The principle of non-discrimination, or, in other words, the requirement not to treat less favorably all “like” products, irrespective of their origin or whether they are imported or domestic, is the cornerstone of the WTO multilateral trading system.
The non-discrimination obligation contributes to ensuring fair and predictable international trade relations. The principle of non-discrimination in international trade is two-faceted: it consists of the most-favoured-nation treatment obligation and the national treatment obligation.
The principles of non-discrimination:
- MOST FAVOURED NATION TREATMENT OBLIGATION (Article I:1):
The most-favoured-nation treatment obligation, widely known as the MFN treatment obligation, requires WTO Members not to discriminate between products originating in or destined for different countries.
More particularly, Article I:1 of the GATT 1994 provides: General Most-Favoured-Nation Treatment
“With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any [Member] to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other [Members].”
In order to determine whether or not there is a violation of the MFN treatment obligation of Article I:1, three questions need to be answered:
- Does the measure at issue confer an “advantage” upon the products originating in or destined for the territories of all other Members?
- Are the products concerned “like”?
- Was the advantage at issue granted “immediately and unconditionally” to all like products concerned?
- NATIONAL TREATMENT OBLIGATION (Article III):
The national treatment obligation, commonly referred to as the NT obligation, requires WTO Members not to discriminate against imported products once the imported products have entered the domestic market.
Article III of the GATT 1994 prohibits discrimination between domestic and like imported products through the use of various internal measures enumerated in Article III:1, namely: “Internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions.”
The purpose of Article III:1 is to ensure that such internal measures should “not be applied to imported or domestic products so as to afford protection to domestic production (Article III:1).”
In Japan – Alcoholic Beverages II, the Appellate Body emphasized that the broad and fundamental purpose of Article III is to avoid protectionism and that toward this end Article III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products.
In Korea – Alcoholic Beverages, the Appellate Body went on to explain further, that Article III aims at avoiding protectionism, requiring equality of competitive conditions and protecting expectations of equal competitive relationships.