International Trade Law c c

Subject: International Trade Law

c c c

2nd Assignment on:

c c

UNDERSTANDING PRINCIPALS IN WTO

SUBMITTЕD cBY:
Abhijeet Rai, c

Semester VII,BALLB(Hons.)
c

Roll No.: 1020171818

c c

Submitted to: c c

Mr. Aayush Raj

c c

Teaching Associate c

Himachal cPradesh cNational cLaw cUniversity c

2020

1 c| cP a g e
 INDEX

INTRODUCTION ………………………………………………………. 3
c c

DIFFERENCE BETWEEN DE JURE (in law) and DE FACTO (in fact)

c c c c c c c c c c

c DISCRMINATION ……………………………………………………….3
c

PRINICPLES OF NON-DISCRIMNATION IN THE WTO …………..4

c c c c c c

THE MOST FAVOURED NATION (MFN) PRINCIPLE …………….4

c c c c c c

THE NATIONAL TRATMENT PRINCIPLE …………………………8

c c c c

CONCLUSION …………………………………………………………..11
c

WEBLIOGRAPHY ……………………………………………………....11 c

2 c| cP a g e
 INTRODUCTION

The cimportance cof cWTO cbecoming cvisible cin cthe cpresent cCOVID-19 cinduced crecession cin
global csupply cchain cof cproducts cand cjust cand cequitable cdistribution cof cCovid-19 cVaccine,
c

wherein cin cdeveloped ccountries, cthrough cthere cmonetary cpower cpressuring cproducers cfor
c

secured cearly cdelivery cof cvaccine cand cthus csuch caction cby cfew ccosting cdeveloping ccountries
c

,which clacks csuch cpowers, cfor cequal cdistribution cof cvaccine. c

c

Non-discrimination cis ca cfundamental cprinciple cof cthe cmultilateral ctrading csystem cand cis
recognized cin cthe cPreamble cto cthe cWTO cAgreement cas ca ckey cinstrument cto cachieve cthe
c

objectives cof cthe cWTO. cIn cthe cPreamble, cWTO cmembers cexpress ctheir cdesire cto celiminate
c

discriminatory ctreatment cin cinternational ctrade crelations. cBefore cexamining cthe cdetails cof cthe
c

specific cprovisions csetting cout cthe cnon-discrimination cprinciple, cit cis cuseful cto cstep cback cand
c

think cabout cthe cpossible ccomponents cof ca clegal cstandard cfor cidentifying cdiscrimination
c

against cimported cproducts. cThere care ctwo cfundamental celements cin cthis cregard, cwhich care
c

intent cto cdiscriminate cand cthe ceffect cof cdiscrimination. c

c

DIFFERENCE BETWEEN DE JURE (IN LAW) AND DE FACTO (IN

CFACT) DISCRIMINATION

De cjure cdiscrimination cinvolves cdiscrimination cthat cis capparent con cthe cface cof cthe cmeasure.
The cdiscrimination chere cis cexplicitly cstated cin cthe cmeasure. cA cdiscriminatory ceffect cresults
c

because call cimports cface ca chigher ctax crate cthan call cdomestic cgoods. c
c

By ccontrast, cde cfacto cdiscrimination cinvolves cmeasures cthat cdo cnot cexplicitly cdifferentiate
between cimports cand cdomestic cgoods. cRather, cthese cMeasures cmay cdistinguish cbetween
c

different cproducts, cbased con ctheir cphysical ccharacteristics. cThus, ca cmeasure cmay cimpose ca
c

variable ctax crate con calcoholic cbeverages, cwith ca chigher ctax crate cimposed con cbeverages cwith
c

higher calcohol ccontent. cThere cis cnothing cnecessarily cdiscriminatory cabout csuch ca cmeasure, cof
c

course. cHowever, cif, cbased con cthe cmarket csituation, cimports ctend cto chave chigh calcohol
c

content cand cdomestic cproducts ca clow cone, cthe cmeasure chas ca cdisparate cimpact con cimports,
c

3 c| cP a g e
and cthus cdiscriminates cagainst cimports con ca cde cfacto cbasis. cMuch cof cthe cGATT/WTO
c

jurisprudence con cnon-discrimination caddresses csituations cinvolving cde cfacto cdiscrimination

c

Claims cof cthis ckind.

c

PRINCIPLES OF NON-DISCRIMINATION IN THE WTO

C C C C C

Non-Discrimination cin cWTO cembodies ctwo cprincipal1 c:-

A>The cMost-favoured cnation c(MFN) cprinciple: cTreating cother cWTO cmembers cequally c

B>The cNational ctreatment cprinciple: ctreating cforeigners cand clocals cequally.

