whether the lack of such a
criterion in Articles III and XI of GATT 1994 makes these provisions
more general as opposed to merely having a broader range of coverage on
the same criteria. The only practical difference and potential advantage
in looking at the TRIMs agreement first in this instance seems to be the
possible utilization of the Illustrative List, to the extent that it
would be relevant to the claims at issue and may facilitate the
identification of a violation of Articles III:4 or
XI:1 of GATT 1994. back to text
469.
Panel Report on India — Autos, para. 7.157. back to text
470.
Panel Report on India — Autos, para. 7.161. back to text
471. Panel Report on
Canada — Periodicals,
para. 2.2. back to text
472. Appellate Body Report on Canada —
Periodicals, p. 17. back to text
473. Appellate Body Report on Canada —
Periodicals, p. 19. back to text
474. (footnote original) Appellate Body Report on Canada —
Periodicals, p. 19. back to text
475. Appellate Body Report on EC — Bananas III,
para. 221. back to text
476. Appellate Body Report on
Canada — Autos,
para. 159. back to text
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