This is from the EU first written submission in the Philippines - Distilled Spirits case (DS396 for the EC case, DS403 for the parallel U.S. complaint):
105. In the light of the above, it is useful to recall once again that the vast majority of imported products are subject to the higher tax rates whereas all (or most of)118 local products enjoy the lower tax rate119. It has just to be pointed out that the fact that few imported products (e.g. 'Bacardi') may also enjoy the lower tax rate doesnot exclude that the measures violate Article III:2. As the Panel in Argentina – Bovine Hides made it clear: "Article III:2, first sentence, is applicable to each individual import transaction."120 It is thus sufficient to establish a breach of that provision that some (or even one) imported product is taxed in excess of a like domestic product.
106. In the present case, it must be therefore concluded that the taxes applied to (the vast majority of) imported spirits are ‘in excess of’ those applied to the like domestic products.
What's interesting about this passage is that the discriminatory effect (or disparate impact or disproportionate disadvantage or asymmetric impact, or whatever you want to call it) approach is mixed together with the individual product (or diagonal test or best treatment, or whatever you want to call it) approach. The argument starts off by recalling that "the vast majority of imported products are subject to the higher tax rates whereas all (or most of) local products enjoy the lower tax rate." So it sounds like they'll be relying on discriminatory effect. But it then cites to Argentina - Bovine Hides for the proposition that "Article III:2, first sentence, is applicable to each individual import transaction," and on this basis argues, "[i]t is thus sufficient to establish a breach of that provision that some (or even one) imported product is taxed in excess of a like domestic product." Thus, now they are comparing individual products. Finally, they note that "the taxes applied to (the vast majority of) imported spirits are ‘in excess of’ those applied to the like domestic products," which seems to go back to the discriminatory effect test.
It may not be as clear as if the opposing sides were arguing for the different approaches, but this claim definitely puts the different options for non-discrimination standards in front of the panel. I think everyone knows at this point what my view of this issue is (some recent thoughts are here, but in a nutshell, I argue for looking at the overall discriminatory effect rather than just looking at individual products). The question now is, what will the panel do with this issue? If the EU is correct about the facts, it seems that the discriminatory effect standard is easily satisfied. How will that affect the Panel's approach?
