Topics handled by WTO committees and agreements
Issues covered by the WTO’s committees and agreements

REPERTORY OF APPELLATE BODY REPORTS

MFN Treatment


ON THIS PAGE:

Article I of the GATT 1994
Article II of the GATS
Article 4 of the TRIPS Agreement


M.2.1 Article I of the GATT 1994     back to top

M.2.1.1 EC — Bananas III, para. 206
(WT/DS27/AB/R)

 

… we agree with the Panel that the activity function rules are an “advantage” granted to bananas imported from traditional ACP States, and not to bananas imported from other Members, within the meaning of Article I:1. Therefore, we uphold the Panel’s finding that the activity function rules are inconsistent with Article I:1 of the GATT 1994.

 

M.2.1.2 Canada — Autos, para. 78
(WT/DS139/AB/R, WT/DS142/AB/R)

 

… we observe first that the words of Article I:1 do not restrict its scope only to cases in which the failure to accord an “advantage” to like products of all other Members appears on the face of the measure, or can be demonstrated on the basis of the words of the measure. Neither the words “de jure” nor “de facto” appear in Article I:1. Nevertheless, we observe that Article I:1 does not cover only “in law”, or de jure, discrimination. As several GATT panel reports confirmed, Article I:1 covers also “in fact”, or de facto, discrimination. Like the Panel, we cannot accept Canada’s argument that Article I:1 does not apply to measures which, on their face, are “origin-neutral”. …

 

M.2.1.3 Canada — Autos, paras. 79, 81
(WT/DS139/AB/R, WT/DS142/AB/R)

 

We note next that Article I:1 requires that “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” (emphasis added). The words of Article I:1 refer not to some advantages granted “with respect to” the subjects that fall within the defined scope of the Article, but to “any advantage”; not to some products, but to “any product”; and not to like products from some other Members, but to like products originating in or destined for “all other” Members.

 

 

Thus, from both the text of the measure and the Panel’s conclusions about the practical operation of the measure, it is apparent to us that “[w]ith respect to customs duties … imposed on or in connection with importation” Canada has granted an “advantage” to some products from some Members that Canada has not “accorded immediately and unconditionally” to “like” products “originating in or destined for the territories of all other Members” (emphasis added). And this, we conclude, is not consistent with Canada’s obligations under Article I:1 of the GATT 1994.

 

M.2.1.4 Canada — Autos, para. 84
(WT/DS139/AB/R, WT/DS142/AB/R)

 

The object and purpose of Article I:1 supports our interpretation. That object and purpose is to prohibit discrimination among like products originating in or destined for different countries. The prohibition of discrimination in Article I:1 also serves as an incentive for concessions, negotiated reciprocally, to be extended to all other Members on an MFN basis.

 

M.2.1.5 EC — Tariff Preferences, para. 101
(WT/DS246/AB/R)

 

It is well settled that the MFN principle embodied in Article I:1 is a “cornerstone of the GATT” and “one of the pillars of the WTO trading system”, which has consistently served as a key basis and impetus for concessions in trade negotiations. …

 
M.2.2 Article II of the GATS     back to top

M.2.2.1 EC — Bananas III, paras. 233-234
(WT/DS27/AB/R)

 

… The question here is the meaning of “treatment no less favourable” with respect to the MFN obligation in Article II of the GATS. There is more than one way of writing a de facto non-discrimination provision. Article XVII of the GATS is merely one of many provisions in the WTO Agreement that require the obligation of providing “treatment no less favourable”. The possibility that the two Articles may not have exactly the same meaning does not imply that the intention of the drafters of the GATS was that a de jure, or formal, standard should apply in Article II of the GATS. If that were the intention, why does Article II not say as much? The obligation imposed by Article II is unqualified. The ordinary meaning of this provision does not exclude de facto discrimination. Moreover, if Article II was not applicable to de facto discrimination, it would not be difficult and, indeed, it would be a good deal easier in the case of trade in services, than in the case of trade in goods to devise discriminatory measures aimed at circumventing the basic purpose of that Article.

 

For these reasons, we conclude that “treatment no less favourable” in Article II:1 of the GATS should be interpreted to include de facto, as well as de jure, discrimination. …

 

M.2.2.2 EC — Bananas III, para. 241
(WT/DS27/AB/R)

 

We see no specific authority either in Article II or in Article XVII of the GATS for the proposition that the “aims and effects” of a measure are in any way relevant in determining whether that measure is inconsistent with those provisions. In the GATT context, the “aims and effects” theory had its origins in the principle of Article III:1 that internal taxes or charges or other regulations “should not be applied to imported or domestic products so as to afford protection to domestic production”. There is no comparable provision in the GATS. …

 

M.2.2.3 Canada — Autos, paras. 170-171
(WT/DS139/AB/R, WT/DS142/AB/R)

 

The wording of this provision suggests that analysis of the consistency of a measure with Article II:1 should proceed in several steps. First, as we have seen, a threshold determination must be made under Article I:1 that the measure is covered by the GATS. This determination requires that there be “trade in services” in one of the four modes of supply, and that there be also a measure which “affects” this trade in services. We have already held that the Panel failed to undertake this analysis.

 

If the threshold determination is that the measure is covered by the GATS, appraisal of the consistency of the measure with the requirements of Article II:1 is the next step. The text of Article II:1 requires, in essence, that treatment by one Member of “services and services suppliers” of any other Member be compared with treatment of “like” services and service suppliers of “any other country”. Based on these core legal elements, the Panel should first have rendered its interpretation of Article II:1. It should then have made factual findings as to treatment of wholesale trade services and service suppliers of motor vehicles of different Members commercially present in Canada. Finally, the Panel should have applied its interpretation of Article II:1 to the facts as it found them.

 

M.2.2.4 Canada — Autos, para. 181
(WT/DS139/AB/R, WT/DS142/AB/R)

 

Clearly, here the Panel is confusing the application of the import duty exemption to manufacturers with its possible effect on wholesalers. In our view, the Panel has conducted a “goods” analysis of this measure, and has simply extrapolated its analysis of how the import duty exemption affects manufacturers to wholesale trade service suppliers of motor vehicles. The Panel surmised, without analysing the effect of the measure on wholesalers as service suppliers, that the import duty exemption, granted to a limited number of manufacturers, ipso facto affects conditions of competition among wholesalers in their capacity as service suppliers. As we stated earlier in respect of whether the measure at issue “affects trade in services”, the Panel failed to demonstrate how the import duty exemption granted to certain manufacturers, but not to other manufacturers, affects the supply of wholesale trade services and the suppliers of wholesale trade services of motor vehicles. In reaching its conclusions under Article II:1 of the GATS, the Panel has neither assessed the relevant facts we see no analysis of any evidence relating to the supply of wholesale trade services of motor vehicles nor has it interpreted Article II of the GATS and applied that interpretation to the facts it found

 
M.2.3 Article 4 of the TRIPS Agreement     back to top

M.2.3.1 US — Section 211 Appropriations Act, para. 317
(WT/DS176/AB/R)

 

The fact that Section 515.201 of Title 31 CFR could also apply to a non-Cuban foreign national does not mean, however, that it would offset in each and every case the discriminatory treatment imposed by Sections 211(a)(2) and (b) on Cuban original owners. … We are, therefore, not satisfied that Section 515.201 would offset the inherently less favourable treatment present in Sections 211(a)(2) and (b) in each and every case.

 


The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.