Introduction
This essay examines the evolution of the Appellate Body’s interpretation of ‘likeness’ under Article III of the General Agreement on Tariffs and Trade (GATT) 1994, with a particular focus on two landmark cases: Japan – Taxes on Alcoholic Beverages II (1996) and EC – Measures Affecting Asbestos and Asbestos-Containing Products (2001). Article III, which governs national treatment obligations, prohibits discrimination between domestic and imported products deemed ‘like.’ The concept of ‘likeness’ is central to determining whether discriminatory treatment violates GATT rules, making the Appellate Body’s jurisprudence critical to international trade law. This discussion will explore how Japan – Alcoholic Beverages II prioritised a market-based, competition-focused approach to assessing ‘likeness,’ while EC – Asbestos introduced non-commercial factors, notably health risks, into the analysis of physical characteristics. The essay will further evaluate the coherence of the Appellate Body’s approach to ‘likeness,’ reflecting on whether these shifts represent a consistent legal framework or a fragmented evolution. Through this analysis, the essay aims to provide a sound understanding of the topic while engaging with key debates in international trade law.
The Market-Based Approach in Japan – Taxes on Alcoholic Beverages II
In Japan – Taxes on Alcoholic Beverages II (1996), the Appellate Body adopted a predominantly economic and competition-oriented interpretation of ‘likeness’ under Article III:2 of the GATT 1994. The dispute centred on whether Japan’s taxation system, which imposed higher taxes on imported spirits such as vodka compared to domestically produced shochu, violated national treatment obligations. The Appellate Body clarified that ‘likeness’ should be determined based on a product’s competitive relationship in the marketplace. It endorsed the criteria previously outlined by GATT panels, including physical characteristics, end-uses, consumer preferences, and tariff classification, but placed significant emphasis on whether the products were in direct competition or substitutability (WTO, 1996).
This approach marked a shift towards a more objective, market-driven analysis, as the Appellate Body sought to avoid subjective assessments of product differences. For instance, despite differences in production methods or cultural significance, the focus remained on whether consumers viewed shochu and vodka as substitutable. The ruling underscored that even small differences in physical characteristics would not preclude a finding of ‘likeness’ if the products competed in the same market. Scholars have generally praised this framework for providing clarity and predictability in trade disputes (Hudec, 2000). However, critics argue it prioritises economic considerations over other relevant factors, such as policy objectives behind differential treatment (Howse and Tuerk, 2001). This market-focused interpretation set a benchmark for subsequent cases, though it would later be nuanced by other rulings.
Incorporating Non-Commercial Factors in EC – Measures Affecting Asbestos
A significant evolution in the interpretation of ‘likeness’ emerged in EC – Measures Affecting Asbestos and Asbestos-Containing Products (2001). This case involved a French ban on asbestos and asbestos-containing products, challenged by Canada as a violation of national treatment under Article III:4 of the GATT 1994. The core issue was whether asbestos and alternative materials, such as fibreglass, could be considered ‘like’ despite profound differences in their health impacts. The Appellate Body introduced a notable departure from the purely market-based approach by factoring health risks into the analysis of physical characteristics (WTO, 2001).
While affirming the traditional criteria for ‘likeness’—physical characteristics, end-uses, consumer preferences, and tariff classification—the Appellate Body clarified that physical characteristics include not only tangible properties but also inherent risks associated with a product. It concluded that the carcinogenic nature of asbestos rendered it fundamentally different from substitutes, even if they shared similar end-uses or competitive relationships. This reasoning effectively incorporated non-commercial considerations, such as public health, into the determination of ‘likeness,’ marking a shift from the competition-focused stance of Japan – Alcoholic Beverages II. As Howse (2002) notes, this decision reflected a sensitivity to domestic policy objectives, particularly in areas of significant public interest like health. However, it also raised questions about the consistency of applying non-economic factors, as their inclusion could arguably open the door to subjective or protectionist justifications in future disputes.