These ctwo cprinciples capply cto ctrade cin cgoods, ctrade cin cservices cand ctrade crelated caspects cof
intellectual cproperty crights. c
c

A cdifferent ctreatment cis cnot csufficient cto cfind ca cviolation. cFor cinstance, cin cthe cNational
Treatment ccontext, ctreatment cmust cactually chave can cadverse ceffect con cthe c„conditions cof
c

competition‟ cfor cimports. cThus, cthe cmere cexistence cof cdifferent crules cfor cdomestic cproducts
c

and cimports cdoes cnot cnecessarily clead cto ca cviolation cof cthe crules. cIn corder cto cdetermine
c

whether ca cviolation cexists, cthere cwill chave cto cbe can cexamination cof cwhether cthe
c

differentiation cbetween cimports cand cdomestic cproducts cactually cputs cimports cat ca
c

disadvantage cas ccompared cto cdomestic cproducts. c

c

THE MOST-FAVOURED NATION (MFN) PRINCIPLE

C C C C

The cMFN cprinciple censures cnon-discrimination cbetween ctrading cpartners. cIf ca cWTO cmember
grants cto ca ccountry can cadvantage, cit chas cto cgive csuch cadvantage cto call cWTO cmembers.
c

Members cof cthe cWTO ccan cbe cseen cas cmembers cof ca cclub. cOne cof cthe cfundamental crules cof
c

the cclub cis cthat ceach cmember cwill cgrant call cother cmembers cthe cbest cpossible ctreatment cit
c

grants cto cany ctrading cpartner. c

c

In cgeneral, cthe cMFN cprinciples censures cthat cevery ctime ca cWTO cmember clowers ca ctrade
barrier cor copens cup ca cmarket, cit chas cto cdo cso cfor cthe clike cgoods cor cservices cfrom call cWTO
c

1
Principal cof ctrading csystem,WTO c(www.wto.org,(18 cDEC c2020).
c

4 c| cP a g e
members-without cregard cof cthe cmembers ceconomic csize cor clevel cof cdevelopment. cIt cis cworth
c

noting cthat cthe cMFN cprinciple crequires caccording cto cWTO cmembers cany cadvantage cgiven cto
c

any cother ccountry cmember cor cnot cof cthe cWTO. cThe copposite cis cnot can cobligation: ca cWTO
c

member ccould cgive can cadvantage cto cother cmembers, cwithout chaving cto caccord csuch can
c

advantage cto cnon cWTO cmembers. c

c

Legal cBasis cof cMFN cStatus

The cMFN cprinciple cis cso cimportant, cthat cit cis ccontained cin cthe cArticle cI cof cthe cGATT cfor
trade cin cgoods. c
c

The cMFN cprinciple cis ccontained cin cArticle cII cof cthe cGATS cfor ctrade cin cservices. cIn cthe
context cof ctrade cin cservices, cthe cMFN cprinciple capplies cto cservices cand cservices csuppliers.
c

