The principle of non-discrimination is the cornerstone of the WTO law system. It has to branches: the Most-Favoured Nation principle (MFN) and National Treatment. Essentially, MFN gain importance starting with 1947, when it was enshrined in Article 1 of the General Agreement on Tariffs and Trade, and it reads as follows: ’’Any trade advantage granted to products of any country must be extended immediately and unconditionally to like products of goods originating in a WTO Member.”  This obligation outlaws discrimination among foreign like products, but deviations from this rule are accepted and, among the principal ones, there are waivers (Art. IX:3-4 WTOA), enabling clauses, but also safeguards (Art. XIX GATT), infant industry protection (Art. XVIII c GATT), balance of payments (Arts. XII, XVIII GATT), and exchange restrictions (Art. XV GATT). On the other hand, National Treatment constitutes the second prompt of the non-discrimination principle which is of essence in the context of GATT. The National Treatment obligation is enshrined in Article III GATT and refers to the prohibition of discrimination between domestic and foreign products, when they are already circulating in domestic markets, via internal measures. These internal measures which have the potential of being discriminatory can be either fiscal or non-fiscal in nature. Non-fiscal or regulatory measures are dealt with in Article III, paragraph 4 of the GATT, which essentially outlaws all internal laws, regulations and requirements which grant less-favourable treatment to foreign products than to like domestic products.[1] Article III:4 GATT is, in economic terms, “an incomplete contract in that it provides neither an exhaustive nor even an indicative list of the measures covered”[2]. Over the years, in numerous cases, “the Appellate Body (AB) has ruled […] that imported and domestic products are ‘like products’ within the meaning of Article III:4 GATT if they directly compete in the market and that the imported product is accorded ‘less favourable treatment’ within the meaning of that provision if it is accorded less favourable competitive opportunities”[3]. One recent WTO case considerably relevant on Art. III:4 GATT is EC – Seal Products[4]. Ergo, this short paper aims to uncover some of its intriguing particularities.

The application of the NT requirement in GATT and WTO case law has fluctuated over time, traversing stages of differing degrees of rigour and leniency. At the core of these interpretive cycles, has constantly lied the clash between the liberal commitment to free trade and the sovereign’s authority to impose taxes, enact laws, and regulate in consonance with domestically established policy objectives.[5]

The AB EC – Seal Products is a recent case, particularly important for understanding National Treatment, because it is the first case in which the AB offered a clearer codification of how less-favourable treatment (LFT) should be interpreted.

In 2009, Canada and Norway filed objections against European Union (EU) regulations which essentially prohibited the importing and marketing of seal products from those countries, based on numerous provisions in the GATT and the Technical Barriers to Trade Agreement. These complaints were the foundation of the EC-Seal Products dispute. The EU has claimed in response that the regulations addressed the vast European moral indignation towards the killing of seals.[6] “The EU regulations included three explicit exceptions, covering products: from seals hunted by Inuit or other indigenous communities (IC exception); from seals hunted for the purpose of marine resource management (MRM exception); brought into the EU by travellers under certain conditions (travellers’ exception).”[7] The IC exception was most concerning out of the three ones, because virtually all Greenlandic products were eligible for it, while the Norwegian and the Canadian ones did not.[8]

From the ratiocination and the conclusions of the AB, it becomes clear that LFT does not require identical treatment, but effective equality of opportunities, which leads to the idea that in order to determine whether foreign products are treated less favourably than like domestic products one has to pursue an assessment of the effects of the contested measure on the equality of competitive conditions between imported and like domestic goods. A formal difference in treatment between imported and domestic like products is not sufficient, and neither needed, to establish that foreign products are afforded LFT in comparison to like domestic products. If the measure actually has a detrimental impact on the conditions of competition for like imported products, then such negative implications will amount to LFT within the meaning of Article III:4 GATT. Moreover, for a measure to be found to alter the competitive conditions in the internal market to the disadvantage of imported products, there must be a “genuine relationship” between the measure at issue and the adverse influence on competitive opportunities for foreign goods.[9]

This case partly touches upon the delicate balance between public morals and distortions in competition within a specific market, being similar to a previous case dealing with public health (instead of public morals), namely EC – Asbestos[10]. As legal doctrine on the matter has highlighted, it seems as though WTO “case law is more deferential to the proffered justifications of regulators”[11] in this kind of cases, and “a tendency to escape the automaticity of punishing any differential treatment between two products competing in the same market”[12] is visible. In the same vein, EC – Seal Products illustrates the intricacy of the legal issues which appear in disputes like this, disputes which rotate around the tension between public policy and trade liberalization, and also displays “the tension between the objectives listed in GATT Article XX and the rationale for any discrimination highlighted under the Article XX chapeau”[13].

In conclusion, EC – Seal Products is a salient case for shaping the interpretation of the national treatment obligation under Article III:4 GATT. In this case, the Appellate Body clarified the importance of non-discrimination between domestic and foreign products, while also reinforcing the right of states to legitimately pursue their own public policy objectives.

 

[1] P.C. Mavroidis, Trade in Goods – The GATT and the Other Agreements Regulating Trade in Goods (2014), 2nd edition, Oxford University Press, 231-233.

[2] Ming Du, ‘Treatment No Less Favorable’ and the Future of National Treatment Obligation in GATT Article III:4 after EC–Seal Products (2016), World Trade Review, 15: 1, 163.

[3] Frieder Roessler, The scope of regulatory autonomy of WTO members under Article III:4 of the GATT: a critical analysis of the jurisprudence of the WTO Appellate Body (2015), EUI RSCAS PP, Global Governance Programme, Global Economics 1.

[4] European Communities – Measures Prohibiting the Importation and Marketing of Seal Products, WT/DS400 & 401/R (adopted as modified 18 June 2014).

[5] Du (n 2), 139.

[6] Philip I. Levy and Donald H. Regan, EC–Seal Products: Seals and Sensibilities (TBT Aspects of the Panel and Appellate Body Reports) (2015), World Trade Review, 14: 2, 337.

[7] Paola Conconi and Tania Voon, EC–Seal Products: The Tension between Public Morals and International Trade Agreements (2016), World Trade Review, 15: 2, 212.

[8] Rob Howse, Joanna Langille, and Katie Sykes, Sealing the Deal: The WTO’s Appellate Body Report in EC – Seal Products (2014), ASIL Insights, 18:12, online article – https://www.asil.org/insights/volume/18/issue/12/sealing-deal-wto%E2%80%99s-appellate-body-report-ec-%E2%80%93-seal-products .

[9] EC-Seal products (n 3), para. 5:101.

[10] European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/12, (11 April 2001).

[11] Mavroidis (n 1), 297.

[12] Ibid, 298.

[13] Conconi and Voon (n 6), 234.