In the US- Clove Cigarettes case, the Appellate Body again rejected the ‘use of an aim and effects’ test in analysing whether products are like and stated that the Border Tax Adjustments factors as the touchstone for a competitive relationship.
It is necessary to note that in this statement, the Appellate Body does not exclude regulatory purposes of technical regulations by examing whether products are like in Art 2.1 of the TBT Agreement. In the determination of the ‘likeness’, panels must evaluate all relevant evidence, including evidence related to the health risks associated with a product, which was the underlying concern of the challenged measure in that dispute.[1]
In the EC – Asbestos case, it was already found out that regulatory concerns and considerations may be relevant in applying certain of the ‘likeness’ criteria and thus, in the determination of likeness under Article III:4 of the GATT 1994. However, this divergent risks posed by the product categories are relevant only to determining competitiveness of product categories, but not in themselves sufficient to establish that competitive products are not like.
Applying this reasoning to the Border Tax Adjustments criteria, the Appellate Body demonstrated that end-uses ‘describe the possible functions of a product, while consumer tastes and habits reflect the consumers’ appreciation of these functions’.[2] This explanation can suggest that the Appellate Body accepted to take into account regulatory objectives in case that it is already reflected in how the products compete. However, such situations raise the question of why the technical regulation was necessary in the first place.[3]
This approach supports the interpretation that consumer tastes and habits should be formulated, as they would exist in an idealised market with consumer protection laws and entire information about the products in question.[4]
Nevertheless, it is understandable that a technical regulation can affect consumer tastes and habits. The law’s capacity to inform consumers of product differences can undermine the role of the market as an objective benchmark for assessing whether two products are competitive and substitutable[5]
In effect, the determination of consumers’ tastes and habits should be made as they would be without the measure at issue, by discounting the impact of the challenged measure on consumer tastes and preferences.[6] In the US-Clove Cigarettes case, the Appellate Body held:
‘a panel should determine the nature and the extent of the competitive relationship for the purpose of determining likeness in isolation from the measure at issue, to the extent that the latter informs the physical characteristics of the products and/or consumers’ preferences.[7]
This statement has met considerable critic in the doctrine because the assessment whether there is a competitive relationship between products in isolation from the technical regulation can reveal limits on the market as an objective standard for determining likeness. [8]
The approach represented by the US-Clove Cigarettes case, that technical regulation can be separated out from the market, and that likeness can be determined on the basis of pure market criteria, disregard the extent to which measure permeates modern economies and informs consumers’ attitudes.[9] It should be remember that modern sophisticated markets cannot be fully independent from regulations that protect property rights, enforce contracts and penalise producers in order that their products can cause harm to the health of consumers. The artificial separation can lead to that panels would base their decisions on hypothetical speculation about how consumers would behave absent the challenged measure. This hypothetical examination may be carried out far from the objective facts of whether and how goods compete in the market, toward its own analysis of how consumers should view the products at issue. [10]
[1] Appellate Body Report, US-Clove Cigarettes, para. 118; Appellate Body Report, EC – Asbestos, para. 113.
[2] Appellate Body Report, US-Clove Cigarettes, para. 127.
[3] Meltzer, J., Porges, A., Beyond discrimination? The WTO parses the TBT Agreement in US- Clove Cigarettes, US-Tuna II (Mexico) and US- COOL, p. 16.
[4] Trebilcock, M., Robert Howse R., Eliason A., The Regulations of International Trade, p. 137.
[5] Teisl M.F., Roe B. Hicks R.L., Can Eco-Labels Tune a Market? Evidence from Dolphin-Safe Labelling, p. 339.
[6] Meltzer, J., Porges, A., Beyond discrimination? The WTO parses the TBT Agreement in US- Clove Cigarettes, US-Tuna II (Mexico) and US- COOL, p 16.
[7] Appellate Body Report, US – Clove Cigarettes, para. 111.
[8] Howse R., More from Rob Howse on the Clove Cigarettes Case, International Econonomic Law & Policy Blog (Apr. 11, 2012, 7:58 AM),
[9] Meltzer, J., Porges, A., Beyond discrimination? The WTO parses the TBT Agreement in US- Clove Cigarettes, US-Tuna II (Mexico) and US- COOL, p16
[10] Meltzer J., The WTO Ruling on U.S. Country of Origin Labeling (‘COOL’), p. 130
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