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Conglomerating the actual wording of (b) and (c) of Art. XXIII:1, the panels acknowledge that this change in the balance can be brought about either by an action or by a non-action. Further, although not tested, dicta suggests that an impairment need not be limited to the disadvantaging of a complaining party, it may also include actions or non-actions that result in a benefit to the responding party, especially when the responding party is not a original negotiating party. One could infer that it is the unjust benefit that is causing the impairment and not the unjustified harm from the action that is a possible basis of an impairment claim. However, causality may be one of the more factually complex areas of examination. In this connection, in the three prior Non-violation cases where panels found that the complaining parties had failed to provide a detailed justification to support their claims, the issue turned primarily on the lack of evidence of causality. We will explore some aspects general as to the causality in the following paragraphs.
In Japan-Film (DS44), the Panel rules in pertinent part as:17
“The third required element of a non-violation claim under Article XXIII:1(b) is that the benefit accruing to the WTO Member (e.g., improved market access from tariff concessions) is nullified or impaired as the result of the application of a measure by another WTO Member. In other words, it must be demonstrated that the competitive position of the imported products subject to and benefitting from a relevant market access (tariff) concession is being upset by (‘nullified or impaired ... as the result of’) the application of a measure not reasonably anticipated. The equation of ‘nullification or impairment" with "upsetting the competitive relationship’ established between domestic and imported products as a result of tariff concessions has been consistently used by GATT panels examining non-violation complaints. For example, the EEC - Oilseeds panel, in describing its findings, stated that it had "found ... that the subsidies concerned had impaired the tariff concession because they upset the competitive relationship between domestic and imported oilseeds, not because of any effect on trade flows". The same language was used in the Australian Subsidy and Germany - Sardines cases. Thus, in this case, it is up to the United States to prove that the governmental measures that it cites have upset the competitive relationship between domestic and imported photographic film and paper in Japan to the detriment of imports. In other words, the United States must show a clear correlation between the measures and the adverse effect on the relevant competitive relationships.
We consider that this third element -- causality -- may be one of the more factually complex areas of our examination. In this connection, we note that in the three prior non-violation cases in which panels found that the complaining parties had failed to provide a detailed justification to support their claims, the issue turned primarily on the lack of evidence of causality. Four issues related to causation merit general discussion. First, the question of the degree of causation that must be shown -- ‘but for’ or less. Second, the relevance of the origin-neutral nature of a measure to causation of nullification or impairment. Third, the relevance of intent to causality. And fourth, the extent to which measures may be considered collectively in an analysis of causation.
As to the first issue, the United States argues that it need not show that the measures in issue are a ‘but for’ cause of impairment of market-access conditions for imported film and paper, but that it need only demonstrate that these measures are ‘a’ cause of such distortion. Japan argues that a clear linkage between the measure at issue and the alleged nullification or impairment must be proved by the complaining party in order to establish the necessary causal connection. Specifically, Japan states that the issue is whether the complaining party has provided a ‘detailed justification’ in support of its claim that a measure has caused nullification or impairment. In our view, Japan should be responsible for what is caused by measures attributable to the Japanese Government as opposed, for example, to what is caused by restrictive business conduct attributable to private economic actors. At this stage of the proceeding, the issue is whether such a measure has caused nullification or impairment, i.e., whether it has made more than a de minimis contribution to nullification or impairment.
In respect of the second issue, Japan argues that all of the accused ‘measures’ are neutral as to origin of the goods, none of them distinguishing between the imported and domestic products concerned, and that there is accordingly no causal connection between the alleged ‘measures’, individually or collectively, and any unfavourable competitive conditions for imported film and paper. The United States responds that the ‘measures’ at issue have had a disparate impact on imported products in their application, thereby upsetting competitive conditions of market access for imported film and paper. In our view, even in the absence of de jure discrimination (measures which on their face discriminate as to origin), it may be possible for the United States to show de facto discrimination (measures which have a disparate impact on imports). However, in such circumstances, the complaining party is called upon to make a detailed showing of any claimed disproportionate impact on imports resulting from the origin-neutral measure. And, the burden of demonstrating such impact may be significantly more difficult where the relationship between the measure and the product is questionable.
We note that WTO/GATT case law on the issue of de facto discrimination is reasonably well-developed, both in regard to the principle of most-favoured-nation treatment under GATT Article I and in regard to that of national treatment under GATT Article III. The consistent focus of GATT and WTO panels on ensuring effective equality of competitive opportunities between imported products from different countries and between imported and domestic products has been confirmed by the Appellate Body in its reports on Japan - Alcoholic Beverages and most recently in Bananas III, with respect to both GATT and GATS non-discrimination rules. We consider that despite the fact that these past cases dealt with GATT provisions other than Article XXIII:1(b), the reasoning contained therein appears to be equally applicable in addressing the question of de facto discrimination with respect to claims of non-violation nullification or impairment, subject, of course, to the caveat, that in an Article XXIII:1(b) case the issue is not whether equality of competitive conditions exists but whether the relative conditions of competition which existed between domestic and foreign products as a consequence of the relevant tariff concessions have been upset.
The third issue is the relevance of intent to causality. The parties disagree in many cases whether the intent behind a specific measure is to limit imports or to promote an unrelated policy goal. From our reading of the measures and consideration of the parties'' arguments, it is apparent that there may have been more than one reason motivating the adoption of measures. We note, however, that Article XXIII:1(b) does not require a proof of intent of nullification or impairment of benefits by a government adopting a measure. What matters for purposes of establishing causality is the impact of a measure, i.e. whether it upsets competitive relationships. Nonetheless, intent may not be irrelevant. In our view, if a measure that appears on its face to be origin-neutral in its effect on domestic and imported products is nevertheless shown to have been intended to restrict imports, we may be more inclined to find a causal relationship in specific cases, bearing in mind that intent is not determinative where it in fact exists. It remains for the complaining party to show that the specific measure it challenges does in fact nullify or impair benefits within the meaning of Article XXIII:1(b).
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