Trade law is famous for its "sin" tax cases, on products such as alcohol and tobacco. But the list of "sins" out there keeps growing. There is sugar, there is junk food in general, and yes, now we have hamburgers. This is from the FT:
Anyone following events in Ecuador will know that Rafael Correa, the fiery president, is not one to avoid confrontation, as journalists, bankers and bondholders, among others, well know.
It seems he has found a new target: fast food, along with other threats to the nation’s health such as alcohol and cigarettes, on which he wants to raise taxes. According to the leftist president, with the proposed levy, “people will stop eating so many McDonald’s and Burger King hamburgers.” The move would also “favour the production of [Ecuadorian] food, our traditional gastronomy.”
I'm partial to the gourmet burger places myself, especially the ones that use grass-fed beef. Would those fall within the tax? The article doesn't say what Correa thinks about omega-3s.
It's interesting that he explicitly talks about favoring local products. That's never a good thing to say for purposes of a potential trade dispute!
And I wonder where the McDonald’s and Burger King franchises in Ecuador get their beef. Is it local or imported? Assuming some is imported, there may be a decent case for a GATT Article III violation. Even if there is a violation, though, Correa seems to be laying the groundwork for a public health defense:
For Correa, a US-trained economist, there is a straight trade-off for users of Ecuador’s health services:
If you want to make yourself sick, that is your problem. We are in a free country. But, at least, then pay a little extra so we can take care of you later. We are talking of a tax on cigarettes, liquors, junk food to avoid people consuming those goods in excess that affect their health. If you deliberately affect your health, then contribute a little more to the healthcare system so to help you once you are ill.
They could probably structure such a tax in a way that it does not violate WTO rules, or at least falls within the health exception. But if they implement the tax so that it only targets McDonald’s and Burger King, that will be a problem (assuming their beef is imported).
(I'm a little burned out on investment law issues right now, so I'm not going to discuss possible BIT claims.)