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S.7A.1 Article XVII of the GATT 1994 — “principles
of non-discriminatory treatment” back to top
S.7A.1.1 Canada
— Wheat Exports and Grain
Imports, para. 85
(WT/DS276/AB/R)
Subparagraph (a) of Article XVII:1 contains
a number of different elements, including both an acknowledgement and
an obligation. It recognizes that Members may establish or maintain
State enterprises or grant exclusive or special privileges to private
enterprises, but requires that, if they do so, such enterprises
must, when they are involved in certain types of transactions (“purchases
or sales involving either imports or exports”), comply with a
specific requirement. That requirement is to act consistently with
certain principles contained in the GATT 1994 (“general principles
of non-discriminatory treatment … for governmental measures
affecting imports or exports by private traders”). Subparagraph (a)
seeks to ensure that a Member cannot, through the creation or
maintenance of a State enterprise or the grant of exclusive or special
privileges to any enterprise, engage in or facilitate conduct that
would be condemned as discriminatory under the GATT 1994 if such
conduct were undertaken directly by the Member itself. In other words,
subparagraph (a) is an “anti-circumvention” provision.
S.7A.1.2 Canada
— Wheat Exports and Grain
Imports, para. 87
(WT/DS276/AB/R)
This requirement, which lies at the core of
subparagraph (a), is a requirement that STEs not engage in certain
types of discriminatory conduct. When viewed in the abstract, the
concept of discrimination may encompass both the making of
distinctions between similar situations, as well as treating
dissimilar situations in a formally identical manner. The Appellate
Body has previously dealt with the concept of discrimination and the
meaning of the term “non-discriminatory”, and acknowledged that,
at least insofar as the making of distinctions between similar
situations is concerned, the ordinary meaning of discrimination can
accommodate both drawing distinctions per se, and drawing
distinctions on an improper basis. Only a full and proper
interpretation of a provision containing a prohibition on
discrimination will reveal which type of differential treatment is
prohibited. In all cases, a claimant alleging discrimination
will need to establish that differential treatment has occurred in
order to succeed in its claim.
S.7A.1.3 Canada
— Wheat Exports and Grain
Imports, para. 98 and footnote 104
(WT/DS276/AB/R)
As we have seen, through its reference to
the “general principles of non-discriminatory treatment prescribed
in this Agreement for governmental measures affecting imports or
exports by private traders”, Article XVII:1 imposes an obligation on
Members not to use STEs in order to discriminate in ways that would be
prohibited if undertaken directly by Members. Yet even if Article XVII:1 itself did not exist, this would not imply that STEs would be
subject to no disciplines under the GATT 1994. For example, the
express provisions of Article II:4 of the GATT 1994 and the ad
Note to Articles XI, XII, XIII, XIV and XVIII constrain the behaviour
of STEs. Other provisions of the GATT 1994, notably Article VI, also
apply to the activities of STEs.104
We need not identify, for
purposes of this appeal, all of the provisions of the GATT 1994 that
may apply to STEs, nor consider how these disciplines interact with
and reinforce each other. We do, however, believe that these other
provisions reveal that, even in 1947, the negotiators of the GATT
created a number of complementary requirements to address the
different ways in which STEs could be used by a contracting party to
seek to circumvent its obligations under the GATT. The existence of
these other provisions of the GATT 1994 also supports the view that
Article XVII was never intended to be the sole source of the
disciplines imposed on STEs under that Agreement. This is also
consistent with the view that Article XVII:1 was intended to impose
disciplines on one particular type of STE behaviour, namely
discriminatory behaviour, rather than to constitute a comprehensive
code of conduct for STEs. Moreover, as the Panel observed, since the
conclusion of the Uruguay Round, a number of additional obligations,
under different covered agreements, operate to further constrain the
behaviour of STEs.
S.7A.1.4 Canada
— Wheat Exports and Grain
Imports, para. 145
(WT/DS276/AB/R)
… The disciplines of Article XVII:1 are
aimed at preventing certain types of discriminatory behaviour. We see
no basis for interpreting that provision as imposing comprehensive
competition-law-type obligations on STEs, as the United States would
have us do.
S.7A.2 Article XVII of the GATT 1994, Note
Ad — differential prices for commercial reasons
back to top
S.7A.2.1 Canada
— Wheat Exports and Grain
Imports, para. 94
(WT/DS276/AB/R)
… This ad Note is attached to
Article XVII:1 as a whole, rather than to either subparagraph (a) or
subparagraph (b) alone. This sentence of the ad Note confirms
that at least one type of differential treatment — price
differentiation — is consistent with Article XVII:1 provided that
the reasons for such differential prices are commercial in nature, and
gives an example of such commercial reasons (“to meet conditions of
supply and demand in export markets”). Thus, this Note also
contemplates that determining the consistency or inconsistency of an
STE’s conduct with Article XVII:1 will involve an examination of both
differential treatment and of commercial considerations.
