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Part A:
The concept of National Treatment is possibly one of the most important pillars among the modern trading system brought up because of the genesis of WTO/GATT. The principle is present in many contract with respect to WTO like the Agreement on trade related aspects of intellectual property rights (TRIPs) , The agreement on Trade related investment measures (TRIMs) and the general agreement for trade in practices (Alcover and  Garcés 2016). One of the mechanisms with respect to anti-discrimination in the regime of multilateral trading is principle of national treatment. The significance of the concept of national treatment with respect to not only the WTO but also with a number of different international regimes is showed upon in its existence in many Bilateral Investment Treaties (BITs) existing in the present and therefore efficiently changing the method in which trade in done by one nation with another. One of the essential principle of WTO has been the system of national treatment observed to support MFN treatment. Discrimination is prohibited through the principle of national treatment with respect to imported goods over the goods produced domestically (United Nations 2003). To make it simple the states who are members of the WTO are not allowed to favor the goods produced by them over imported goods. The nations cannot make polices and laws within their territories which would directly or indirectly discriminate imported goods with domestic products (David 2016). The purpose of article III:4 was to prevent protectionism with respect to regulatory actions and internal taxes. Further the application extend  towards the supposition to denote that the members of WTO were forced to make sure that protectionist functions are not served through internal regulations and taxes . The members should not have the scope of changing the conditions of the market in order to make it difficult for the imported goods. Thus it can be stated clearly that the main intention of Article III:4 was to prevent the endorsement of regulations and laws in support of domestic goods bringing detriment to imported goods. The purpose of Article III is to ensure fair international trade whereas Article III:4 specifically deals with internal regulations and taxation such as transportation , distribution , put up for sale, imported product use and regulations affecting internal sale. However Article III:4 is not applicable to different charges of internal transportation exclusively based upon market operations related to modes of transport rather than the product nationality (Herman 2013). 
Three questions have to be taken into account in order to determine whether or not the national treatment obligation has been violated by the members of WTO.

1. Whether the issue in hand is a requirement, regulation or a law which affects the internal sale , distribution, purchase, transportation and offering for sale or not. 
2. Whether the domestic and imported products in question are “like products” or not
3. Whether the imported product has received less favorable or discriminatory treatment as compared to the domestic product or
not (Horn and Mavroidis 2001)

The term like products is a disputed area with respect to the Article III. The word is interpreted in two ways to achieve a meaning. In one approach a flexible definition is given to the word “like” and a strict literal meaning has been provided in the other approach. In the recent panel ruling of Japan- Alcoholic Beverages 1998, Case 98B which was latter brought to scrutiny of the appellate under the rule of the latest WTO Dispute Settlement Understanding (Horn and Mavroidis 2004). Firstly the word was interpreted in a strict way and the appeal to mitigate the damage further intensified the confusion over the term. Presently the national treatment obligation is not clear and too harsh application of the word likely would make matter more difficult. The court in US- Malt beverages took into account regulatory purpose it cannot be considered as violation of the agreement. The court merely pointed out what was actually lacking in the agreement. It was confirmed by the appellate body of EC- Asbestos that the word like can have different meanings and may mean different things with respect to the first sentence of Article III:2 and Article III:
 
4. The ordinary meaning approach was adopted by the appellate body it was found by them that a necessary situation for likeliness is competitive relationship (Houston 2017). It is argued against the decision that the EC failed to leave any room for consideration in future for example regulatory purpose. In order to determine whether two domestic and imported products are like products or not an analysis of the nature and extent of the competitive relationship between such products in question in required. In the case of AC Asbestos it was also held by the court that the word like should be interpreted in a method which would bring out the concept of anti protectionism provided by Article III:1. As the word like has been used many times in Article III it is not interpreted in similar way and this was the cause why likeness was discussed in Japan-Alcoholic Beverages like an accordion that can be constructed less depending or more narrowly according to the context.  As compared to the first sentence of Article III:
 
2 The word likely is interpreted in a much wider scope in Article III:
 
4. However it cannot be more wide as compared to directly substitutable or competitive products and like products under Article III:
 
2. In the case of EC asbestos France was challenged by Canada for imposing a ban with respect to Chysotile fibers. It was argued by Canada that France has breached the agreement as it allowed the sale of domestic fibers such as PCG fibers. It was held by the appellate body overruling the decision of the panel that as chrysotile fibers were having a health risk as compared to PCG fibers they were not like products. Thus the court ruled that France did not breach Article III:4. In this case the court considered as non economy factor and widened the scope of determining the term likeness. 