Article c4 cof cthe cTRIPS cAgreement ccontains cthe cMFN cprinciple cas capplicable cto ctrade-related
aspects cof cintellectual cproperty crights. cIn cthe ccontext cof cTRIPS, cthe cMFN cprinciple capplies
c

to cnationals, cincluding cboth cnatural cand clegal cpersons. c

c

Historical perspective
c c

The corigin cof cthe cMFN cobligation cin cthe cGATT ccan calso cbe cexplained cfrom ca chistorical
perspective. cAs cthe cworld cwas ccoming cout cof cthe cSecond cWorld cWar, cmany cwere csaying
c

that creasons cfor cthis catrocious cwar cincluded cthe cisolation cof cGermany, cthe cexistence cof
c

preferences camong ccertain ccountries c(such cas cthe cCommonwealth) cand cthe cunilateral cactions
c

of cthe cUnited cStates cwho cwas calready cmaking cbilateral cdeals cwith cother cstates. cStates
c

therefore cwanted cto cfavour cmultilateralism. cStates cwanted cto cinstitutionalize cthe cMFN
c

principle. cIn cthe cearliest ctrade cnegotiations, cthere cwere ctwo cvery cdifferent capproaches ctaken
c

to cMFN cwhen cnegotiating cthese ctariff cconcessions. cThey cwere c„unconditional‟ cMFN cand
c

„conditional‟ cMFN. cIt cwas c„unconditional‟ cin cthe csense cthat cno cconditions cwere cplaced con
c

granting cconcessions cto cother ccountries. cThat cis, crecipient ccountries cneed cnot cgive canything
c

in creturn. cIt cwas c„conditional‟ cin cthe csense cthat ctariff cconcessions cwere cgranted cto cother
c

countries conly con cthe ccondition cthat cthey cwere coffered ccompensation cin cthe cform cof ctheir
c

own cconcessions2. c
c

Different ccountries ctook cdifferent capproaches. cDuring cthe cnineteenth ccentury, cthe cUnited
States cpractised cconditional cMFN. cThe cUnited cKingdom, cby ccontrast, cfollowed
c

2
c Most cFavoured cNation cTreatment,UNCTAD cseries con cInternational cInvestment cagreement cII,p.26

5 c| cP a g e
unconditional cMFN, cas cdid cmuch cof cEurope cby cthe cend cof cnineteenth ccentury. cWith cits clong
c

and cstrong cbacking cby cthe cmajor ctrading cnations, cit cwas cno csurprise cthat cthe cMFN cprinciple
c

was cincluded cin cthe cGATT. c

c

Benefits of the MFN principle3

c c c c c

1. cEnsures cequal caccess cto cinternational cmarkets: cThe cMFN cprinciple censures call cmembers,
including csmall cdeveloping cmembers, cthat cthey cwill cbenefit cfrom cthe cbest ctrading cconditions
c

provided cby cother cmembers-however cthis cmay csometimes carise cproblems cof c“free-riding”. c
c

2. cMaximizes cefficiency: cby censuring cthat ceach ccountry cwill cimport cfrom cthe cmost cefficient
supplier. cWithout cthe cMFN cprinciple, cthe cimporting ccountry cwould cimpose chigher ctariffs cor
c

other ctrade cbarriers con cthe cproducts ccoming cfrom cthe cmost cefficient csupplier cin corder cto
c

protect cits cindustry. cThe cimposition cof chigher cbarriers cwould clead cto cinefficiencies cbecause
c

the cmost cefficient cfirms cwould cbe cpunished cand cproduction cwould cbe cshifted cto ca cless
c

efficient cfirm cin canother cexporting ccountry. c

c

3. cReduces cthe ccost cof cadministration cof ctrade crules: cby crequiring cequal ctreatment camong
Members, cthe cMFN cprinciple cpromotes cthe csimplification cof cprocedures cand crequirements
c

related cto cimportation cand cexportation. c

c

4. cMinimizes ccosts cof ctrade cnegotiations: ccountries cnegotiate cone cmultilateral cagreement
instead cof cseveral cbilateral cagreements. c
c

The cMFN cPrinciple cwith cregard cto cthe cTrade cin cGoods c(GATT) c

GATT cArticle cI: c1 ccontains cthe cspecific crules cfor cMFN ctreatment cfor cgoods. cThe cgeneral
effect cof cArticle cI.1 cis cto ccreate cthe cobligation camong cWTO cMembers cto cgive cto cone canother
c

like cproducts cthe cbest cexisting cmarket caccess copportunities, cwithout cdiscrimination cin claw cor
c

in cfact. c
c

A cdetailed creading cof cthe cprovision creveals cthat cthe ckey celements cof cthe cMFN cprinciple care4: c

1. cAny cadvantage, cfavour cor cprivilege ccovered cin cArticle cI.1.