S.7A.30 Article XVII:1 of the GATT 1994 — Relationship between subparagraphs (a) and (b)
back to top
S.7A.3.1 Canada
— Wheat Exports and Grain
Imports, para. 89
(WT/DS276/AB/R)
… the question we are asked to consider is
how subparagraph (a) relates to subparagraph (b) of Article XVII:1. In
our view, the answer to that inquiry is not found in the text of
subparagraph (a). Rather, the words that bear most directly on the
relationship between the first two paragraphs of Article XVII:1 are
found in the opening phrase of subparagraph (b), which states that the
“provisions of subparagraph (a) of this paragraph shall be
understood to require that such enterprises shall …”.
(emphasis added) This phrase makes it abundantly clear that the
remainder of subparagraph (b) is dependent upon the content of
subparagraph (a), and operates to clarify the scope of the requirement
not to discriminate in subparagraph (a). … Thus, the opening phrase
in subparagraph (b) of Article XVII:1 supports Canada’s view that
the principal source of the relevant obligation(s) in Article XVII:1(a) and (b) is, indeed, found in “[t]he provisions of
subparagraph (a)”.
S.7A.3.2 Canada
— Wheat Exports and Grain
Imports, para. 91
(WT/DS276/AB/R)
Having examined the text of subparagraphs
(a) and (b) of Article XVII:1, it is our view that subparagraph (b),
by defining and clarifying the requirement in subparagraph (a), is
dependent upon, rather than separate and independent from,
subparagraph (a). …
S.7A.3.3 Canada
— Wheat Exports and Grain
Imports, paras. 99-100
(WT/DS276/AB/R)
… subparagraphs (a) and (b) are
necessarily related to each other. Subparagraph (a) is the general and
principal provision, and subparagraph (b) explains it by identifying
types of differential treatment in commercial transactions. It appears
to us that these types of differential treatment would be the most
likely to occur in practice and, therefore, that most if not all cases
under Article XVII:1 will involve an analysis of both subparagraphs
(a) and (b).
For all these reasons, we are of the view
that subparagraph (a) of Article XVII:1 of the GATT 1994 sets out an
obligation of non-discrimination, and that subparagraph (b) clarifies
the scope of that obligation. We therefore disagree with the United
States that subparagraph (b) establishes separate requirements that
are independent of subparagraph (a).
S.7A.3.4 Canada
— Wheat Exports and Grain
Imports, para. 106 and footnote 115
(WT/DS276/AB/R)
Our conclusions regarding the relationship
between subparagraphs (a) and (b) imply that a panel confronted with a
claim that an STE has acted inconsistently with Article XVII:1 will
need to begin its analysis of that claim under subparagraph (a),
because it is that provision which contains the principal obligation
of Article XVII:1, namely the requirement not to act in a manner
contrary to the “general principles of non-discriminatory treatment
prescribed in [the GATT 1994] for governmental measures affecting
imports or exports by private traders.” At the same time, because
both subparagraphs (a) and (b) define the scope of that
non-discrimination obligation, we would expect that panels, in most if
not all cases, would not be in a position to make any finding of
violation of Article XVII:1 until they have properly interpreted and
applied both provisions.115
S.7A.3.5 Canada
— Wheat Exports and Grain
Imports, para. 109
(WT/DS276/AB/R)
Thus, in each case it is the nature of the
relationship between two provisions that will determine whether there
exists a mandatory sequence of analysis which, if not followed, would
amount to an error of law. In some cases, this relationship is such
that a failure to structure the analysis in the proper logical
sequence will have repercussions for the substance of the analysis
itself.
S.7A.3.6 Canada
— Wheat Exports and Grain
Imports, paras. 110-111
(WT/DS276/AB/R)
… a panel faced with a claim of
inconsistency with Article XVII:1(a) and (b) will, in most if not all
cases, need to analyze and apply both provisions in order to
assess the consistency of the measure at issue. Subparagraph (b) sets
forth two specific conditions with which an STE must comply if
allegedly discriminatory conduct falling, prima facie, within
the scope of subparagraph (a) is to be found consistent with Article XVII:1. Yet, in order to know whether the conditions in (b) are
satisfied, a panel must know what constitutes the conduct
alleged to be inconsistent with the principles of non-discriminatory
treatment in the GATT 1994. A panel will need to identify at least the
differential treatment at issue. The outcome of an assessment under
subparagraph (b) of whether the differential treatment is consistent
with commercial considerations may depend, in part, upon whether the
alleged discrimination relates to pricing, quality, or conditions of
sale, and whether it is discrimination between export markets or some
other form of discrimination.
