National Treatment II: Regulation and Procurement, Article III:4 and III:8

In one line

A domestic regulation must not put imported goods at a competitive disadvantage, and the two carve-outs for government purchasing and for producer subsidies are narrower than they look.

In exam wording: Article III:4 of GATT 1994 requires that imported products be accorded treatment no less favourable than that accorded to like domestic products in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use, and Article III:8 excludes government procurement and producer subsidies from that obligation.

The provision

Article III:4 in its own words. The products of any member imported into the territory of any other member shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.

Three elements. The products must be like. There must be a law, regulation or requirement affecting one of the listed internal dealings. And the imported product must be accorded treatment no less favourable.

Treatment no less favourable means effective equality of competitive opportunities. It is not a requirement of identical treatment: a measure may treat imports differently and still comply, provided it does not modify the conditions of competition to their detriment. Conversely formally identical treatment can breach the article if it bears more heavily on imports in fact.

Likeness here is wider than in the first sentence of Article III:2

European Communities: Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001. Facts. France banned asbestos and products containing it; Canada, an exporter of chrysotile fibre, complained, arguing that chrysotile and the substitute fibres were like products. Held. The health risks associated with a product are relevant to likeness under Article III:4, entering through the criteria of physical properties and of consumers' tastes and habits, so chrysotile and the safer substitutes were not shown to be like; and even if they had been, the ban was necessary within Article XX(b). The European Communities won and Canada lost. Why it matters: it settles that likeness under III:4 is a determination about the competitive relationship in which risk can play a part, and it is the standard authority on the interaction of Article III with Article XX.

India's two encounters

India: Measures Affecting the Automotive Sector, WT/DS146/R and WT/DS175/R, adopted 5 April 2002. Facts. Public Notice No. 60 and India's Export and Import Policy required a car manufacturer signing a memorandum of understanding to indigenise components to a rising percentage and to balance its foreign exchange outgo with export earnings. The European Communities and the United States complained. Held. The indigenisation requirement breached Article III:4, because a requirement to source parts in India gives domestic parts a competitive advantage over imported like parts; and the trade balancing requirement breached Article XI:1 as a restriction on importation. India lost and did not pursue its appeal. Why it matters: it is the first Indian application of III:4 and it shows the two limbs of a local content policy failing under two different articles.