Petroleum Case (Violation Case)
i) Holding - What counts for nullification and impairment is that the competitive relationships between the countries are changed, and trade volume does not matter.
ii) US violates Article 3…Article 3 is national treatments (can’t treat domestic products better than imported products.
iii) Facts →US charged a higher tax on foreign crude oil than US crude oil, and this discriminated against foreign imports in favor of domestic production.
iv) US says yes there was a breach but no harm so no nullification and impairment.
v) GATT Panel disagrees…this is not about trade flows…instead about trade balance. Expectations regarding competitive relationships
(1) Art. III:2 – cannot be interpreted to protect expectations on export volumes; rather, it protects expectations on the competitive relationship between imported and domestic products.
vi) RULE → A Change in the competitive relationship contrary to that provision must subsequently be regarded ipso facto as nullification or impairment of benefits accruing under GATT.
(1) Why? → Looking for a fair fight; impact on relationship key