It follows that, logically, a panel cannot
assess whether particular practices of an allegedly discriminatory
nature accord with commercial considerations without first identifying
the key elements of the alleged discrimination. We emphasize that we
are not suggesting that panels are always obliged to make
specific factual and legal findings with respect to each element of a
claim of discrimination under subparagraph (a) before undertaking any
analysis under subparagraph (b). Rather, because a panel’s analysis
and application of subparagraph (b) to the facts of the case is, like
subparagraph (b) itself, dependent on the obligation set forth in
subparagraph (a), panels must identify the differential treatment
alleged to be discriminatory under subparagraph (a) in order to ensure
that they are undertaking a proper inquiry under subparagraph (b).
S.7A.3.7 Canada
— Wheat Exports and Grain
Imports, paras. 124-125
(WT/DS276/AB/R)
… although the Panel refrained from
explicitly defining the relationship between the first two
subparagraphs of Article XVII:1, its approach was consistent with our
interpretation of that relationship.
In sum, we find that, in the particular
circumstances of this case, the Panel did not err in not considering
the “proper” relationship between subparagraphs (a) and (b) of
Article XVII:1 of the GATT 1994, or in proceeding to examine the
consistency of the CWB Export Regime with Article XVII:1(b) without
first having found a breach of Article XVII:1(a). …
S.7A.4 Article XVII:1(b) of the GATT 1994 — “commercial considerations” back to top
S.7A.4.1 Canada
— Wheat Exports and Grain
Imports, paras. 140-141
(WT/DS276/AB/R)
… The Panel began its analysis by
considering the meaning of the term “commercial considerations” in
subparagraph (b) and found that this term should be understood as
meaning “considerations pertaining to commerce and trade, or
considerations which involve regarding purchases or sales ‘as mere
matters of business’.” The Panel also determined that the
requirement that STEs act solely in accordance with such
considerations “must imply that they should seek to purchase or sell
on terms which are economically advantageous for themselves and/or
their owners, members, beneficiaries, etc.” Thus, the Panel
interpreted the term “commercial considerations” as encompassing a
range of different considerations that are defined in any given case
by the type of “business” involved (purchases or sales), and by
the economic considerations that motivate actors engaged in business
in the relevant market(s).
The Panel then turned to address several
arguments advanced by the United States with respect to the
interpretation of the first clause of subparagraph (b). It was in
responding to the United States’ assertion that the requirement that
STEs act “solely in accordance with commercial considerations” is
equivalent to a requirement that STEs act like “commercial actors”
that the Panel made the statement that “the requirement in question
is simply intended to prevent STEs from behaving like ‘political’
actors”. Yet in so doing the Panel expressly stated that it was not,
as the United States now suggests that it did, equating “non-commercial”
actors with political actors. …
S.7A.4.2 Canada
— Wheat Exports and Grain
Imports, paras. 144-145
(WT/DS276/AB/R)
… it is important to observe that the
Panel’s interpretation of the term “commercial considerations”
necessarily implies that the determination of whether or not a
particular STE’s conduct is consistent with the requirements of the
first clause of subparagraph (b) of Article XVII:1 must be undertaken
on a case-by-case basis, and must involve a careful analysis of the
relevant market(s). We see no error in the Panel’s approach; only
such an analysis will reveal the type and range of considerations
properly considered “commercial” as regards purchases and sales
made in those markets, as well as how those considerations influence
the actions of participants in the market(s).
At the same time, our interpretation of the
relationship between subparagraphs (a) and (b) of Article XVII:1
necessarily implies that … a panel inquiring whether an STE has
acted solely in accordance with commercial considerations must
undertake this inquiry with respect to the market(s) in which the STE
is alleged to be engaging in discriminatory conduct. Subparagraph (b)
does not give panels a mandate to engage in a broader inquiry into
whether, in the abstract, STEs are acting “commercially”. …
S.7A.4.3 Canada
— Wheat Exports and Grain
Imports, para. 146
(WT/DS276/AB/R)
… For the United States, because
commercial actors naturally conduct their business on the basis of
commercial considerations, the first clause of Article XVII:1(b)
necessarily must prevent an STE from using its privileges in a way
that creates serious obstacles to trade and disadvantages such
commercial actors. …
S.7A.4.4 Canada
— Wheat Exports and Grain
Imports, para. 149
(WT/DS276/AB/R)
… the Panel’s approach emphasizes that
whether an STE is in compliance with the disciplines in Article XVII:1
must be assessed by means of a market-based analysis, rather than
simply by determining whether an STE has used the privileges that it
has been granted. In arguing that Article XVII:1(b) must be
interpreted as prohibiting STEs from using their exclusive or special
privileges to the disadvantage of “commercial actors”, the United
States appears to construe Article XVII:1(b) as requiring STEs to act
not only as commercial actors in the marketplace, but as virtuous
commercial actors, by tying their own hands. We do not see how such an
interpretation can be reconciled with an analysis of “commercial
considerations” based on market forces. In other words, we cannot
accept that the first clause of subparagraph (b) would, as a general
rule, require STEs to refrain from using the privileges and advantages
that they enjoy because such use might “disadvantage” private
enterprises. STEs, like private enterprises, are entitled to exploit
the advantages they may enjoy to their economic benefit. Article XVII:1(b) merely prohibits STEs from making purchases or sales on the
basis of non-commercial considerations.
