Non-Discrimination in WTO Agreements - Dissertation Example

Non-Discrimination in WTO Agreements Introduction WTO (World Trade Organisation) is a global institution that facilitates a free trade to happen in the world. The phrase “free trade” is always misconstrued since it does not connote that it is a free to trade from one nation to another nation. The WTO rules permit tariffs and other varieties of restrictions that assist to safeguard a nation from unfair trades. Thus , the phrase “ free trade “ can better be explained as a market where business can happen in an open and a fair field where there exists no ingenuous competition. By including a non-discrimination clause, WTO facilitates that a free trade exists in the international level. All countries that are members of WTO have consented to play fair in all their business transactions. This is made possible by demanding all trades to be made in the public eye. A WTO member country should not have a restriction to any trade that is being offered to one company and the same restriction would extend to all the companies which indulge in the same type of commerce. Among the non-discrimination measures, the most renowned ones are the national treatment and the most favoured nations. These two clauses under the guise of non-discrimination appear in some form or other in the” GATS (The General Agreement on Trade in Services), the GATT (the General Agreement on Tariffs and Trade), the TRIPS (the Agreement on Trade-Related Aspects of Intellectual Property Rights)” and in other numerous WTOs agreements1. In addition to “National Treatment (NT) and Most Favoured Nations (MFN), WTO also have more commonly termed anti-discrimination provisions, some important illustrations of which contain non-discrimination clauses in GATS Article XIV, other Agreements on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement) and GATT Article.” In EC Preferences case2 , the AB (Appellate Body of WTO) has explained the generic phrase “non-discrimination” as a prerequisite for not treating analogously –situated nations in a different way .Thus, as per this definition, favouritism happens simply when disparity treatment is given to analogously positioned nations; thus, the key matter is to assess the fundamental for relationship between WTO Member nations3. Under WTO agreements, nations cannot formally differentiate or discriminate between their business associates. A member nation cannot grant some country a unique favour like a lesser customs duty rate for its merchandise that should be extended for all other WTO member nations that wish to trade with that country in the same product. This is also known as MFN (the Most Favoured Nation) treatment. Thus, among the WTO members, the trading system should be without any differentiation. This research essay focuses on non-discrimination in the background of global “trade in services “ and in products by introducing the cannons of non-discrimination in international trade law as well as, in particular, the international trade in GATS and services as the main regulatory framework. This research essay will also make an earnest attempt to break the non-discrimination concept into its legal features of “likeness”, “less favourable treatment “, “regulatory purpose” after evaluating their individual importance and their respective interdependence. Finally, this research essay will highlight in specific how the elucidation of each legal feature impacts the reach and substance of a non-discrimination requirement. WTO and Non-Discrimination The concept of non-discrimination is an intricate one. Its definition is highly context-dependent and elastic in nature. Taking cognisance of the “ infinite intricacy “ surrounded by the concept , a WTO panel once remarked as “ the term “discrimination” is a phrase to be circumvented when further opt norms are in existence , and when used , it is a phrase to be construed with prudence , and with utmost care to include no further accuracy than the notion include4. The chief terms of the GATT 1994 concerning with non-discrimination in trade in products are. The MFN Treatment through Article I The National Treatment Commitment under Article III The chief terms of the GATS concerning with non-discrimination in trade in products are. The MFN Commitment through Article II The National Treatment Commitment under Article XVII Both the GATS and GATT 1994 vide their national treatment and MFN obligations bar discrimination on the footing of “the national destination or national origin” or “nationality” of a goods, service suppliers or services. Under certain scenarios, WTO also bars discrimination other than the “national destination or origin”, “nationality “. For instance, the GATT 1994 through it’s the Article: 3(a) obligates that regulations, laws, administrative rulings and judicial rulings of general purpose relating to commerce be governed in a standardised, reasonable and impartial way. It has been argued that the stipulation in Article 3(a) of GATT 1994 has the impact of inflicting a general non-discrimination commitment. Further Article VI of GATS offers an identical obligation5. The Appellate Body in EC Preferences6 case deduced