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LAWS0255 International Trade Law

Published : 01-Sep,2021  |  Views : 10


Part A
In the light of GATT Article 111(4) critically review the conditions for a national treatment violation by internal regulations. 
Knowledge and understanding
Application of the law to the relevant facts
Ability to articulate a convincing argument
Grammar, presentation and referencing.
Part B
In the light of GATT Article 1.1 critically review the Canada - Autos (2000) dispute, highlighting at the same time the importance of the Most Favoured Nation (MFN) principle. 


Part A

Under the requirement of Article III of GATT 1994, there have been two essential principles of the WTO agreement such as the principle of Most Favoured Nation Treatment (MFN) with the concept of National Treatment (NT). Also, due to the establishment of GATT or WTO the posts of the modern-day operating system was seen to be developed wherein the principle of NT was probably be recognized as one of the significant influencing factor (OECD, 2004).

It was through this principle of NT that the discrimination between the generally formed products and imported goods were limited for imposing internal taxes or law (Ministry of Economy, Trade and Industry, 2017). As, it was clearly stated in the precedent quarrel of Japan- Taxes on Alcoholic beverages by the Appellate body (AB) that the main purpose of Article III was to prevent protectionism in the appeal for imposing inner tax and taking authoritarian measures. In addition, such requests would enlarge this belief in order to suggest that people were obligated to provide equivalent competitive conditions for imported goods as it grants to its domestic goods. Hence, the basic purpose of Article III was that all the laws and rules for the domestic and imported goods must be equal so that importation of goods would be left with a lesser competitive advantage in market (Alcover and  Garcés, 2016).

With regard to NT there has been a thin line difference between Article III and Article III: 4 as Article III includes the domestic rules and policies with domestic taxes whereas Article III: 4 comprises of predominantly the domestic laws and rules. It was Article III: 4 which particularly affirms that the products of the country of a person who was imported into the state of any other person must be provided no less favorable treatment (LFT) than what conduct such person would have provided to like products of origin state with regard to all rules, policies and requirements affecting their inner sale, contribution for sale, procurement, or utilization. So, the sub-sections of this article shall not influence the application of extent of differentiation in inner transportation prices which originated wholly on the financial operation of mode of transportation and not on the inhabitants of the product (World Trade Organization, 2010).

As a result, requirement of NT requires that:

  • Actions by people which fall in the array of the responsibilities;
  • Must not be provided less favorable treatment;
  • To like products which develops in the region of other person (World Trade Organization, 2017).

Similarly, article III: 4 oblige the individuals to be provided not less favorable treatment than the treatment provided to the like domestic products for trading with imported goods. Also, AB stated that within the implication of Article III: 4, domestic goods and imported goods were considered as like products (Institute of Policy Studies, 2017). Although in EC- Asbestos it was concluded that products that were in a determined alliance in the market could be exaggerated with regard to treatment of imported goods to be less favorable than the treatment of domestic goods as the word “like” in the Article was to be interpreted to be applicable to products that were in a spirited association (Regan, 2002).

So, in totality it could be stated that Article III: 4 contain a study of a consistency of a determination which includes a 3 tier test to be followed in order to find a incongruity such as:

  • The imported and the domestic goods at issue should be considered as like products;
  • The consideration at issue was a act, law or precondition which impacted the inner sales;
  • The products which were imported were provided LFT than domestic goods (Regan, 2002).

In Canada-Autos it was concluded that the phrase "affecting" used in Article III: 4 has been interpreted to incorporate not only regulations which reliably direct over the situations of buying or selling but also any of the regulations which might adversely modify the situations of challenge between domestic or business products (Singh, 2017).

So, in the light of this part of the report the only unenthusiastic point which was seen to be taken apprehension with regard to the subject of NT was that if a assessment would provide a LFT to the imported goods than what was provided to the domestic goods then the determination would be conflicting with the duty of NT (Houston, 2017).

As the point of diverging treatment of goods was not a acceptable basis to be recognized as a factor to be measured with regard to contravention of the NT principles under article III: 4 so this fact could be measured to be a lack which could be observed to be detrimental under the Article.

In Korea, the AB raised the similar point by stating that an authorized disparity in conduct between like domestic products and the imported goods was not required, nor enough to confirm that there was a infringement of Article III: 4.

Also, while keeping in mind that what were the conditions of the NT regulations it was stated in EC- Bananas that Article III: 4 does not predominantly consider Article III: 1 in its submission. So, for such erroneous act the aim of measuring if an infringement of Article III: 4 does not desire a different reflection of whether a calculation provide security to domestic production or not.

Though, in the case of EC- Asbetos it was concluded that the term LFT describes the general principle of NT in Article III: 2 that the rules of a domestic nation should not be pertinent so as to provide protection to domestic making of goods.

