Regulators' Mindsets, Ingroup Favoritism, and the National Treatment Obligation in World Trade Organization Law

Decision-making processes leading to governmental measures affecting international trade involve socio-cognitive processes, biases, and sociocultural factors. The legal prohibition of discrimination against imported products constitutes a fundamental principle of World Trade Organization (WTO) law, but discrimination against foreign products is widespread. This study explores the contribution of social cognitive and sociological literatures to international trade scholarship concerning the “national treatment” obligation. Ingroup favoritism bias, related cognitive biases, such as confirmation bias, and sociocultural processes, such as “loyalty norms”, facilitate and support discrimination against foreign products. One of the most contested issues regarding the interpretation of GATT Article III concerns the role of regulators' intention in establishing a violation of this provision. The approach undertaken by the WTO Appellate Body is characterized by a preference for the “objective” test of regulators' intention (focusing on intention revealed in the regulatory measure itself), and a reluctance to take into account regulators' “subjective” intentions, discerned from regulators' statements and a variety of other sources. In contrast to the WTO Appellate Body's approach, this contribution suggests that once presented with credible evidence regarding key-role regulators' intentions, manifested in both the regulatory measure itself and in a variety of other items of evidence, it is desirable that WTO tribunals assign adequate probative weight to such intentions. In addition, where it is credibly proven that ingroup favoritism norms prevail in the key role regulator's social environment, it is advisable to grant some probative weight to such social norms. Assigning a probative weight to regulators' subjective intentions and relevant norms is justified by the significant influence of intentions and norms on the prospects of discriminatory behavior. The article highlights three principal types of regulators' mindsets: mindful, mindless, and bias-resisting. Mindful regulators deliberately intend to restrict internal sale of foreign goods through discriminatory measures. Mindless regulators do not aim to discriminate against imported goods, and the disparate impact influences of their regulations are relegated to the background. Bias-resisting regulators intend to grant equal treatment to domestic and imported products and resist ingroup biases.