2. cLike cproduct. c

3
c Kimberly cAmadeo, cMost cFavoured cnation cclause cprons cand ccons,(www.thebalance.com,18 cDec c2020).
4
c Legal ctext,GATT c1947,Article cI:General cmost cfavored cnation ctreatment c.

6 c| cP a g e
3. cThe cimmediate cand cunconditional cgrant cto call cMembers cof cthe cadvantage cat cissue cin
respect cof cthe clike cproduct cconcerned. c
c

Meaning cof c“ANY cADVANTAGE cCOVERED cIN cARTICLE cI:1” cas cunder

The cadvantages cthat ca cWTO cMember cmust cgrant cto call cmembers clike cproducts cwithout
discrimination cin cfact cor cin claw care clisted cin cthe cfirst cpart cof cArticle cI.1. cThey care cadvantages
c

in crespect cof cthe cfollowing cmeasures: c

c

1.Customs cduties.

2.Any cduties cand ccharges cimposed con cimportation cor cexportation; c

3.Any cduties cand ccharges cimposed cin cconnection cwith cimportation cor cexportation; c

4.Any cduties cand ccharges cimposed con cthe cinternational ctransfer cof cpayments cfor cimports cand
exports.
c

5.The cmethod cof clevying csuch cduties cand ccharges; c

6.The crules cand cformalities cin cconnection cwith cimportation cand cexportation; c

7.Internal ctaxes cor cother cinternal ccharges c(covered cin cArticle cII.2);

8.Laws, cregulations cand crequirements caffecting cinternal csale, coffering cfor csale, cpurchase,
transportation, cdistribution cor cuse cof cany cproduct c(covered cin cArticle cIII.4). c
c

The cscope cof cthe cmeasures ccovered cin cArticle cI.1 cin cpractice cis cwide cenough cto ccover ca cvery
broad crange cof cmeasures cin crelation cto cexportation cand cimportation cas cwell cas cinternal
c

measures. c
c

Meaning cof c“LIKE cPRODUCTS”5: c

The cessence cof cthe cMFN cprinciple cis cthat c“like cproducts” cshould cbe ctreated cequally,
irrespective cof ctheir corigin. cIn cother cwords, cproducts cwhich care c“not” clike cproducts cmay cbe
c

treated cdifferently.The cidea cof c“likeness” cis cvery crelative cand cis cnot cdefined cin cthe
c

GATT.However,generally
c four
c ccriteria cis c seen while
c determining
c likeliness
c cof
products,these care: c
c

1. cPhysical ccharacteristics cof cthe cproducts,

5
c Article cI, cGATT c1947.

7 c| cP a g e
2. cEnd cuse cof cthe cproducts, c

3. cConsumer cpreferences, c

4. cThe cclassification cof cthe cproducts cin cMembers ctariff claws. c

Meaning cof c“THE c IMMEDIATE cAND cUNCONDITIONAL cGRANT cOF cTHE

ADVANTAGE cTO cTHE cLIKE cPRODUCTS cCONCERNED” cunder cArticle cI:1 cis
c

Once ca cWTO cMember chas cgranted can cadvantage cto cimports cfrom cany ccountry, cit cmust
immediately cgrant cthat cadvantage cto cimports cfrom call cWTO cMembers. cFurthermore, cit
c

cannot cmake cthe cgranting cof cthat cadvantage cto cimports cfrom call cWTO cmembers cconditional
c

upon creceiving csomething cin creturn. cThis cobligation capplies cequally cto cexports, ctherefore
c

advantages cgranted cby ca cWTO cMember cto cexports cto cany ccountry cmust cbe cgranted
c

immediately cand cunconditionally cto cexports cto call cWTO cMembers.

c

The cNational ctreatment cprinciple

The cNational cTreatment cprinciple cconstitutes cthe csecond ccomponent cof cthe cnon-
discrimination cpillar. cIt calong cwith cthe crules con ctariff cconcessions cand cMFN cremains, cone cof
the ccore cprinciples cof cGATT/WTO. cThese cthree careas cmake cup cthe cfirst cthree cArticles cof
c