non-discrimination as a requisite not to treat the “analogously situated “nations variedly. It applies within the WTO agreements which operate outside the sphere of NT and MFN commitments, but also apply to phrases “like services “, “like products”, and “like service suppliers” which describe NT and MFN commitments under GATS and GATT. Both NT and MFN provision characterise the concept “non-discrimination “in a moderately clear-cut term. In opposition to the NT and MFN provisions, the wide-ranging non-discrimination clauses of the WTO agreements use the phrase “discrimination” per se. For instance, Article XX of GATT which authorises a Member to peruse measures incompatible with its commitments under GATT for some policy objectives obliges on the Member nations a duty not to enforce such measures “in a style that would represent ways of unjustifiable or arbitrary differentiation between nations where the same situations exist. “Johnson (1976:18) was of the view that “the principles of non-discrimination have no foundation whatever in the hypothetical argument for the advantages of a moderate global trade order in general or in any logical economic hypothesis of the negotiating process, in specific.” The doctrine “non-discrimination” represents the chief principle of international trade law and is substantiated in all trade agreements virtually both the outside and within the WTO framework. Thus, the non-discrimination doctrine can be analysed with the help of most-favoured nation and national treatment and how they are applied in the agenda of WTO with specific emphasis on GATT and GATS7. Non-discrimination can be explained as a form of restriction of nationality –oriented de jure discrimination. On the de facto side of non-discrimination which connotes ‘less favorable treatment ‘ which inflicts a duty to treat all foreign services or products equivalent to the like domestic services or products.8 The non-discrimination rights in the WTO are not only very narrow but also focused mainly on the global economic sphere, effectively safeguarding the local business under National Treatment or foreign business from discrimination from other foreign businesses under the MFN clause9. WTO non-discrimination spotlights on “equality in regulatory treatment of services and goods between various nations rather than on discrimination against non-nationals per se10. On the other hand, WTO restrictions on discrimination are intended to thwart protectionism with regard to services offered or products traded11. For instance, WTO does not forbid discrimination against local industry, nor does it appear to allow exceptions where some local businesses might be disadvantaged as contrasted to foreign competitors12. In case of any dispute as regards to discrimination, the Dispute Settlement Mechanism (DSB) of WTO would initially assess whether the initiative was against GATT principle and in specific, the DSB would see that whether the initiative adheres with the basic WTO standard of non-discrimination. If the WTO found that measure infringes that principle, then DSB would proceed to analyse whether the initiative could be rationalised by one the immunities as detailed in the Article XX. “Exceptions offered under Article XX are the privilege to enjoy a clean atmosphere, the protection of the right to life, the privilege to self fortitude over the exploitation of natural resources, the right to food and health, the right to freedom and development from slavery, etc”13. Any infringement of the non-discrimination provision in WTO agreement has to be analysed in two steps. First, it has to be proved that the set of goods at issue is “like products “or not. Secondly, it is to be examined whether treatment given to foreign goods at issue is “less favourable “than the treatment given to the “like” domestic goods, or the ‘like’ product originating from a third country respectively. One another important point is that WTOs non-discrimination does not recognise whether there is a regulatory intent or a legitimate rationale for the variance in treatment. The phrase of the non-discriminatory provisions involves instead that any variance in treatment with the less favourable treatment given to foreign goods is discriminatory or not. It is to be noted that while the second step mentioned above do not pose any issue at all, and it is the first step which deals with “ like” products, which bear a major chaos as the objects between which discrimination is not permitted are not detailed exhaustively and clearly in WTO documents14. Member nations of WTO should not differentiate between their business and trading associates. If a WTO member nation grants some special privilege like lesser customs duty for one their goods, it should extend the same concession for all other WTO member nations. The phrase “ non-discrimination “ denotes that a WTO member nation should not show favoritism or discrimination between its business partners or trading associates, and they should ensure that all such trading partners are given equal “ most favoured nation “ status. Thus, a WTO member nation should not differentiate between foreign products and its own products and services or nationals thereby giving