International Trade and Investment Law

International Trade and Investment Law Non-discrimination -One of the GATT principles of WTO law -Further divided into two principles – MFN and NT obligations, MFN is more favorable

-Three dimensions of comparing the applicability of the MFN and the NT:

-1.Typesofmeasuresaddressed:MFNappliestobothborderandinternalmeasures,NT

applies only to internal measures

-2.Degreeofsimilaritybetweentheproductsrequired:Theproductsrequiredforthe

clausetoapply:MFNhasmorestringentrequirements,itrequiresthatthemeasuresare

fully similar

-3.Originoftheproductstobecompares:MFNreferstotreatmentofdifferentforeign

products,NTrefers to the treatmentbetween the domesticand foreign like products MFN

-Art.1GATT:‘Anytradeadvantagegrantedtoproductsofanycountrymustbeextended

immediatelyandunconditionallytolikedproductsofgoodsoriginatinginaWTO member’.-MFNregulatesthetreatmentofproductsamongWTOmembers.Treatmentofforeign product, same good coming from the WTO members must be treated the same way -Aims to → Spread liberalization quickly → Spread liberalization completely → Make joining the WTO more attractive Scope of MFN -Appliestobothdejureanddefactodiscrimination(Canada-Autos-Discriminationdoes not need to be described in the actual law, neutral law can still discriminate) -Alsoapplytopotentialdiscriminationifthereisasmallchancetheythinkyou discriminate a product then you are violating the MFN principle -Don’t care about your aims,

-Thereisnoaims-and-effectstest:theaimsoftheregulatingcountryandtheeffectson

trade become irrelevant -No re-balancing is possible -Applies to tariffs and NTBs -Actualtradeeffectsarenotrequired,potentialtradeeffectscansufficetoestablisha violation of the MFN principle (art. 28 GATT) EC-Bananas III: States must treat products equally,irrespective of their origin. (p. 136 book) “ThePanelfoundthatconditioningtheimpositiononcertainbananasofthein-quotatariffrate upon their origin was an advantage coming under the purview of art. I GATT” EC-Seals:Protectingexpectationsofequalcompetitiveopportunitiesisimportantforlike imported products from all members. 1 / 4

• steps to establish if there is a MFN violation

1.If the measure/ omission an advantage of the types covered in art. I?

2.Is the advantage offered immediately and unconditionally?

3.Istheadvantageofferedtoalllikeproducts?Ifyesthennoviolation;ifit’sonlyforsome products then you are violating it.Any advantages?MFNappliestoanyadvantage,broadinterpretation,advantagecanbebothanactoran omission -somepoliciesthatcouldviolatetheMFNprinciplearetherequirementofmarkingthe originofaproduct,alicenseprocedure,atariffquotaoradiscriminatoryadministration proceeding (Border measures) -MFN also applies to internal measures To any country -TheMFNappliestoanyadvantagegrantedtoanycountry,regardlessoftheyareWTO members or not -SuchadvantagemustbeextendedtoallotherWTOmembers→Guaranteethe best-available treatment -EvenifyougaveittoaNon-WTOmember,youarestillsupposedtogivethesame advantagetoaWTOmember;itdoesn'tmatteriftheadvantageisgrantedtoamember state or not.Immediately and unconditionally… Any advantages must be extended immediately and unconditionally to all other WTO members ‘Immediately’ = the absence of a time gap ‘Unconditionally’=generallymeanthatanyadditionalconditionsapplyinanon-discriminatory manner when it comes to like products originating in two countries EC-Seals→introducedasmallexception,conditionscanbeallowedaslongastheydonot result in a detrimental impact on the competitive opportunities for imported products.

Doesnotmeanthatnoconditionisallowed.Mainrule:Youarenotsupposedtomakeit

conditional.Art1permitsregulatorydistinctionsbetweenimportedproducts,aslongassuch distinctionsdonotresultinadetrimentalimpactonthecompetitiveopportunitiesforimported products.Like products under art. 1 GATT AccordingtotheBorderTaxAdjustmentcaselaw,4criteriacanbeusedtoestablish likeness(you are supposed to give advantage to ‘like-productaccording to art. 1) 1.Physical characteristics – first sight, what do you see 2.Consumertastesandhabits–howtheconsumerusetheproduct,dotheyuseitinthe same way 2 / 4

3.End uses– what’s the ultimate end use that these products are gonna be in place for 4.Tariffclassification(mostimportantcriterion)–whenMSentersintotheGATT,they haveatariffschedule,forthisproductweputthismuchtariff(taxyoupaytoexport goods),ifyouimposethesametariffthenit’smorelikelythattheyarelike,theyare similar!Allofthemhavetobemet,evenifoneisnotmet,ECSealtellsusthatthe4thcriterionisthe most dominant one, just look at the tariff!LikenessisinterpretednarrowlyfortheMFNprinciple,andthe4thcriterioniswidelyaccepted as the most dominant one.

