Trade in Goods: Non-Discrimination and General Exceptions
| Author | Jon R. Johnson |
| Pages | 52-74 |
CHAPTER
2
TRADE
IN
GOODS:
NON-DISCRIMINATION
AND
GENERAL
EXCEPTIONS
The
core discipline
of the
rules-based international trading system
of
which Canada
is a
part
is
non-discrimination. Market access
is
most fre-
quently denied through
the
application
of
measures that discriminate
against goods
from
certain countries
in
favour
of
those
from
others
or
that treat domestic goods more
favourably
than imported goods.
This
chapter describes
the
principles
of
non-discrimination
of the
trade-in-
goods provisions
of the
trade agreements
to
which Canada
is
party.
Article
XX of
GATT
1994 sets
out
general exceptions that apply
to
all
provisions
of
GATT
1994. These exceptions
are
frequently
invoked
to
justify
discriminatory
and
other GATT-inconsistent measures.
Evolv-
ing
jurisprudence through
WTO
panels
and the
Appellate Body
is
defin-
ing the
limits
of
these exceptions with increasing precision. This chap-
ter
describes these
GATT
1994 exceptions
and
their incorporation into
and
refinement
by
each
of
NAFTA,
CIFTA,
and
CCFTA.
A.
MFN
PRINCIPLE
1)
GATT 1994
a)
Article
I of
GATT 1994
The
most-favoured-nation
or MFN
principle described
in the
"Over-
view"
to the
effect
that
an
advantage granted
to one be
extended
to all
is
applied
to
trade
in
goods
by
Article
I of
GATT
1994. Article
I
requires
52
Trade
in
Goods:
Non-discrimination
and
General
Exceptions
53
that
any
advantage,
favour,
privilege,
or
immunity granted
by a
con-
tracting
party
to any
product originating
in or
destined
for
another
country
(whether
or not a
contracting party)
be
granted
to
like products
originating
in or
destined
for all
contracting
parties.1
The
rule applies
to
duties
or any
other charges
in
connection with importation
or
exporta-
tion,
border formalities, internal taxes (such
as GST and
PST),
and
reg-
ulations respecting internal sale
and
distribution.
The
Appellate Body
in EEC —
Regime
for the
Importation,
Sale
and
Distribution
of
Bananas2
considered
the
application
of
import rules
applied
by the
European Union
in
respect
of
bananas that were more
onerous with respect
to
importing bananas
from
some countries than
with others.
The
Appellate Body observed that
the
term "advantage"
had
been given
a
broad definition
by
earlier
GATT
panels
and
found that
the
requirements were inconsistent with Article
1:1
of
GATT
1994.3
b)
Significance
of MFN
Principle
for
Government Policy
and
Sectoral Arrangements
The MFN
obligation
of
GATT
1994
requires
the
Canadian government
and
the
governments
of its
trading partners
to be
even-handed
in the
application
of
measures
to
other countries.
The MFN
obligation
has the
effect
of
prevent-
ing
trade measures
from
becoming
a
morass
of
special arrangements with
individual trading
partners.4
The MFN
obligation also requires that
the
gov-
ernment
carefully
consider
the
impact
of
changing
its
trade policies because
alterations
must apply
to all
trading partners that
are WTO
members.
Sectoral
free
trade
is
raised
from
time
to
time
as a
policy that should
be
pursued
by the
Canadian government.
The
difficulty
with sectoral arrange-
ments
is
that
the MFN
obligation
of
GATT
1994 prevents Canada
and
other
WTO
member countries
from
entering into preferential arrange-
ments covering
specific
sectors. Since
the
GATT
first
became
effective
in
1 The
scope
of
art.
I of the
1994,
set out in
Annex
1A of the
Agreement Creating
the
World
Trade
Organization,
15
April 1994
(Dobbs
Ferry, N.Y.: Oceana Publications, 1997) [GATT 1994]
depends
on the
meaning
of the
expression
"like
products."
The
meaning
of
this
expression
in the
context
of
GATT art.
Ill
has
been
considered
in
recent
WTO
jurisprudence
described
below
under
"First
Sentence
and
"like
products."
"
2
WT/DS27/AB/R,
Appellate Body Report
(AB-1997-3)
[Bananas Appellate
Body].
3 See
ibid.,
paras.
205-207.
This
case
involves
a
complex
scheme
for
regulating
the
importation
of
bananas
into
the
European Union that
was
found
to be
inconsistent
with
a
number
of
provisions
of
GATT 1994, ibid.
There
had
been
several earlier
GATT
panel
decisions
on the
banana
importation
issue.
4 As
will
be
seen
in
following chapters,
the
permitted
exceptions
(free
trade
areas,
Generalized System
of
Preferences) have
resulted
in a
substantial variation
in the
manner
in
which
Canada treats
goods
imported
from
its
trading
partners.
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