them a national treatment. However, there are some exceptions to the WTOs non-discriminatory principles. For instance, two or more nations can sign a free trade agreement where tax concessions or lesser customs duty can be charged for the products traded within such group nations' thereby discriminating products from outside of those nations. A WTO member can give some special access to developing nations to access their market. Further, a WTO member can impose restrictions against goods that are regarded to be traded unjustly from specific nations. Further, in case of services, WTO member nations are permitted to show some discrimination in limited scenarios and however, under WTO agreements, these discriminations are allowed only under strict conditions15. The standard of non-discrimination is footed on a comparison of goods, mingled with a comparison of treatment. It is to be observed that only the treatment that is less favourable for one product than for another “like” product can possibly infringe any non-discrimination requirement. Hence, the issue of fixing de facto discrimination may, at least in part, be resolved with an emphasis on the latter comparison. It should be present that discriminatory evaluation should some degree have a discriminatory impact on foreign goods. Therefore, in the absence of any discriminatory impact, there may not be any finding of discrimination at all16. “The notion of “likeness” is construed so as to take into account environmentally injurious products as being diverse from environmentally sustainable products and in such scenarios, the WTO non-discrimination commitments would offer significant flexibility to Member states implementing domestic health or environmental measures. “In case, if environmental features were not to occupy a major part when deciding whether two services or products are like or not, then the WTO’s “non-discrimination” conditions could restrain the domestic dogmatic privilege to implement health or environmental safeguard features. “Thus, as of date, the precise peripheries of “likeness” as extended under diverse WTO commitments and the exact effect of the “likeness” decision on domestic health and environment policy making continues to be ambiguous”.17 Most Favoured Nation The non-discriminatory principle of WTO is codified in “Articles I and III of the GATT and the Article I is famously known as the “Most Favoured Nation” (MFN) clause.” This Clause demands that Member Nations should give analogues treatment to “like” imports from all WTO Member Nations. “Under “most favoured nation (MFN) “treatment, States must offer any privileges extended to a product or service from on WTO Member nation to “like” services or products from all other Member nations.” In general , MFN connotes that on every occasion, a nation opens up a market or lowers a trade barrier , then such nation has to do so for the same services or products from all its business associates or trading partners despite the fact, whether they are developing or developed ,rich or poor , strong or weak. It is to be observed that the MFN commitment, as construed in case law, contains of the following features: With regard to , in principle , all measures that impact trade either de facto or de jure , any advantage offered to merchandises originating from anywhere in the globe; It must be offered to the like products ; It could be originating from any WTO member; It should be offered unconditionally and immediately; A number of provisions are available under the GATT 1994 needing MFN –like or MFN treatment. Article V (concerning liberty to transit); Article III:7 (concerning internal quantitative rules); Article XIII (concerning the administration of quantitative restrictions on a non-discrimination basis) Article IX:1: ( concerning marketing needs) Article XVII ( concerning government trading companies) Further, similar MFN-alike commitments can be seen in the Article XX GATT 1994, which is the ‘general exceptions clause”. MFN obligations are required by other multilateral agreements on trade in products like SPS agreement, TBT Agreement and the Agreement on import licensing regulations18. In EC-Tariff Preference case, the AB held that MFN treatment commitment laid in Article 1:1 of the GATT 1994 is the founding stone of the GATT and regarded to be one of the mainstays of the WTO trading setup. National Treatment (NT) “Article III which is famously known as the “National Treatment Clause” codifies that imports must be given no less favourable treatment than that of “like” domestic goods. “ NT is the guise of non-discrimination thereby demanding sovereign states to peruse regulations in a style so as to not to treat the foreigners less favorably than its citizens. “The establishment of an invasive outline of a non-discrimination theory is not a matter of legal interpretation but that of policy choice and contains both constitutional and institutional considerations. Thus, under the national treatment standard, internal regulations and taxations should handle imported services or products no less favourably than like domestic services or products”19. Under national treatment, both locally –manufactured products and imported