‘Likeness’ Standard under Article III:4 – Absence of separate examination under Article III:1

Article III:4 of the GATT is considers to be a cornerstone of the multilateral trading system, defining the approach of the system to domestic regulation which may have an effect on trade[1].

The national treatment obligation of Article III:4 dealing specifically with internal laws and regulations provides that:

‘the products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.’

The textual interpretation of the provision demonstrates no specific reference to the general principle of Art III:1, which undoubtedly specifies that its purpose is to prevent the application of measures ‘so as to afford protection to domestic production’.

The lack of the reference arose an important question, whether there is a violation of Article III:4 which does not require a separate consideration of whether a measure ‘afford protection to domestic production’. The WTO Appellate Body was several time involved to clarify this issue, however there is a inconsistent with regard to the significance and role of the general principle set out in Article III:1 in interpreting the terms and obligations of Article III:4.[2]

In the EC – Bananas III case, the Appellate Body after examination of the constituent element of Article III:4, hold that an independent consideration of the notion ‘so as to afford protection to domestic production’ is not necessary under Article III:4, as follows:

‘Article III:4 does not specifically refer to Article III:1. Therefore, a determination of whether there has been a violation of Article III:4 does not require a separate consideration of whether a measure ‘afford protection to domestic production’.’[3]

In effect, the Appellate Body evidently followed its decision in the Japan—Alcohol II case concerning the treatment of Article III:2, first sentence, saying that the general principle of Article III:1 is not required in interpreting Article III:4.[4]

Nevertheless, this statement was implicitly revised in the EC – Asbestos case. First, the Appellate Body reminded that Bananas case did not involve the interpretation of ‘like products’, which is a crucial point for understanding the provisions of Art III.[5] Then, the Appellate Body hold that Article III:1 has particular contextual significance in interpreting Article III:4, as it sets forth the ‘general principle’ pursued by that provision’.[6]

Consequently, the meaning of the terms ‘like products’ and ‘less favourable treatment’ included in Article III:4 must be interpreted in light of Article III:1, which prohibits the application of internal regulations ‘so as to afford protection to domestic production’ and the existence of protectionism depends on regulatory purpose.

[1] Howse R, Regan D., The Product/Process Distinction – An Illusory Basis for Disciplining ‘Unilateralism’ in Trade Policy.p 253.

[2] Regan, D. H., Regulatory Purpose and ‘Like Products’ in Article III:4 of the GATT (With Additional Remarks on Article III:2), p. 447.

[3] Appellate Body Report EC- Bananas III, para. 216 and Panel Report, Canada – Periodicals, para. 5.38.

[4] Appellate Body Report, EC-Bananas III, para. 216.

[5] Appellate Body Report, EC- Asbestos, para. 88.

[6]Bossche P., Zdouc W., The law and policy of the World Trade Organization: text, cases and materials, p. 406.

 

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