S.7A.5 Article XVII:1(b) of the GATT 1994 — Afford adequate opportunity to compete for participation in purchases
or sales back to top
S.7A.5.1 Canada
— Wheat Exports and Grain
Imports, para. 153
(WT/DS276/AB/R)
… The United States asserts that the Panel’s
incorrect interpretative approach led it to the erroneous conclusion
that this term [afford the enterprises of the other Member adequate
opportunity … to compete for participation in such purchases or
sales] referred to enterprises that wish to buy from an STE,
but not to enterprises that wish to sell in competition with an
STE. …
S.7A.5.2 Canada
— Wheat Exports and Grain
Imports, paras. 156-157
(WT/DS276/AB/R)
In the abstract, competition to participate
in purchases and sales could include competition to participate as a
buyer, as a seller, or both. However, the clause under examination
does not refer, in the abstract, to any purchases and sales.
Rather, it refers to “such purchases or sales”, repeating
the phrase found in the first clause of subparagraph (b). As discussed
in our analysis above, this phrase in subparagraph (b) of Article XVII:1 refers back to the activities identified in subparagraph (a),
namely the purchases and sales of an STE involving imports or exports.
In other words, the second clause of
subparagraph (b) refers to purchases and sales transactions where: (i)
one of the parties involved in the transaction is an STE; and (ii) the
transaction involves imports to or exports from the Member maintaining
the STE. Thus, the requirement to afford an adequate opportunity to
compete for participation (i.e., taking part with others) in
“such” purchases and sales (import or export transactions
involving an STE) must refer to the opportunity to become the STE’s
counterpart in the transaction, not to an opportunity to
replace the STE as a participant in the transaction. If it were
otherwise, the transaction would no longer be the type of transaction
described by the phrase “such purchases or sales” in the
second clause of Article XVII:1(b), because it would not involve an
STE as a party. Thus, in transactions involving two parties, one of
whom is an STE seller, the word “enterprises” in the second clause
of Article XVII:1(b) can refer only to buyers.
S.7A.5.3 Canada
— Wheat Exports and Grain
Imports, para. 160
(WT/DS276/AB/R)
… The Panel did not determine the full
ambit of the requirement to “afford adequate opportunity … to
compete for participation” in relevant purchases and sales. Nor do
we. The Panel expressly recognized the possibility that, in other
circumstances, particular enterprises could act both as a buyer and as
a seller. The Panel also explicitly stated that it was not asked to,
and was not, ruling on the scope of the obligation in this
clause with respect to STEs that act as purchasers, rather than
as sellers.
S.7A.6 Article XVII:3 of the GATT 1994
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S.7A.6.1 Canada
— Wheat Exports and Grain
Imports, para. 97
(WT/DS276/AB/R)
To us, [Article XVII:3] explicitly
recognizes that, notwithstanding the existence of certain
disciplines on STEs in Article XVII:1, these alone may not suffice to
prevent the various ways in which STEs might create obstacles to
trade, and that additional measures to limit or reduce such obstacles
should therefore be pursued through negotiation. Thus, this provision
constitutes acknowledgement by the GATT contracting parties of the limitations
inherent in Article XVII:1, and recognizes that Article XVII:1 cannot
serve as the sole legal basis for eliminating all potential
obstacles to trade relating to STEs. …
104. We note that different views exist as to whether, or
the extent to which, Article III of the GATT 1994 would also apply to STEs,
although we take no view on this issue for purposes of this appeal. …
back to text
115. We are not asked, in this appeal, to rule on whether it
might be possible for a panel to find a violation of Article XVII:1 based solely
on an analysis undertaken under subparagraph (a) — without conducting any
analysis under subparagraph (b) — and we make no finding in this regard. The
question before us is, rather, whether it might be possible for a panel to find
a violation of Article XVII:1 based solely on an analysis undertaken under
subparagraph (b) — without conducting any analysis under subparagraph (a). In
other words, although we accept that subparagraph (b) identifies two examples of
conduct consistent with the obligation set forth in subparagraph (a), we
make no finding as to whether subparagraph (b) also serves to define,
exhaustively, the type of conduct that is inconsistent with the
obligation in subparagraph (a). back to text
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