I want to go back to the Staiger/Sykes paper on Intenational Trade and Domestic Regulation that I mentioned a little while ago. At the end of the paper, they present a hypothetical set of facts, based (somewhat) on the EC - Hormones case, which I think provides a good illustration of the boundary between discriminatory measures and non-discriminatory measures that affect trade. Here is their description:
The regulation concerns the intensity with which cows are treated with hormones as part of the production process: we can think of increases in hormone treatment as leading to increases in the amount of beef production per acre of pasture land, and hence as leading to outward shifts in the supply curve of beef. Assuming that individual consumers are unaware or unconcerned about any health risks associated with hormone-treated beef, if the beef industry is unregulated worldwide then there will be an optimal level of hormone treatment that minimizes the cost of beef production, and let us assume that this level is independent of total production.
Now consider the possibility that the home country imposes a non-discriminatory regulation amounting to a total ban on the domestic production and importation of hormone-treated beef. This regulation will not effect the position of the home demand curve for beef (since by assumption consumer demands are not sensitive to the hormone content of the beef they consume), but it will lead to a reduction in global demand for hormone-treated beef and thus to a drop in its world price (assuming that the home country is "large" in economic terms, as in our model). Foreign producers who wish to continue to sell to the home country must now shift at least in part to the production of (higher cost) hormone-free beef. They will be willing to do so in a competitive market as long as the equilibrium price of hormone-free beef sold to the home country is just high enough to cover the additional marginal production cost. Note, however, that because the world price of hormone-treated beef has fallen, the price of hormone-free beef exported to the home market in equilibrium -- which is the price of hormone-treated beef plus the cost of regulatory compliance -- will rise by less than the cost of regulatory compliance. The home country will enjoy whatever benefits flow from compliance with the regulation, but will have externalized some of its cost. This is the regulatory cost-shifting mechanism that is at the heart of our paper.
First off, note that the authors describe the ban as "non-discriminatory." In a sense, it is. It does not explicitly single out foreign or domestic products. Rather, it applies to all products.
However, as they note, there will be a cost to complying with this regulation, some of which will be borne by foreign beef producers. The question I would ask is this: How are the costs broken down as between foreign producers and domestic producers? I see three possibilities:
1) relatively more are borne by foreign producers
2) it is roughly equal as between foreign and domestic producers
3) relatively more are borne by domestic producers
(The "relatively more" and "roughly equal" I have in mind are on a per producer basis).
If it is the first one, then arguably there is discrimination here. Obviously, this depends in part on how you define discrimination. But if you accept that disparate impact is a relevant factor for finding discrimination (there may be other factors as well), there is a good case that the measure is, in fact, discriminatory.
A key issue in this regard is, where was most of the hormone-treated beef being produced prior to the ban? If it was disproportionately a foreign product (e.g., 80% of foreign beef production was hormone-treated, whereas only 10% of domestic beef production was hormone-treated), then there will be a disparate impact.
With the second two situations related to the cost breakdown, by contrast, there is pretty clearly no disparate impact (although there may be some people who would find discrimination in spite of this, under one theory or another). On the other hand, there are still costs borne by foreign companies (and thus an impact on trade). The question is, how should measures that have an impact on trade, but are non-discriminatory, be dealt with under trade rules? Not any easy question to answer, and there are probably many different views.