Even though Article III:4 does not grant exceptional preference to any domestic product as its basic aim was to contract with the products in a like way such as imported goods = domestic goods. Though in Thailand- Cigrettes (Philippines) it was concluded that while the article affirms that no LFT would be provided to any individual but then also on some point certain favorable treatment would be given to the domestic goods over outside goods. So, it was stated that where a legal scheme of people would be pertinent to a sole dictatorial administration which relates to both the imported and the domestic goods. But the only disparity which exists on the point of NT in the Article was that an additional requisite was imposed only on imported goods, the continuation of this added obligation may give a noteworthy implication that imported goods were delighted to attain LFT i..e there was a background on the point of being treated as domestic good.

So, if there would be equilibrium of the LFT to some imported goods with more FT to other imported products does not maintain a calculation from a verdict of inconsistency.

Although, in US- section 337 such a authority of harmonizing the treatment was specifically discarded by the GATT wherein it was confirmed that the no LFT obligation under the Article III:4 has to be interpreted to be applied to all the people for imported products. Also, all the viewpoints of balancing MFN treatment of some imported products were discarded by the board against LFT of other imported products. Also, if this thought was acknowledged then it would facilitate a constricting person to deviate from the no LFT duty in one case, or definitely in deference of one constricting person. So, a consideration would lead to massive suspicion about the circumstances of opposition amid domestic and imported goods and therefore strike the objectives of Article III (Horn and Mavroidis, 2001).

Consequently at the end it has been stated that even though the circumstances concerning the principle of NT and a determination does not officially need certain treatment of imported goods in a varied way but it may still be mandatory to provide a LFT to the imported products if it makes enticements for market players to act in a requisite way and has the practical impact of treating imported products in a LF manner.

So, in the illumination of the above mentioned thought it could be confirmed that the determination at topic provides the people to seal products and provide them a treatment LF than that provided to the other seal goods within the significance  of Article III:4 (Regan, 2002).

Even though the major apprehension which was found out by the learning was that while it has been particularly believed by the article to not treat any good improbable and treat them uniformly but there have been some outer conditions which would be useful by the state to treat the products remarkably.

For that reason, the conditions which were to be pursued for providing NT by enforcement of the inner rules were observed to be distressing the products in one manner or another. As a result, it was also construed that AB would also not chase a manner of least variance but would reconsider its consideration of Article III: 4. Also, it would balance the range of the rigid self-government of the people under the principle of NT (Commercial Diplomacy, 2017).

So, it was established that the LFT of some imported products in special matters could be unprejudiced by MFN treatment of particular products in others. Also, the non-discriminatory regulations applied on a NT under Article III: 4 desires to have absolute exposure of essentials which would be used as a choice consistent with the General Agreement (World Trade law, 2010).

Part B

The general concept of the Most Favored Nation Treatment under Article 1 of the GATT 1994 particularly states that the trade acknowledgments which were given to a single member were pertinent instantly and without conditions to all the other individuals (Natens and Geraets, 2014).

So, according to the obligation of the article 1.1 it has been concluded that in connection to customs duties and claims of any type forced on or in correlation with introduction, exportation or enforced on the international transmit of expenses for export or import, and with admiration to the method of accusing such obligations and expenses; with respect to all regulations and legitimate processes in association with import and export. Similarly, in connection with all the matters which were incorporated in paragraphs 2 and 4 of Article III, it was stated that, “any gain or right given by any contracting party to any product making in or proposed for any other state shall be provided directly and extremely to the like product making in or proposed for the states of all other individuals (World Trade organization, 2006).

Though under Article I:1 it has been particularly concluded that in order to determine if there has been a infringement of the MFN treatment tasks there have been 3 questions that must be responded such as whether the:

  • Assessment at issue provides a trade advantage of the kind which was incorporated by article 1;
  • The products were like products;
  • Benefit at issue was provided right away and absolutely to all the like products (Araki, 2004).

So, according to the necessity of the article if advantages were given to all other states, including non-WTO parties, then the people has to grant that advantage also to all WTO people. Also, such a proclamation affirms that the duty of the MFN treatment requires that any benefit provided by a person to any good from or for another state be granted to all like products from or for all other people (United Nations Conference On Trade And Development, 2010).

Though, the significance of the MFN principle was observed to be made notably from the case of Canada Auto Pact Case 2000.

This Canada Auto Pact Case 2000 was supposed to be one of such matters in which the principle of MFN was considered as a vital issue for the AB to provide a verdict as it pronounced it this matter. In this case, a contract was signed in 1965 for establishing trade in the field of autos and its spares between two states.

