Principle of National Treatment

The principle of national treatment stands alongside with most-favoured-nation treatment (MFN), one of the most significant pillars of the World Trade Organization. It is included in the Art III of GATT and prohibits any discrimination for foreign products, as compared to similar domestic goods. The aim of the commitment is therefore to grant the best possible treatment in relation to these products and to prevent any form of protectionism — measures that differentiate domestic and imported goods.

The principle embodied in Art III applies to internal taxes or other internal charges of any kind (Art III:2); to all laws, regulations and requirements (Art III:4); to any internal quantitative regulation (Art III:5) and to price control measures (Art III:9) which could afford protection to domestic production. The national treatment obligation does not, however, interdicts imposing the WTO Members taxes and other internal regulations on the imported products. The only requirement assumes that the taxes must be the same as those applied to national goods, and internal regulations cannot adversely affect competitive conditions for imported goods relative to domestic products.

Historically, the objective of introducing the clause was to prevent national governments from taking actions, which would affect the competitive conditions of imported products for the benefit of domestic products. The theory of comparative advantage supposes that market forces, and not government intervention should determine competition between imported and domestic products in international trade. This presumption ensures fair competition, economic efficiency and promotes lower prices for consumers.

National treatment principle can be also understood as a logical complement to other Agreements composing the system of GATT/WTO, like the GATS, TRIPS. The principle is also applicable to technical regulations, standards and conformity assessment procedures in the provisions of the TBT Agreement. Article 2.1 contains the non- discrimination obligations and Article 2.2 requires regulations to not be more trade-restrictive than necessary. The implementation of these provisions has involved many difficulties because non-discriminatory regulations can also impose increased costs on imported goods due to regulatory differences between the home and export markets. Therefore, many political and academic commentaries have urged flexible interpretation of the TBT Agreement to create more policy space for government regulation.

In three decisions adopted in 2012,[1] the WTO Appellate Body had the opportunities to develop and clarify the non-discrimination commitments based on the breach of the Art 2 TBT. The fact that it involves in all cases of the first world economy accentuates the significance of the debate. These three cases are of particular importance because together they provide needed context for interpreting the TBT Agreement in relation with the provisions of GATT. Particularly noteworthy is the fact that in these cases was based on the violation of the non-discrimination.

The nature of the challenge and its legal framework was based among other things on the National Treatment clause included Art. 2 TBT. Appellate Body showed its preference for accepting claims of discrimination under art 2.1 but rejecting all claims under art 2.2 and therefore making it difficult for complainants to succeed with an Article 2.2 claim.

From the perspective of WTO law, the three cases also raise sensitive questions. A major issue is the relationship between the provisions of National Treatment in Art III of GATT and under Art. 2 of TBT. The question is to which extent a WTO member can use technical barriers to trade, including product, labelling, and packaging requirements, to protect its own market and in accordance with the WTO principles.

For these reasons, the three cases constitute a new jurisprudence related to the TBT Agreement and have opened a new debate within and outside the WTO, providing guidance for governments, producers and the public on the outcome of future TBT cases.

The non-discrimination obligation, including national treatment, consists of two principal features that are comparative in nature. The first element of ‘likeness’ requires a comparison between imported and domestic goods and services. The second element is ‘less favourable treatment’ and calls for a comparison between the treatments accorded to these products, in order to assess whether imported product is treated less favourably than the domestic one. The two elements of ‘likeness’ and ‘less favourable treatment’ are cumulative in nature.

[1] United States – Measures Affecting the Production and Sale of Clove Cigarettes (US – Clove Cigarettes), United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (US – Tuna II) and United States – Certain Country of Origin Labelling (COOL) Requirements (US – COOL).

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