products should be given equal treatment at least immediately after the foreign products have made entry into the local market. Further, national treatment should also be extended to both domestic and foreign services, both to local and foreign copyrights, trademarks and patents. “The doctrine ‘ national treatment ‘ i.e. offering others the same dealing or treatment as one’s own resident or national is also embodied in all the WTO main three agreements namely Article 17 of the GATS , Article 3 of TRIPS and Article 3 of GATT though the doctrine of NT is handled somewhat slightly diverse in each of above mentioned agreements.” It is to be observed that national treatment applies immediately after the entry of a service or goods or item of intellectual property into a particular market. Hence, levying “the customs duty on an import is not an infringement of national treatment, even if locally-manufactured like products are not levied with equal customs duty”20. WTO Case Laws dealing with Discrimination In India, etc .v US – Shrimp –turtle21 case, WTO AB held that steps to safeguard sea turtles would be lawful under GATT Article XX, which is concerned with a variety of exclusions to the trade rules of WTO, except if some criterion such as “non-discrimination” were complied with. In this case, US lost the case not on the grounds to safeguarding the environment but due to discrimination shown between WTO members. US offered nations in the Western hemisphere, especially Caribbean nations both financial and technical support and considerable changeover phases for their fishing community to employ turtle-avoidance apparatus. However, the US did not offer the same benefits to the four nations namely India, Pakistan, Thailand and Malaysia, which filed jointly complaint against the US. USA did not succeed in this case not due to the fact as it had required to safeguard the surroundings, but because it differentiated between WTO member nations. USA offered the Caribbean nations both financial and technical help and more transition phases to their fishing community to make use of turtle-excluder apparatuses, whereas it did not extend the same to the appellant nations22. This had been viewed as a discriminatory measure by the Appellate Body of the WTO. In US-Gasoline case, for example, the WTO Panel was of the view that a US step was intended at controlling the emission and composition impacts of gasoline so as to minimise air pollution in the USA which infringed Article III of the GATT. Thus, gasoline imported was effectively thwarted from deriving benefits from sales atmosphere as favourable as domestic gasoline. Hence, the WTO panel viewed that a less favourable treatment was given to imported gasoline that of domestic gasoline and this resulted in discrimination23. “In Tuna Dolphin I and II cases, WTO panel was requested to assess the GATT legitimacy of US prohibitions on “tuna imports “ from nations that did not fall within the U.S norms on “dolphin safe fishing practices. “ In the above cases, WTO Panels held that US ban were an infringement of” GATT Article III “and did not fall within the appropriate exclusions in Article XX. “The WTO Panels held that the US was differentiating against “like “products footed on the production procedure and that this infringed the GATTs Article III national treatment needs”24. AB held in the US- Section 211 Omnibus Appropriations Act, Article 1 of the GATT 1994 is both essential and central to guarantee the accomplishment of an international oriented rule-footed trading system for trade in goods. In Canada – Autos case, AB held that Article, I: 1 of the GATT 1994 bars discrimination between identical goods destined for or originating in from different nations. AB in EC-Bananas case held that the chief element of the non-discrimination commitment is that identical goods should be treated uniformly despite their origin. In this case, a less favourable treatment was given to bananas imported from Latin America (dollar bananas) than the bananas imported from erstwhile European colonies, which was known as ACP bananas25. In EEC-Imports of Beef case, GATT panel earlier held that EC laws that made the annulment of an import levy provided a certificate of authenticity was submitted were found to be not consistent with the Article 1:1 of MFN obligation after it was found by the GATT panel that sole certifying agency permitted to offer a certificate of authenticity was an agency from USA.26 In EEC-Apples I case, the GATT Panel found that the European Communities had functioned not consistent with the non-discrimination requirement of Article XIII: 1. The Panel found that the measures extended to the imports of apples from Chile by the European Communities were not a bar like the free will restraint contracts signed with the other nations like Australia, Argentina, South Africa and New Zealand27. WTO Case Laws which held that there were no Discrimination In EC-Asbestos case, which considered with initiatives like (banning the import, use and sale of asbestos) to address the perils encountered like deterioration of human health from the contact with asbestos and goods made up of asbestos. In this case , Canada , the plaintiff