5 The National Treatment Principle
The National Treatment Principle has an ancient genesis in international trade law, arguably dating back to ancient Hebrew law and then appearing in agreements between Italian city-states in the eleventh century, in commercial treaties concluded during the twelfth century between England and continental powers and cities, and in agreements among German city-states constituting the Hanseatic League from the twelfth century onwards. The principle was also adopted in various shipping treaties entered into between European powers in the seventeenth and eighteenth centuries, and became commonplace in trade treaties drawn up in large numbers in the latter part of the nineteenth century.
*A tax conforming to the requirements of the first sentence of paragraph 2 would be considered to be inconsistent with the provisions of the second sentence only in cases where competition was involved between, on the one hand, the taxed product and, on the other hand, a directly competitive or substitutable product which was not similarly taxed.
Over the history of the GATT/WTO, divergent approaches to the interpretation of Article III have been adopted, ranging from literal-ist or formalistic approaches; aims-and-effects approaches that focus on discerning protectionist intent; and economic or market-based approaches that focus on domestic fiscal or regulatory measures that upset competitive relationships between imports and domestic products.
The first Japanese-Alcohol Beverages case (1987)1 was the leading GATT case on internal taxes, and in interpreting the phrase “like products” in Article III(2) tended to focus on actual or potential substitutability...
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