Jean Monnet Center at NYU School of Law


VI. Positions Expressed in the WTO Related Literature

Given the ambiguous jurisprudence on origin-neutral national measures, one might expect a vivid debate on this question in the literature. This is also the case as far as the adoption or rejection of the "aims and effects" test is concerned. In contrast, the question examined here, i.e. under what conditions an origin-neutral measure amounts to less favorable treatment, protection or the denial of an advantage, has so far received surprisingly little attention.

Indeed, the general description of national treatment is that it precludes the application of more stringent requirements to imported goods than to domestic products. In order to address measures that do not openly discriminate against imports, yet are highly burdensome for foreign producers, the world trading system developed additional regimes like the Agreement on Technical Barriers to Trade (TBT Agreement) 137 and the SPS Agreement. 138

It also appears that the possibility of de facto discrimination is sometimes altogether neglected. 139 Paradigmatic is an official GATT publication on the sensitive topic of environmental protection. This publication states that "non-discriminatory environmental policies ordinarily would not be subject to any GATT constraints." Specifically, "sales taxes on products that can create pollution ... or favourable tax treatment of environmentally friendly products would not normally be open to challenge." Before turning to the Standards Code (the predecessor of the TBT Agreement) and the regulation of production methods, the conclusion reads: "[g]enerally speaking, a country can do anything to imports or exports that it does to its own products." 140

On the other hand, the problem of formally origin-neutral measures was recognized quite early. At the Review Session, 141 the Swedish delegate proposed, in vain, the adoption of an interpretative note on GATT Article III:2, second sentence. The note should have made clear that this provision does not prohibit internal taxes assisting the production of a particular domestic product (e.g. butter) at the expense of another product (e.g. oleomargarine) of which there is a substantial domestic production. This suggestion relied on a statement from the negotiating history of the Havana Charter. 142 The working party did not appear supportive of the proposal, but took note of the Swedish statement that the proposed interpretation was still valid. 143

One view is to call these statements a "gentlemen's agreement exception to Article III", given the prevalence of the origin-neutral kind of protective internal taxation illustrated by the butter/oleomargarine example. This view simultaneously rejects the generalization of such a limited interpretation. It is believed that it would rob the second sentence of Article III:2 of most or all of its meaning if it were only applicable to situations in which there is no (substantial) domestic production of the more heavily taxed product. 144 The opinion that cases like the butter/oleomargarine example are violations of Article III:2, second sentence, has received further support in the literature. 145

It appears that there is a widespread view, especially among proponents of the "aims and effects" approach, which does not intentionally defend the diagonal approach, but assumes that any origin-neutral differentiation between like or directly competitive products violates Article III. 146 Most commentators, however, seem to take an asymmetric impact requirement for granted in the context of most-favored-nation and national treatment, sometimes implicitly 147 and somewhat ambiguously, 148 sometimes explicitly. 149

Only a few publications have made the question of an asymmetry requirement their main focus. Amongst these one finds considerable support for such a requirement in the context of GATT Article III:2. This support mainly stems from a fear of an undue restraint on the freedom of WTO Members to choose among available strategies in pursuit of legitimate policy objectives. For instance, in order to internalize environmental externalities, Members might wish to adopt progressive tax rates, grant specific tax preferences or introduce other types of tax schemes which differentiate between products on the basis of their respective ecological impact. Relying on the purpose and wording of Article III, this opinion rejects the diagonal approach for origin-neutral national measures. 150 The same rationale - support for asymmetry and rejection of the diagonal test - applies to Article I:1 in relation to border measures. As far as the cross-reference to Article III is concerned, i.e. the obligation of most-favored-nation treatment in relation to taxation and regulation, this opinion considers that even an asymmetric impact on the imports from different countries does not qualify for a violation. The justification for this position is that it would be excessively burdensome for a Member to achieve equal effects on the competitiveness of the entire group of like imports from each individual country. Ensuring this neutrality in the relationships between all other countries taken individually is far more difficult than preventing an advantage for like domestic goods as a whole to the detriment of the entire group of like imports from all other Members, taken together. 151 It is indeed likely that among over 140 Members there is at least one which, taken individually, does not produce all the sub-categories of like products available in other parts of the world.

