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QUESTION | A WTO member country “X” agrees with a non-member country “Y” to reduce the tariff on product “A” to 7 percent. Can the WTO members claim the same tariff level on like product “A” from country “X” ? How have the dispute settlement bodies defined the "like product” in Article I-1 of GATT?
Importance of this question : International law question - 2020 UPSC
QUESTION POSTED ON | 27.10.2021
MODEL ANSWER WILL BE POSTED ON | 28.10.2021
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ANSWER | This question can be divided into 2 Parts.
PART 1 : ISSUE | Whether the tariff reduction given by one WTO member to a non-member of WTO, can be claimed by all other members of WTO.
RELEVANT LEGAL PROVISIONS |
· Article I:1 of GATT obligates that ‘any advantage, favour, privilege or immunity’ – given by 1 member to another – to any product – should be given to others.
· If a Member grants an advantage to a non-Member, Article I:1 obliges the Member to grant that advantage also to all WTO Members.
DISCUSSION ON THE ISSUE | BUT MFN principle is not strictly applicable for TARIFF REDUCTIONS/NEGOTIATIONS.
TARIFF REDUCTION HAS A DIFFERENT PRINCIPLE : As the Article XXVIII bis of the GATT 1994 calls for ‘[tariff] negotiations on a reciprocal and mutually advantageous basis’.
WORKING EXAMPLE | X wants Y to reduce tariff on corn, if Y reduces, then X should reduce the tariff on similarly/equivalent priced product. This is how the principle of reciprocity and mutual advantage works. Therefore, it can be agreed that outcome of tariff negotiation is based on (1) equivalent reduction of prices (2) political considerations.
ANSWER TO PART 1 : Therefore, the Other WTO members can claim the same tariff level for Product ‘A’ from country ‘X’. But it is for the country ‘X’ to reduce the tariff to others, based on the ‘bound’ and ‘applied’ rates of tariff schedule prevailing on that time.
PART 2 OF THE QUESTION : How the ‘like product’ is defined by WTO DSB.
ANSWER TO PART 2 : LIKE PRODUCTS : As per MFN treatment - Article I:1 of the GATT 1994 prohibits discrimination between like products originating in, or destined for, different countries.
MEANING : In EC- Asbestos case, WTO Appellate Body HELD that the dictionary meaning of ‘like’ suggests that ‘like products’ are products that share a number of identical or similar characteristics.
FACTORS TO BE CONSIDERED : In determining “like products” under the first sentence of Article III: 2, the following four factors are considered: (1) the product’s properties, nature and quality, (2) the product’s end uses, (3) consumer tastes and habits, and (4) tariff classification.