GATT: cArticle cI cis cMFN, cArticle cII cis ctariff cconcessions, cand cArticle cIII cis cNational
c

Treatment. c
c

Whereas cthe cMFN crequirement cprohibits cdiscrimination camong ctrading cpartners, cthe
National cTreatment crequirement cprohibits cdiscrimination cagainst cforeign cproducts. cMany
c

aspects cof cNational cTreatment cnon-discrimination cprinciple care cvery csimilar cto cthose
c

discussed cin cthe ccontext cof cMFN. cThus csome cof cthe cconcepts cused cin cMFN, csuch cas
c

„likeness‟ cand cdiscriminatory ceffect care calso crelevant cfor cNational cTreatment. cHowever,
c

because cof ca cnumber cof cdifferences cin cthe cspecific clanguage cof cthe ctwo cprovisions, cthere care
c

important cdistinctions cas cwell. c

c

In cgeneral, cNational cTreatment cprohibits ca cmember cfrom cfavouring cits cdomestic cproducts
over cthe cimported clike cproducts cof cother cmember‟s conce cimported cproducts chave centered cthe
c

domestic cmarket. cThe cobjective cof cthe cnational ctreatment cprinciple cis cto cprovide cequality cof
c

competitive cconditions cfor cimported cproducts cin crelation cto cdomestic cproducts. c
c

Legal cbasis cof cNational cTreatment cPrincipal c. c

8 c| cP a g e
1.Article cIII cof cthe cGATT cembodies cthe cnational ctreatment cprinciple cfor ctrade cin cgoods. c

2.For ctrade cin cservices, cthe cnational ctreatment cprinciple cis ccontained cin cArticle cXVII cof cthe
GATS. cUnder cthe cGATS, cthe cnational ctreatment cobligation cis cnot ca cgeneral cobligation. cIt
c

applies conly cto csectors clisted cin cthe cindividual cmember‟s cschedules cof ccommitments cand
c

subject cto cthe climitations ccontained ctherein. c

c

3.Article c3 cof cthe cTRIPS cAgreement cprovides cthe cnational ctreatment cprinciple cwith crespect
to ctrade-related caspects cof cintellectual cproperty crights. c
c

The National Treatment Principle with regard to the Trade in Goods

c c c c c c c c c c

c (GATT) c

The cnational ctreatment cobligation cis cprovided cin cArticle cIII cof cthe cGATT6. cIt cprovides cthat cno
domestic cregulation ccan cbe cso cas cto cafford cprotection cto cthe cdomestic cproduction. cIn
c

particular, cArticle cIII cprovides cthat conce cin cthe cterritory cof ca cMember, cproducts cimported
c

from cother cMembers cmust cnot cbe ctreated, cin crespect cof cinternal ctaxes cand cinternal
c

regulations, cin ca cless cfavourable cmanner cthan csimilar cdomestically cproduced cgoods. cThe
c

WTO cAppellate cBody chas cdeclared cthat cthe cgoal cof cArticle cIII con cnational ctreatment cis cto
c

avoid c“protectionism”. c
c

If cgovernment cimposes ctaxes cor cadopts cproduct cregulations cfor cthe cprotection cof cenvironment
and cfor cthe chealth cand csafety cof ccustomers, csuch ctaxes cand cregulation cshould cbe capplied cto
c

domestic cand cimported cproducts con ca cnon-discriminatory cbasis. cThus cit cis cof cvital
c

importance cto cexporting centerprises. c

c

THE cNATIONAL cTREATMENT cPRINCIPLE cAPPLIES cONLY cTO cINTERNAL

c MEASURES c

The cnational ctreatment cprinciple conly capplies cto cinternal cmeasures, cas copposed cto cborder
measures c(e.g. ctariffs). cIn cgeneral, cthe cnational ctreatment cprinciple capplies conce ca cproduct
c

has centered cthe cdomestic cmarket. cIt cshould cbe cnoted cthat cthe cAd cnote cto cArticle cIII cclarifies
c

that can cinternal cmeasure cmay cbe capplied cat cthe cborder con cimported cgoods. cThe cprovision
c

comes cinto cplay conce cthe cgoods chave ccrossed cthe cfrontier cand centered cthe cworld cof
c

commerce cin cthe cimporting ccountry. cThere cshould cbe cdiscrimination con cthe cbasis cof cforeign
c

origin. cThe carticle calso cprohibits cmeasures cwhich cspecify cthe cdomestic cproducts cshare cin ca
c

6
c Part cII cof cLegal cText, cGATT c1947.