 As per the contract, Canada determined to grant equal treatment to cars and pioneering tools generating spares, but only if the car importer met the definition of motor vehicles as a “producer” which was outlined in the Auto Pact. But an individual who needs to be regarded as a producer have to meet 3 tests which have been provided under GATT (World Trade Organization, 2000).

Under contract, Canada also decided to eradicate its duty on imports from the US of some completed cars, and on imports of some parts to be used as exceptional tools in motor vehicle to be formed in Canada. It also granted its permission affirming that auto spares could be imported liberally not only from the US, but also from other states. Though, all the individuals may not be benefited from the free behavior for autos and its spares but would only meet the standard of the people and also the successive people were no one other than the main US producers, Like Ford, General Motors, etc.

But the chief legal quarrel that was highlighted in this matter was the principle of MFN.

It was in 1998 that the apprehension commenced for MFN was confronted in the Auto Pact in the WTO, and it was in the starting of 20th century when a WTO AB issued its final report. The judges gave their judgment in the positive way. But both EU and Japan reciprocally were doubtful on the point that the 1965 Auto Pact run away of the duty described in article I:1. So, it was confirmed that agreement differentiates in favour of US car corporations, and next to all other car corporations (Ministry of Economy, Trade and Industry, 2017).

Even after having a quarrel with the people the AB concluded that the Article I: 1 would pertinent to be applicable in a de facto as well as de jure way. It was also concluded that contracts did not make de jure prejudice in relation to import of auto and its spares but that was not the only a way to flit in divergence of any guideline. Till the time when there would be a de facto injustice that was enough for the infringement of the duty of MFN principle (World Trade Organization, 2017).

Under the obligation of Article I:1 it was stated that the exclusive Auto Pact member corporations in Canada could attain the vehicles freely without imposition of any tax so long as they meet requirements of  MFN Treatment Principle, while non-inhabitants had to pay a 6.1 % tax,  regardless of the fact that all of these organizations incorporates like products and services in the manner of  creation, import and sale of vehicles (Natens and Geraets, 2014).

So, in the Auto Canada case it was stated by the judges that there was an infringement of the MFN principle so it could be affirmed that this principle must have been applicable consequently. Also, as the MFN principle was critically considered to be momentous for the small states as it provides them to have admittance to the wide variety of market. It diminishes the price of their exports as trade boundaries were the lowest granted (Herman, 2013).

Also, the principle of MFN has numerous vital and beneficial points to be kept in mind like red tapism cut down but then also it was in this case that it was confirmed that with observance to so many beneficial things and rules the treatment granting country infringed the principle of MFN. The treatment providing state did not provide equivalent treatment to the importer Japanese corporations as a result of which it was concluded to be in infringement of treating the Japanese states uniformly (World Trade Organization, 2017).

Therefore, after observing the principle the only lacunae found out in the case was that as per the obligation of the MFN principle as it was purposely confirmed that the state that has been provided MFN accord may not be treated LF than any other state by the capable state. But in the matter it was exclusively affirmed that non-residents or the other individuals of the Japanese country from whom the products were imported were provided LF treatment as they had to pay a 6.1 % tax (Westberg, 2012). So, by referring to the matter of Canada it has been affirmed that the significance of MFN principle was to grant equal treatment to all the people and do not provide a less or MFN treatment to either the importer or the individuals of the state. But this matter also had taken a wrong turn or choices by not unswervingly granting any constructive treatment to its people but circuitously by asking the Japanese importer to pay a particular sum of tax have granted them a LF treatment then its inhabitants (European Commission, 2000).

As a consequence of such a conduct, the individuals of the other state were observed to be provided a LF treatment then the inhabitants which were observed to be evidently as a part of the infringement of the regulations and the laws of the MFN principle (Ministry of Economy, Trade and Industry, 2017).

So, in conclusion on the base of the provisions of Article I:1 of GATT and the chief matter  of Canada wherein the principle of MFN was the problem at the centre. Also, the MFN principle has been stared as a base of the multifaceted trading system which was achieved soon after World War II so it has a chief implication. Also, to a certain extent, the best access circumstances that have been established by means of one state must frequently be related to all other people who were there and were a part of the system (Gowa and Hicks, 2012).

Such a principle allows all the people to get benefit, without putting further resolution actions, from getting any extraordinary deliberation that may have been allowed between a number of leading trading members with a chief supremacy and influence to have a barter authority. 

Even though the deal of Regional Trading Blocks has worn out the critical consequence of the insight to some extent as it was still the most indispensable obligation on which the entire organization of GATT and WTO was founded on.

As a result, the MFN principle must be stared to be viewed as an indispensable principle for sustaining the comprehensive free trading system. Also, the idea of Regional integration and the strictly linked and inter related exceptions needs to be carefully directed so as not to confront this principle as an indispensable and imperative principle of the GATT.


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