Trade in goods plays an important role in shaping global economies, creating connections between nations, and ensuring the availability of products worldwide. However, understanding the complex frameworks that govern these exchanges can often feel overwhelming. Let’s delve into the foundational aspects of trade in goods, focusing on the General Agreement on Tariffs and Trade (GATT) and its evolution, which continues to influence international trade practices today.
What is the GATT?
The General Agreement on Tariffs and Trade, known by its abbreviation GATT, exists in two variants. The first is the 1947 GATT.
The objectives of this agreement are to:
- End discrimination in the trade-in of goods;
- bind and lower relevant tariffs applicable to goods; and
- remove further non-tariff trade restrictions for trade in goods.
Before the World Trade Organisation (WTO) was founded, the GATT 1947 governed the trade of goods.
The second version, the GATT 1994, was accepted as part of the WTO’s collection of agreements upon its creation.
It includes a few of the legal agreements reached under the 1947 GATT. These legal tools include, among other things, the GATT 1947 accession treaties of Member States and tariff concessions.
Moreover, it contains the Marrakesh Protocol to GATT 1994, which integrates the concessions and tariff obligations that Member States reached during the Uruguay Round of negotiations.
Uruguay Round established the World Trade Organisation. Finally, incorporating so-called understandings and other decisions reached under the GATT 1947 also clarifies the nature and scope of some of the duties outlined in that agreement.
The inclusion of these legal instruments within the GATT 1994 preserves their standing and binds all Member States. Since January 1, 1995, trading in products has been governed by the GATT 1994.
The connection between other WTO agreements and the GATT
The GATT 1994, annexed to the Marrakesh Agreement, also contains annexes that address particular issues, like subsidies and trade in agriculture.
Even when other WTO agreements’ requirements apply to a contested measure, the provisions of the GATT 1994 take precedence.
This is the case to the extent that the terms of the other WTO agreements do not contradict those of the GATT 1994.
As a result, in cases where the terms of the GATT 1994 and another WTO agreement do not conflict, the dispute measure will be reviewed in light of the relevant provisions of both agreements. The GATT’s provisions will always take precedence over those of the other WTO agreements in case of a conflict.
The non-discrimination principle in the trade in goods
The Most Favoured Nation (MFN) and National Treatment duties include the GATT 1994’s non-discrimination concept. It forbids any Member State from discriminating against imported goods compared to indigenous goods and against other Member States. Ensuring that the non-discrimination principle has been broken is a crucial query.
Has there been a breach of the MFN obligation?
A three-tiered approach is outlined in Article I:1 to ascertain if a governmental action breaches the MFN requirement. For a measure to be considered a violation of the MFN requirement, the answers to the following three questions must be in the affirmative:
- Is there a trade advantage to the government action?
- Are the items in question “like products”?
- Have the other Member States received the benefits right away and without conditions?
Does the government action provide a trade advantage,MFN?
According to Article I:1, the MFN commitment encompasses more than just tariffs or customs charges; it also includes:
- The customs fees and charges associated with import and export
- The process for applying customs taxes or fees
- All regulations and procedures about import and export
- Domestic levies and fees for imported commodities, including
- Internal laws, rules, and specifications that impact import market sales
The MFN’s responsibilities cover any benefit provided by the kinds of measures mentioned. It is necessary to ascertain if the MFN duty covers the legislation. If not, even if it covers an advantage, it wouldn’t breach the MFN requirement.
The term “advantage” has been interpreted broadly by the Panels and the Appellate Body of the WTO’s dispute settlement body to include not only tax and customs advantages but also laws, rules, and requirements that impact the importation and exportation of goods, their sale, and policies that change competition.
Consequently, the benefit is related to the kinds of actions covered by the MFN duty. According to the Panel, benefits are those that influence the commercial interaction between goods of different origins or produce “more favourable import opportunities.”
According to the Appellate Body, an advantage is defined as any advantage. Additionally, it ruled that the MFN duty covered both de jure and de facto discrimination. Therefore, if the legislation creates a de jure or de facto advantage, then any failure to give like products of all other Members an advantage would be applicable.
Are the products in question "like products," MFN?
Although “like products” are not defined in Article I:1, it is stated that only “like products” are subject to the MFN duty. The MFN obligation only forbids Discrimination between imported goods if the goods in question are “like.” A Member State may regard the commodities differently if they are not “like.”
Several GATT articles, including Article IV and the later Agreement on Implementation of Article IV of the GATT 1994 (the so-called Anti-dumping Agreement), contain the idea of “like products.”
The term “like products” is only defined in the Anti-dumping Agreement. It is acknowledged that the phrase “like products” might indicate different things depending on the context.
The Appellate Body famously likened the idea of a product’s “likeness” to an accordion. As various WTO Agreement clauses are applied, the accordion of “likeness” extends and squeezes in different places.
The specific provision in which the term “like” appears, as well as the context and circumstances that exist in any given situation to which that provision may apply, must be considered for determining the breadth of the accordion in any of those locations.
Numerous Panel and Appellate Body rulings have defined the context-specific notion of “like product.”
According to Article I:1, “likeness” is established by considering the following elements:
- The characteristics, nature, and quality of the products;
- the products’ intended purposes;
- the preferences and behaviours of customers about the products, and
- the goods’ tariff categorisation.
MFN—have the other Member States received the benefits unconditionally and right away?
A Member State is required by the MFN requirement to instantly and unconditionally give all other Member States the advantage. According to one interpretation of this provision, the providing Member State is not allowed to place any restrictions on the advantage. Additionally, delivering the benefit immediately and unconditionally cannot be exchanged for anything.
Has there been a breach of the National Treatment obligation?
The National Treatment commitment, outlined in Article III, forbids a Member State from treating imported goods differently from indigenous goods. Article III has numerous subparagraphs, but three in particular—Article III:1, Article III:2, and Article III:4—are crucial for assessing whether the National Treatment requirement has been broken.
Article III:1: National Treatment Obligation Scope
Discrimination between indigenous and imported goods is forbidden by Article III; refer to Practice Note: An overview of the fundamentals of commerce. The different internal measures that might be discriminatory are listed in Article III:1. These internal actions consist of:
- Internal charges, including taxes
- Rules, legislation, and specifications about internal sales
- Rules, legislation, and specifications about the sale
- Rules, laws, and specifications about the purchase
- Rules, laws, and specifications about transportation
- laws, rules, and specifications about the usage or distribution of products, and
- internal quantitative rules that mandate that products be combined, processed, or used in predetermined ratios
The specified internal measures should not be applied to domestic or imported items to protect home production.
The Appellate Body has reiterated this, saying that the goals are to prevent protectionism, demand equal competitive circumstances, and safeguard the expectations of an equal competitive relationship between domestic and imported goods.
Article III:1 serves as a guide for comprehending and interpreting the particular duties outlined in Articles III:2 and III:4.
This article covers only the internal measures specified in Article III. 1. All border measures are covered under other GATT clauses. A clause in Article III guarantees that any listed measure will be considered an internal measure and subject to the National Treatment obligation if applied to domestic and imported commodities at the border.
Has there been a violation of Article III:2 regarding National Treatment?
Article III:2 explains one of the forbidden internal procedures mentioned in Article III:1 in greater detail. It expands upon the internal measure of internal taxes and other internal charges. The two sentences in Article III:2 each contain linked but distinct factors that must be considered when determining whether a National Treatment infringement occurred regarding internal taxes and other internal charges.
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