Evaluating the Coherence of the Appellate Body’s Jurisprudence
Reflecting on the Appellate Body’s evolving interpretation of ‘likeness,’ a tension emerges between the desire for a predictable, market-based framework and the need to accommodate legitimate policy objectives. The approach in Japan – Alcoholic Beverages II provided a clear, competition-oriented standard that prioritised economic considerations and minimised the risk of disguised protectionism. By contrast, EC – Asbestos introduced flexibility by allowing non-commercial factors to influence the analysis, acknowledging that trade rules must sometimes yield to overriding concerns such as public health. This shift, while arguably necessary, complicates the application of ‘likeness’ by introducing elements that are harder to assess objectively (Mavroidis, 2000).
The coherence of the Appellate Body’s jurisprudence can be questioned on several grounds. Firstly, the integration of non-economic factors risks undermining the predictability that the market-based approach sought to achieve. If health or environmental risks are factored into physical characteristics, as in EC – Asbestos, the scope for subjective interpretation widens, potentially allowing states to justify discriminatory measures under the guise of policy objectives. Secondly, the Appellate Body has not provided a clear methodology for balancing economic and non-economic considerations, leaving future panels with limited guidance on prioritising competing factors. Indeed, as Ortino (2004) suggests, this lack of a structured framework could lead to inconsistent rulings, particularly in complex cases where multiple policy objectives are at play.
However, it is important to note that the Appellate Body has consistently reiterated the case-by-case nature of ‘likeness’ determinations, suggesting that flexibility is a deliberate feature of its approach rather than a flaw. This adaptability allows the WTO dispute settlement system to respond to the diverse circumstances of member states, ensuring that trade rules do not unduly constrain domestic policy space. Furthermore, both Japan – Alcoholic Beverages II and EC – Asbestos demonstrate a commitment to grounding decisions in evidence, whether through market data or scientific assessments of risk, which lends a degree of rigour to the jurisprudence. Therefore, while coherence may be limited by the absence of a rigid formula, the Appellate Body’s evolving interpretation reflects a pragmatic attempt to navigate the complexities of international trade.
Conclusion
In conclusion, the Appellate Body’s interpretation of ‘likeness’ under Article III of the GATT 1994 has undergone significant evolution, as evidenced by the contrasting approaches in Japan – Taxes on Alcoholic Beverages II and EC – Measures Affecting Asbestos and Asbestos-Containing Products. The former championed a market-based, competition-focused framework, emphasising substitutability and consumer preferences, while the latter introduced non-commercial considerations, notably health risks, into the analysis of physical characteristics. This shift reflects an attempt to balance trade liberalisation with domestic policy objectives, though it raises concerns about predictability and consistency. Evaluating the coherence of the Appellate Body’s jurisprudence reveals both strengths and limitations: while its flexibility allows responsiveness to diverse contexts, the lack of a clear methodological framework risks inconsistent application. Ultimately, the evolving interpretation of ‘likeness’ underscores the challenge of reconciling economic and non-economic priorities in international trade law, highlighting the need for further clarity in future rulings to ensure a more cohesive legal standard.
References
- Hudec, R.E. (2000) ‘GATT/WTO Constraints on National Regulation: Requiem for an “Aim and Effects” Test’, The International Lawyer, 34(3), pp. 609-645.
- Howse, R. (2002) ‘The Appellate Body Rulings in the Shrimp/Turtle Case: A New Legal Baseline for the Trade and Environment Debate’, Environmental Law Review, 27(2), pp. 491-521.
- Howse, R. and Tuerk, E. (2001) ‘The WTO Impact on Internal Regulations – A Case Study of the Canada-EC Asbestos Dispute’, in The EU and the WTO: Legal and Constitutional Issues, edited by G. de Búrca and J. Scott, Hart Publishing, pp. 283-328.
- Mavroidis, P.C. (2000) ‘Like Products: Some Thoughts at the Positive and Normative Level’, in Regulatory Barriers and the Principle of Non-Discrimination in World Trade Law, edited by T. Cottier and P.C. Mavroidis, University of Michigan Press, pp. 125-150.
- Ortino, F. (2004) Basic Legal Instruments for the Liberalisation of Trade: A Comparative Analysis of EC and WTO Law. Hart Publishing.
- World Trade Organization (1996) Japan – Taxes on Alcoholic Beverages II, Appellate Body Report. WTO.
- World Trade Organization (2001) EC – Measures Affecting Asbestos and Asbestos-Containing Products, Appellate Body Report. WTO.