There is also the more nuanced position which lauds the asymmetric impact requirement for the reduced intrusion of GATT obligations into domestic regulatory regimes and the resulting greater flexibility for objective distinctions between products. Suggested arguments in favor of this possible approach are the wording of Articles III:2 and III:4, as well as the purpose of Article III and the WTO Agreement to avoid origin-related discrimination. 152 Doubts arise from an alleged shift of the attention from competitive opportunities to trade flows and a possibly inappropriate shift of the burden of proof at the expense of the complaining party. 153

137 The TBT Agreement is part of Annex 1A of the WTO Agreement, supra note 1.

138 Alan O. Sykes, supra note 29, at 66, 69, 70.

139 William D. Zeller, Countertrade, the GATT, and the Theory of the Second Best, 11 Hastings Int'l & Comp. L. Rev. 247, 272 (1988): "[d]istinctions among goods are permissible".

140 GATT Secretariat, Trade and the Environment, 1 Int'l Trade 1990-91 pp. 19, 22-23 (1992).

141 The Review Session took place from 28 October 1954 to 8 March 1955 and resulted in several amendments to the text of the GATT. See GATT, Analytical Index: Guide to GATT Law and Practice, vol. 1, 7 (6th ed. 1995).

142 See infra, section IX.D, text accompanying note 193.

143 BISD 3S/205, 210 (1955).

144 Kenneth W. Dam, The GATT 118-119 (1970).

145 Paul Demaret & Raoul Stewardson, supra note 84, at 35 with note 118, p. 63 (1994). The authors, however, consistently rely on asymmetries in the distribution of imported versus domestic goods in alleging violations of Article III:2, second sentence. See id., at 40.

146 See e.g. Frieder Roessler, Diverging Domestic Policies and Multilateral Trade Integration, in Fair Trade and Harmonization, vol. 2, 21, 25-26, 30 (Jagdish Bhagwati and Robert E. Hudec eds., 1996); Aaditya Mattoo & Arvind Subramanian, Regulatory Autonomy and Multilateral Disciplines: The Dilemma and a Possible Resolution, 1 Journal of International Economic Law 303, 304, 308, 310, 313 (1998).

147 John H. Jackson, supra note 35, at 258-259; Daniel A. Farber & Robert E. Hudec, Free Trade and the Regulatory State: A GATT's-Eye View of the Dormant Commerce Clause, 47 Vand. L. Rev. 1401, 1422 (1994); Robert Howse & Donald Regan, The Product/Process Distinction - An Illusory Basis for Disciplining `Unilateralism' in Trade Policy, 11 EJIL 249, 267 (2000); David M. Driesen, supra note 16, at 348-351, 356-357; Steve Charnovitz, A Taxonomy of Environmental Trade Measures, 6 Geo. Int'l Envtl. L. Rev. 1, 30 (1993); Steve Charnovitz, The North American Free Trade Agreement: Green Law or Green Spin?, 26 Law & Pol'y Int'l Bus. 1, 12 (1994).

148 See John H. Jackson et al., supra note 116, at 522 (3rd ed. 1995). See also Robert E. Hudec, supra note 31, at 639 in the GATS context, whilst the description in the GATT context is based on a diagonal approach, see id., 625, 626.

149 John H. Jackson, supra note 16, at 1236-1237, 1238; Shannon Hudnall, Towards A Greener International Trade System, 29 Colum. J.L. & Soc. Probs. 175, 185 (1996); Robert Howse & Elisabeth Tuerk, supra note 31, at 297-298, note 55; Robin L. Van Harpen, Mamas, Don't Let Your Babies Grow up to Be Cowboys: Reconciling Trade and Cultural Independence, 4 Minn. J. Global Trade 165, 191 note 130 (1995); James Salzman, Sustainable Consumption and the Law, 27 Envtl. L. 1243, 1284 (1997).

150 Ole K. Fauchald, supra note 9, at 117, 223, 224, 229, 245, 400.

151 Ole K. Fauchald, supra note 9, at 248, 250, 251, 252. This argument and comparison between most-favored and national treatment assumes that a national treatment assessment consists of the comparison between only two groups: domestic products and like imports from all other sources taken together. The other assumption is that, in contrast to national treatment, the assessment of most-favored nation treatment requires an examination of the treatment accorded to imports from one Member as compared with the treatment of imports from one other country. On the question of whether these assumptions are correct, see infra section X.C, text accompanying notes 224-229.

152 William J. Davey & Joost Pauwelyn, supra note 8, at 38-40.

153 Id., at 41. As regards the "trade flows" criticism, see infra section IX.C, text accompanying notes 185-187.




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