Global Trade and Customs Journal

Volume 12 (2017)

Volume 12 (2017) / Issue 1

Alex Davis, 'The Shochu Conundrum: Economics and the General Agreement on Tariffs and Trade Article III' (2017) 12 Global Trade and Customs Journal, Issue 1, pp. 32–38


This article will discuss the National Treatment obligation contained in Article III of the General Agreement on Tariffs and Trade (GATT) 1994 as applied in precedential tax discrimination cases. Case law has not taken a firm stance on the economic versus legal interpretation of the likeness/ directly competitive or substitutable criterion or the principle of ‘so as to afford protection’ captured in Article III.2. After examining the case law on discriminatory taxation, I conclude that the National Treatment obligation in trade agreements is imperfect. Nonetheless, National Treatment is a critical component of these agreements, and the international trade order would collapse under the weight of protectionism were it not imposed. In order to ensure the efficacy of National Treatment, the determination of likeness/directly competitive or substitutable and protective application must consider market forces in addition to legal precedent. Economic indicators including elasticity of substitution and cross-price elasticity of the products in question are suitable measures of substitutability and are therefore the most accurate method of quantifying Article III violations.

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ISSN: 1569-755X
ID: GTCJ2017005