In order to be covered by Article III: 4 a measure must be an internal regulation or rule dealing with the sales, distribution transport and use of goods. For example the rule that cigarettes which are imported cannot be moved out of a warehouse unless stamp duty are paid and attached on them in the presence of a tax inspector as per panel reports-Dominican republic. In the case of Canada-Alcohol II case there was a rule of fixing a minimum sales price (Swiss National Science Foundation 2017). 

The other issue which has to be determined is whether there was a less favorable treatment or not. Thus it has to be verified by the panel that the regulation or requirements had been made to protect the domestic product or not.  In the case of Korea- various measures on Beef 2001 it was provided by the court that it was not important or sufficient that different treatment of imported and domestic goods account to violation of the WTO agreements the panel has to take into account the fact that the measure had changed the competition condition causing detriment to the imported goods or not according to Article III:4. In the case of EC-Bananas III separate deliberation that the rule in question has been passed to modify the competition terms to make it difficult for the imported product is not required to determine contravention of Article III:4. The reason for passing the regulatory measure must be considered in order to determine whether a less favorable treatment has taken place or not. Thus only because a measure has caused an adverse impact on the condition of the competition does not prove that the member state has violated the provision of the agreement. However in a latter decision in the case of EC-asbestos a totally different view was taken by the appellate body. The decision of the appellate court in EC – Asbestos restored to the original decision in Japan –alcoholic beverages as article III rules over all its subsections it provides the interpreters a guideline to determine the question. Thus in order to determine a question about breach Article III has to be read together with Article III:
 
4. The confusion over the issue was finally addressed by EC Seals Appellate body 2014. It was held in this case that the only thing which is required to prove that an less favorable treatment has taken place is that the measure taken by the government bring an adverse impact on the condition of the competition with respect to the imported product. In this case the EC has made an attempt to argue that the measure was taken for animal welfare but it was held by the court that the adverse effect caused by the measure to the imported foods were enough to conclude violation of the international agreement (Guzman and Hillman 2016). In this case it was also clearly stated by the AB that the legitimate provision for passing the rule has to be justifiable with respect to article XX. The concept of the AB has been subjected to various criticisms as it made it very easy to establish violation. The members no longer have the power to prove that the policy was not adverse to the foreign product or had occurred incidentally (Ming 2016).
In the case of Thailand- cigarettes it was  clarified by the court that in order to find discriminatory treatment there must be a general connection between the adverse impact with respect to competition condition of imported product and the measure. It has been provided by section 337 of the Tariff Act 1989 that the state are not required to make laws in favor of imported goods in order to promote equality. Thus it is clear that the word likely is to de derived using a bread concept and in case there is an adverse impact on the imported goods because if the measure it results in violation of the agreement (Footer, M.E., 2006). 
Part B
In Canada, the parliament enacted legislation in order to implement the Uruguay Round without any opposition. There was a general acceptance amongst the legislators that the World Trade Organization (WTO) would enable the country to take part and compete in the new international order as well. The legislators of the nation were of the opinion that the WTO agreement would facilitate and enhance the Canadian exports (Matsushita et al. 2015). Further, the parliamentarians believed that the newly rule-based dispute settlement mechanism would act as a counter-force to the US unilateralism internationally. The Minister of the International Trade was of the opinion that the arrangements would be advantageous for small and medium sized trade players like Canada as they are naturally exposed to the threat of unilateralism posed by economic giants (Luqmanl and Quraeshi 2015). 
The House of Commons expressed their concerns about the impact of the Uruguay Round on various industries especially the auto manufacturing. However, the Minister of Trade assured that the new trade regime shall not have any adverse impact on the automobile sales and production in the country. the Uruguay rounds merely reduces the tariffs on manufactured goods and permits the Canadian made vehicles to be exported to third countries beyond the United States. Therefore, the agreement does not adversely affect the Canadian automobile industry. Further, the minister assured that it is expected that Japan would expand the auto production of Canada in future as the Uruguay Round arrangements has enhanced the chance for investment by automobile companies from overseas (Baldwin 2016). 
However, both Europe and Japan after the completion of three years of adoption of the new trade agreement, made a complaint against Canada targeting the auto mobile industry of the country on the ground that a bilateral treaty signed between US and Canada – the Agreement concerning Products known as the Auto pact was inconsistent with the WTO Agreement. The Auto Pact formed a trade agreement for cars and its parts that is free in certain sectors. Canada entered in to this agreement with the United Sates in order to deal with the problems related to developing a strong base for auto-manufacturing in a small domestic market (Hoekman and Mavroidis 2015). The duties on the imported parts and limited production volumes prevented Canadian auto manufacturers from competing in the sectors. 

