From 'Non-Discrimination' to 'Reasonableness': A Paradigm Shift in International Economic Law?
Jean Monnet Working Paper No. 01/05
59 Pages Posted: 10 Aug 2006
Date Written: April 2005
Among the few basic legal instruments employed in international economic law for the promotion of trade and investment, the National Treatment (NT) principle and the reasonableness principle constitute the two predominant ones.
While both norms deal principally with national measures of legislative, administrative or judicial nature taken to regulate the internal market, they appear to represent two quite different legal paradigms. By requiring each member to treat products and investors of the other member (at least) as well as it treats its own products and investors, the NT principle provides for a 'relative' standard of treatment. In other words, the NT principle does not guarantee a specific level of protection or that foreign products or investors will receive a 'fair' or 'reasonable' treatment. On the other hand, the reasonableness principle provides for an 'absolute' standard of treatment, in as far as it requires States to recognize to foreign products and investors a certain level of treatment independently of the treatment afforded to domestic products and investors. Although the concept of reasonableness may be given potentially a broad range of meanings, it usually refers to both substantive and procedural requirements, including concepts such as 'suitability', 'necessity', 'proportionality', 'transparency' and 'participation'. Accordingly, the reach of the reasonableness principle appears to be quite broad compared to that of the NT principle and the normative standards imposed on States by the former seem to bite deeper than those imposed by the latter.
By focusing specifically on the experience of the WTO and NAFTA in promoting trade and investment across countries through the NT principle and the reasonableness principle (i.e., Articles III/XX GATT and 1102 NAFTA; Articles 2 TBT and 1105 NAFTA), this paper tries, first of all, to show that the two norms under consideration do not represent two completely different legal paradigms. On the contrary, the overlap between non-discrimination and reasonableness is quite broad and, depending on the actual drafting, it may even be total. Secondly, and without arguing for the total abandonment of the concept of nationality discrimination as an instrument for global economic governance, the paper argues that in terms of overall legitimacy, there are several reasons supporting the claim that a rationality-based regime should be favored to one based on non-discrimination.
Keywords: national treatment, reasonableness, suitability, necessity, proportionality, transparency, participation, governance
JEL Classification: K33
Suggested Citation: Suggested Citation