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In order to protect and enhance the liberalization of international trade, the WTO Agreement1 contains in several provisions the fundamental obligation on Members to refrain from discrimination. In the early history of the GATT, 2 these obligations mainly served to address and abolish border measures and internal national rules which explicitly discriminated with regard to the origin of products.
More recent trade disputes, however, often deal with national regimes not containing any explicit reference to origin. Applying the non-discrimination disciplines to formally origin-neutral3 measures, be they internal taxes or regulation, raises significant difficulties and concerns. Those concerns relate to a potentially excessive scrutiny of internal legislation by panels and the Appellate Body. The feared result is a partial loss of the national autonomy to pursue legitimate non-trade objectives for socio-economic reasons. Similar problems can arise in relation to origin-neutral 4 tariffs, in the sense that they do not distinguish between different foreign sources.
Yet, these concerns have to be balanced against the interest of preventing de facto discriminatory trade barriers. However, what exactly amounts to an illegal de facto discrimination is unclear and the topic of intense debate. Most of this debate focuses on the legal requirement of "likeness" under the label of whether GATT Article III includes an "aims and effects" test. The other condition for a violation of Article III, "less favorable treatment" and "taxation in excess" respectively, receives very little attention in the literature, although irreconcilable interpretations have appeared in GATT and WTO dispute settlement reports. This paper intends to explore this issue in order to demonstrate its significance. The topic is timely, since the recent Appellate Body report in the Asbestos dispute contains an obiter dictum dedicated precisely to the requirement of less favorable treatment.5 This statement has the potential to redirect the definition of that requirement as regards origin-neutral measures with important implications for the world trading system and national regulatory and fiscal autonomy.
1 Marrakesh Agreement Establishing the World Trade Organization, 15 April 1994, 1867 U.N.T.S. 3.
2 General Agreement on Tariffs and Trade, 30 October 1947, 55 U.N.T.S. 187; General Agreement on Tariffs and Trade 1994, Annex 1A of the WTO Agreement, supra note 1. The GATT 1947 and the GATT 1994 will be referred to as "GATT", since both agreements are identical with respect to the articles discussed in this paper.
3 The terminology in this relation sometimes suffers from ambiguity due to the difference between form and effect. The term "formally" or "facially non-discriminatory measure" usually refers to (formally) origin-neutral rules that have the potential to discriminate de facto, indirectly or implicitly, as opposed to de jure, directly, overtly, formally, facially or explicitly. The unambiguous concept of measures that are "indistinctly applicable" (to goods from any origin) is prevalent in the European law context, but not in the WTO related literature.
4 Throughout this paper, "origin-neutral" and "formally origin-neutral" mean the same and refer to the type of measures described in note 3.
5 Appellate Body Report, European Communities - Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001, para. 100. Reports which have not yet been published in the WTO Dispute Settlement Reports (DSR) are available at <http://www.wto.org/english/tratop_e/dispu_e/distabase_e.htm>.