ECSpain-UnroastedCoffee:WhetherColombiancoffeeandBraziliancoffeewerelike→AB

ruledthatprocess-baseddistinctionswereirrelevantindefininglikeness,thedifferencesin cultivationorprocessingofthebeansshouldnotbeconsideredwhenseekingtoestablish likeness.Differenttypesofcoffeearesubjecttothesametariffrates,thereisnorighttomake tariffclassificationdistinctionsforthetwotypesofcoffeebeansthatdonotappearintheoriginal schedule.Process and Production methods (PPMS) -Difference due to geographical factors, cultivation methods, processing of the beans; -Irrelevance of process-based distinctions in defining likeness -Different types of coffee are subject to same tariff rates -No right to make tariff classification distinctions that do not appear in the original schedule Exceptions to the MFN obligation -Enabling clause -Regionalism → art 24 GATT -Art. 20 GATT – General exceptions -Art. 21 GATT – Security exceptions MFNisnotalwayshelpfulfordevelopingcountries.Thereforedevelopingcountriesareallowed to deviate from GATT disciplines under some exceptions.

S&DT: The Legal discipline

WTO members (developed countries) can have two sets of tariffs -One MFN, that they apply to all other developed WTO Members -Another, preferential, that they can apply to all WTO Members that are developing countries -Rationale: MFN, not helpful for developing countries, even if you integrate them, you need to treat them differently. If you want to close the gap between developing and developed countries you need to set a lower bar to them Towards preferences -The institutional response was not reduction of farm protectionism and tariff escalation -GATT opens the way to non-reciprocal preferences -But preferences do not equal MFN. 3 / 4

General System of preferences (GSP) for goods -Autonomously granted by preference-giving industrialized countries -Based on Resolution 21 (ii) taken at the UNCTAD II Conference in New Delhi in 1968 -Led to adoption of Part IV GATT and waived from MFN obligation under 1979 Enabling clause -Only for selected products -Receive reduced or zero tariff rate when compared to the MFN rate -EBA, AGOA etc -EU GSP+ current beneficiaries: Armenia, Bolivia, Cape Verde, Mongolia, Pakistan, Sri Lanka and the Philippines

Exception 1: Enabling clause

-Can open the way to non-reciprocal preferences granted to certain countries -Cangrantnonreciprocalpreferencetocertaincountries,givethemadvantagewithout expectinganythinginreturn,e.g.developedcountrygrantingittodevelopingcountries to help them -Done under the General System of Preferences -Allows industrialized countries to grant preferences to developing countries -Done through Enabling Clause adopted in 1979 -Definition:Differentialandmorefavorabletreatment,reciprocityandfullerparticipationof developingcountries,grantingnon-reciprocalpreferencesatthediscretionofdonors= developedcountriescanchoosewhethertograntapreferentialtreatmenttoa developing country, non reciprocal = not expecting something in return

Enabling Clause entails:

1.Allowdevelopedcountriestogranttradepreferencestodevelopingcountriesina non-discriminatory basis 2.Allow deeper preferences to be granted to less developed countries with GSP schemes 3.Allow developing countries to enter into Regional Trade Agreements among themselves

ECTariffPreference:IfyoucomplainthatyouarenotgrantedapreferenceunderGSBeven

thoughyouaresupposedtobegranted,youneedtoclaimthatMFNisviolatedandyouare grantedanadvantageandyouneedtoidentitytheenablingclauseprovisionthattheschemeat stakesviolates;showthatyouarealsoapartofGSB,youarealsoadevelopingcountry,and that developed countries forgot about you!Inthiscase,theABconfirmedthattheEnablingClauseisalegalexceptiontotheMFN;

regarding the burden of proof, it’s for the complaining party to:

1.Claim an MFN violation 2.Identify the Enabling Clause provisions that the scheme at stake violates -A GSP scheme can be non-discriminatory even if identical tariff treatment is not accorded to all beneficiaries -However, identical treatment should be granted to all similarly-situated beneficiaries

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