9 c| cP a g e
c final cproduct. cThus ca cmeasure cwhich ccalled cfor clocal ccontent cin cmotor cvehicles cis cviolative
c of cthe cNational cTreatment cprinciple. cIn ctechnical cterms, cthese care c„internal cquantitative
c regulations‟. c

Internal cmeasures cinclude7: c

A. cInternal ctaxation c(Article cIII:2),

B. cInternal claws, cregulations cand crequirements caffecting cthe cinternal csale, ctransportation,
c distribution cor cuse cof cproducts. c(Article cIII:4) c

Internal ctaxation c(Article cIII:2) c

Article cIII: c2 capplies cthe cnational ctreatment cprinciple cto cinternal ctaxation c(e.g. csales ctax,
c value cadded ctax). cIt ccontains ctwo clevels cof cobligations cregarding cinternal ctaxation cdepending
c on cwhether cimported cand cdomestic cproducts ccan cbe cconsidered: c

A.“like cproducts” c(first csentence cof cArticle cIII:2) c cor c

B.“directly ccompetitive cor csubstitutable cproducts” c(second csentence cof cArticle cIII:2)

The csame ccriteria cexplained cfor cdetermining c“likeness” cunder cthe cMFN cprinciple care crelevant
c for cdetermining cwhether cthe cimported cand cdomestic cproducts care c“like cproducts” cin cthe
c context cof cthe cnational ctreatment cprinciple.

Internal claws, cregulations cand crequirements caffecting cthe cinternal csale, ctransportation,
c distribution cor cuse cof cproducts c(Article cIII:4) c

Article cIII:4 capplies cthe cnational ctreatment cprinciple cto call claws, cregulations cand crequirements
c affecting cthe cinternal csale, coffering cfor csale, cpurchase, ctransportation, cdistribution, cor cuse cof
c products. c

This cprovision crequires cWTO cMembers cto ctreat cimported cproducts c“no cless cfavourable” cthan
c domestic c“like cproducts”. cThe cscope cof clikeness cin cArticle cIII: c4 cis cbroader cthan cthe cfirst
c sentence cof cArticle cIII: c2, cbut ccertainly cnot cbroader cthan cthe ccombined cproducts cscope cof cthe
c two csentences cof cArticle cIII: c28. c

7
cLegal cText,GATT c1947, cArticle cIII cand cArticle cIII cunder cPart cII cof cNational cTreatment con cInternal ctaxation

cand cregulation c. c
8
cArticle cIII cOF cNational cTreatment cPrinciple cunder cGATT c1947.

10 c| cP a g e
 CONCLUSION C

The crelevance cof csuch cnon-discrimination cprinciple cin cWTO cis cvisible cin cthe crace cof csecuring
early csupply cof cCOVID-19 cVaccine cby cdeveloped cnation chaving cupper chand cin ccomparison
c

to cdeveloping ccountries. cThe crole cof cWTO cin csuch ccompetitive cenvironment cis cto cuphold
c

such cnon-discriminatory cprinciple cso cas cto cprotect c3rd cworld ccountry cfrom cmarket
c

manipulation cby cfirst cworld ccountry.

c

Further, cMost cFavoured cNation cclause cand cNational cTreatment cprincipal chas cto cbe
harmonised cto creorient cthe cglobal csupply cwith crespect cto cessential ccommodities csuch cas
c

Vaccine cfor ccommunicable cdiseases cfor chumanity cirrespective cof cthe cpurchasing cpower cof
c

countries.
c

Webliography c

1>www.wto.org.

2>www.unctad.org

3>www.jstor.org

cccc

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