LAWS6037 WTO Rules And Principles - Assignment Solution

Question 1:

Historically, there is an ongoing tendency of the importing nations to use the discriminatory policy of imposing higher domestic taxes and regulations on imported products in order to protect the national production. Such an act is often caused by the pressure caused by domestic producers demanding for protection. This discriminatory act disrupts and roughens out the competitive environment given to imported products. GATT Article III was issued for prohibiting such policies of importing countries as it leads to unbalanced market environment leading to reduction in economic welfare. 

The major purpose of Article III is to deal with the issue of protectionism while ensuring that the internal measures are not being applied to domestic as well as imported products. Article III requires all the members of WTO to provide competitive environment on equality basis to all the imported products as compared to domestic products. The Article III does this by prohibiting the use of internal taxes and regulations that is done by importing nations in order to protect all the domestic products produced by local producers. 

The historical international trend of GATT is plagued by the product differentiation issues in many major leading countries. In most of the cases, many countries used higher taxes for the imported products of certain type while favoring the national production industry. The Article III of GATT has been acting as a remedy for the most favored or national treatment of domestic products by reducing the burden through abolition of taxes on the imported products. WTO members are required to abolish the disadvantaged treatment by equalizing the treatment amongst the entire group of like products whether they are imported or produced locally. The “likeness” of products is based on four factors i.e. physical characteristics, consumer preferences, tariff classification and end use and the “less favorable treatment” is explained as the disproportionate treatment of imported good as compared to the “like” domestic products.

The Article III requires equalization to be of any level i.e. may it be imposed on the entire group of like products or on certain product. Thus, the article requires the harmonization of disparity amongst imported and locally produced products. The paragraph 2 of Article III talks about taxes imposition on the imported goods and requires the WTO member states to not to apply taxes or standards higher than those that are imposed on the domestic products. However, the treatment of “like” products is based on the “dynamism” of the market. For example, like products at one time (like whisky and vodka) can be considered “unlike” at another time due to consumers’ perspective and dynamism of the market.