The Canadian vehicle and parts producers always face higher costs compared to the non-Canadian competitors no matter how carefully and diligently the Canadian vehicle producers managed their business operations and took advantage of the modern technologies (Thomas 2016). However, the Auto Pact resolved the problem by placing the car companies of the United States to enhance their production in Canada so that their vehicles are sold in its domestic market duty –free. The Auto Pact has proved to be an immense success in Canada as the Auto –auto parts manufacturing in Canada developed under the Auto Pact policy (Manger 2016). 

The auto pact allowed a company manufacturing automobiles in Canada to import cars and car parts duty –free on the fulfillment of two essential conditions:
 
In order to sale every car in Canada it is mandatory that one car is made in Canada;
A car manufacturer must attain a minimum level of Canadian Value added (CVA) in its local production equivalent to the CVA that existed in 1968 model year;
According to the terms of the Auto Pact, only the cars and the car parts that were imported from the United States, which fulfilled the essential conditions, were entitled to the duty-free access to its entire imported vehicle. The terms of the Auto Pact did not provide this privilege on the grounds of national origin and nationality of the vehicle manufacturer. This prohibited the car manufacturers from importing any cars that they wished to purchase from any country. 
While implementing the treaty, Canada extended the same duty-free treatment to all the GATT members because of which the auto manufacturers from other countries became entitled to the duty-free terms after they met the essential conditions. The extended eligibility for the non-US based auto manufacturers to the duty–free treatment was terminated with the US–Canada Free Trade Agreement in 1989 (Lysenko, Mills and Schwartz 2017). The US trade negotiators insisted to prohibit the other companies from participating in the Auto Pact and hence, the car manufacturers of other countries were not entitled to the duty-free imports even after fulfilling the essential conditions. This caused damage to the Japanese companies who were in the process of speeding up their Canadian production in order to fulfill the Auto Pact conditions. 

After 1989, the list of manufacturers who were granted exemptions were closed except such companies who remained to be qualified. Such companies mainly included US based manufacturers such as Ford, GM, Volvo (European manufacturer) and Chrysler. Although these manufacturers were permitted to bring their vehicles as per their wish but in reality, the manufacturers mainly imported those vehicles that they made themselves. Consequently, although the measure was not de jure discriminatory but it became de facto discriminatory.  These manufacturers only brought in American cars whereas Volvo imported Swedish cars. Since cars belonging to these countries were given an advantage that was not enjoyed by cars from other WTO members due to which the Auto Pact was said to have infringed the MFN treatment.
The complaints brought before the Panel and the Appellate Body by Japan and the European communities were complicated as they alleged that the measures taken by the Canadian government were in consistent with several provisions in various WTO agreements. They include GATT 1994, the Agreement on Trade- Related Investment Measures (TRIMS), SCM and the General Agreement on Trade in Services (GATS). 

During the proceedings, Canada advanced arguments on the ground that the origin of terms of the Auto Pact was neutral. Canada further argued that the car manufacturers are at liberty to bring in any vehicle that they wish to bring in. The Pact did not include any provision that stated that the car manufacturers have to import a car from any specified country. Furthermore, the pact does not entail that the vehicle manufacturers are prohibited from importing on the ground of their origin or nationality. Canada contended that Article I: 1 of GATT includes de jure discrimination therefore, Canada cannot be held accountable for decision made with respect to the private car manufacturers who had been provided the exemption of duty free access. 
 
