‘Like Product’ : the relationship between Article III:1 and Article III:2, first sentence

A literary interpretation of Article III:2  assumes that there are two separate obligations of national treatment and only the second sentence specifically refers to Art. III:1. The notion ‘as to afford protection’ included in Art III:1 has no substantive meaning in Art. III:2 first sentence and therefore the provision of Art III:2, first sentence has no explicit reference to the general principles against protectionism of Article III:1.

This strictly textual approach involved a significant discussion in the literature. As a result, the Japan – Alcoholic Beverages II case, the WTO Appellate Body seized the possibility to clarified the issue eventually. Since Article III:2 first sentence has no explicit reference to the general principles against protectionism of Article III:1., the Appellate Body argued that this omission must have some meaning.

Nevertheless, the Appellate Body insisted this textual approach does not denote the non-application of the general provision to Article III:2, first sentence. In effect, the WTO Appellate Body refused this textual interpretation and stated that the general principle of Art III:1 informed the application of both sentences of Article III:2. For the non-discriminatory purposes of the provision, it is not necessary to make the separate reference because the Article III:2 first sentence is itself an application of the general principle contained in Article III:1.[1]

In light of this analysis, the AB concluded that the words of the first sentence require an examination of the conformity of an internal tax measure with Article III by determining, first, whether the taxed imported and domestic products are ‘like’ and, second, whether the taxes applied to the imported products are ‘in excess of those applied to the like domestic products.

This interpretation of the relationship between Art. III:1 and Art. III:2, first sentence was confirmed in the WTO Panel Report Argentina–Hides and Leather, where the Panel clarified that whenever imported products from one Member’s territory are subject to taxes in excess of those applied to the like domestic products in the territory of another Member, this is deemed to ‘afford protection to domestic production’ within the meaning of Article III:1.[2]

[1] Appellate Body Report, Japan – Alcoholic Beverages II, pp. 18-19

[2] Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and Import of Finished Leather, para. 11.137

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