cum complainant had to demonstrate that goods (containing asbestos) imported by France from Canada were analogues the available domestic substitutes like glass fibers , cellulose and PVA in France and that the French laws gave its consent to the imported goods which gave “ less favourable treatment “ than analogues products manufactured in France. Though, the WTO panel initially found in that case that both the imported and domestic goods were “like” but the Appellate Body (AB) of WTO repealed Panel’s verdict and demonstrated that many decisive factors should be taken into consideration by the WTO Panel in the evaluation of likeness, which should include the competitive association between goods, but should also take into account the peril to health witnessed by the two products, mainly because of their varied physical features28. US-Shrimp case offers an interesting illustration of a reasonable discrimination between “the goods on the basis of Processes and Production Methods (PPMs).” In this case, the issue was the style in which fishermen reaped shrimp. Some production techniques which involved the employment of shrimp trawl vessels and the use of fishing nets, which ended in the high quantum of supplementary carnage of sea turtles, since turtles had been ensnared and obscured by the fishing nets employed to catch shrimp. So as to minimise the killing of turtle, USA had imposed an import bar on Shrimp caught by devises, which may result in the supplementary carnage of sea turtles. To escape from the ban, the shrimp exporters had to prove the employment of TEDs (which restrict the catch of jeopardised species like sea turtles) or analogues equipments, when catching shrimp. In this case, the AB (Appellate Body) was of the view that USA measures were directly linked to the strategy of safeguarding the engendered species like sea turtles and hence, USA’s strategy was regarded to be conditionally rationalised under Article XX (g)29. Conclusion Non-discrimination principle mainly revolves round the concept of treating all foreign services or products equivalent to the like domestic services or products. The doctrine of non-discrimination was intended specifically to thwart protectionism and to make sure that equal treatment is being given to both domestic and foreign goods.30 A question arises whether goods may be treated diversely since the manner in which they have been manufactured, even if the manufacturing process employed does not put down a mark in the end product. Further, it is to be noted that when contrasting two goods, different production methods or processes (PPMs) might have been employed in the manufacture of such goods, which do not per se make these goods “unlike.” For example, governments may like to differentiate between wood where the production process is not known and wood products emanated from sustainably grown forest. Under these circumstances, the evaluation of similarity between two kinds of wood if the two varieties of wood may be especially difficult. For this, the evaluation of likeness between two goods or products should be done on each case basis, which was mentioned by the Appellate Body in EC-Asbestos case to find out whether there is a discrimination or not.31 In WTO law, non-discrimination is a significant component of trade relaxation, but it does not cause free trade on the level of international law as expected. In products and goods, trade curbs remain legal despite non-discrimination. Domestic industries are being protected by the levy of tariffs, and it also offers fiscal income to the nation. They are ever more being lessened and bound in WTO law but are far-flung from being normally absolved or eliminated. As of today, to circumvent non-discrimination, non-tariff embargoes like food standard and technical bar to trade and subsidisation are inflicted to accomplish mercantilist objectives despite pledges to non-discrimination. The best example is despite the process of tariffication in the Uruguay Round, strong barriers are in existence in the field of agriculture though trade in industrial products is relatively open as of date32 Bibliography Bossche P v d, The Law and Policy of the World Trade Organization: Text, Cases and Materials (CUP 2005) Conrad C R: Processes and Production Methods (PPMs) in WTO Law: Interfacing Trade (CUP 2010) De Burca: Unpacking the Concept of Discrimination in EC and International Trade Law (Hart Publishing 2002) Diebold Nicolas F: Non-Discrimination in International Trade in Services: Likeness in WTO/GATS, (CUB 2010) Joseph Sarah: Blame it on the WTO? A Human Rights Critique (OUP 2011) McBeth Adam: International Economic Actors and Human Rights (Routledge 2010) Osterwalder, N B: Environment and Trade: A Guide to WTO Jurisprudence (Earthscan 2006) Qin JY, ‘Defining Nondiscrimination under World Trade Organisation Law’ [2005] < www.worldtradelaw.net/articles/qinnondiscrimination.pdf> accessed 1 April 2011. Schultz J and Ball R:’Trade as a Weapon? The WTO and Human Rights- Based Trade Measures’ (2000) Deakin Law Review, 12 (1). Stiglitz J E & Charlton Andrew: Fair Trade for All (OUP 2005) Stiglitz J E: Globalization and its Discontents, (W.W. Norton & Company 2003) Read More