The challenge gave rise to another significant issue pertaining to the Most Favored Nation Treatment (MFN) clause. The MFN clause requires that if a member to the WTO Agreement grants trade concession to another country then it must immediately and without any conditions grant the same advantages to all the other members of the WTO agreement. A MFN clause states that every time a country opens up a market or reduces its trade barriers, it must do the same for all its trading partners in respect of similar goods and services irrespective of the fact that the trading countries are strong or weak, rich or poor (Lindemann 2014). 
Article 1.1 prohibits discrimination between products that are destined for or originated in different countries (Rubini 2014). The article purports to ensure equal opportunity is provided to import from and export to other countries that are members to the WTO Agreement. For instance- where States A and B have entered into agreement with the conditional MFN obligation and State A grants an advantage to State C regarding the type covered by the agreement, then State A must grant the same advantage to State B provided State B fulfills the conditions of the agreement. The conditions of the agreement would require State B to offer the similar benefits to State A as was offered by State C to State A. 

The significance of the MFN clause lies in the fact that it safeguards the bilateral concessions and simplifies them as the basis for the multilateral trading system. The interests of the small trading countries are safeguarded by the MFN clause. 
In regards to the challenge brought against the Auto Pact treaty between the US and Canada, European communities and Japan argued that the limitation on the eligibility for exemption on import duty in respect of certain vehicles manufacturers is contrary to Article I:1 as it leads to de facto discrimination in favor of the products in certain countries. The Appellate Body sustained Panel’s finding according to which the exemption on duty was inconsistent with the MFN treatment obligation under Article I:1 on the grounds that the article encompasses both de jure and de facto discrimination as per several GATT panel reports (Holmes, Rutherford and Carey 2017). The panel discovered that although the car manufacturers were allowed to bring in vehicles as per their wishes but in reality, the car manufacturers imported only those cars that they manufactured themselves or those from affiliated companies. 

The Appellate Body stated that Article I:1 does not refer to some advantages instead it refers to ‘any advantage’ that may be granted to the subjects that comes under the article. Further, the advantage shall not be restricted to ‘some products’ instead it refers to “any products’ that are originated in or destined for ‘all other members’ and not ‘other members’. Therefore, the Appellate Body held that GATT I:1 should be construed in a manner that includes both de jure and de facto discrimination and same market advantages must be immediately and unconditionally extended to all WTO trading partners. 
References 
Alcover, M. and  Garcés, A.M. (2016) 'The Interpretation of ‘Treatment No Less Favourable’ Under Article III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement: A Comparative Analysis'. Global Trade and Customs Journal, 11(9), pp. 360–368.
Baldwin, R., 2016. The World Trade Organization and the future of multilateralism. The Journal of Economic Perspectives, 30(1), pp.95-115.
David, A. (2016) TheShochu Conundrum: Economics and GATT Article III. Undergraduate Economic Review, 12(1).
Herman, L. (2013) Most-Favoured-Nation Treatment – Some Surprising Aspects. [Online] Herman & Associates. Available from:http://hermancorp.net/2013/11/14/most-favoured-nation-treatment-some-surprising-aspects/ [Accessed on 25/2/17]
Hoekman, B.M. and Mavroidis, P.C., 2015. World Trade Organization (WTO): Law, Economics, and Politics. Routledge.
Holmes, J., Rutherford, T. and Carey, J., 2017. Challenges Confronting the Canadian Automotive Parts Industry: What Role for Public Policy?. Canadian Public Policy, 43(S1), pp.S75-S89.
Horn, H. and Mavroidis, P.C. (2001) Economic and legal aspects of the Most-Favored-Nation clause.European Journal of Political Economy, 17, pp. 233-279.
Houston, J. (2017)A critical analysis of the legitimate regulatory distinction test as conceived in US–Clove Cigarettes, US–Tuna II and US–COOL. [Online] Society of International Economic Law. Available from:http://www.sielnet.org/resources/Houston-McMillan%20-%20winner.pdf [Accessed on 25/2/17]
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Lysenko, D., Mills, L. and Schwartz, S., 2017. Does Canada need trade adjustment assistance?. International Journal, 72(1), pp.91-110.
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Footer, M.E., 2006. An institutional and normative analysis of the World Trade Organization (p. 26). Nijhoff.
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