## Facts

- Italy enacted Law No. 949 (July 25, 1952), creating a revolving fund administered by the Ministry of Agriculture and Forestry to provide special credit terms for purchases of agricultural machinery.
- The fund provided five-year loans at about 3% interest financing up to 75% of the purchase price, and it was scheduled to continue through 1964 using repayments to replenish the fund.
- Preferential credit was available only when purchasers bought agricultural machinery produced in Italy; imported machinery could be bought on less favorable commercial terms (reported to be about 10% interest).
- The United Kingdom alleged the scheme contributed to a decline in its exports of agricultural machinery (notably tractors) to Italy by influencing purchasers’ choices between domestic and imported products.
- A conciliation panel was established under GATT 1947 Article XXIII:2; Denmark participated as an interested exporting country.

## Issues

1. Whether Italy’s preferential credit scheme, limited to purchases of domestic agricultural machinery, was a “law, regulation or requirement affecting” purchase that accorded imported like products “less favourable” treatment under GATT 1947 Article III:4.
2. Whether the measure caused nullification or impairment of benefits accruing to the United Kingdom within the meaning of GATT 1947 Article XXIII.
3. Whether the scheme was exempt under GATT 1947 Article III:8(b) as a subsidy “exclusively to domestic producers.”

## Decision

- The panel found the credit facilities were inconsistent with Article III because purchasers of imported tractors and other machinery could not access the favorable terms, resulting in discrimination contrary to Article III:4.
- The panel rejected Italy’s Article III:8(b) defense, reasoning the financial advantage was granted to purchasers rather than paid as a subsidy exclusively to domestic producers.
- On trade effects, the panel concluded the fall in U.K. tractor imports could not be entirely attributed to the measure, but the preferential credit probably influenced purchaser selection and adversely affected competitive conditions.
- The panel recommended steps to facilitate a satisfactory adjustment between the parties; the report was adopted, and the dispute later ended through a mutually agreed solution.

## Legal Principles

- Article III:4 applies broadly to internal measures that affect the conditions of purchase; a government credit program tied to product origin can qualify as a “requirement affecting” purchase.
- Withholding access to a favorable purchase-related financial advantage from imported like products constitutes “less favourable” treatment under national treatment when it alters competitive opportunities based on origin.
- Article III:8(b) does not cover measures structured as financial advantages to purchasers, even if intended to support a domestic industry; the exception is limited to subsidies paid exclusively to domestic producers.
- For Article XXIII nullification or impairment, a complainant need not show exclusive causation; showing that the contested measure probably influenced purchasing decisions and weakened expected benefits may be sufficient.

## Conclusion

The panel held that Italy’s origin-based preferential credit for purchasing domestic agricultural machinery violated GATT Article III:4 and was not saved by the Article III:8(b) producer-subsidy exception, because the benefit was conferred on purchasers and likely skewed purchase decisions against imports.


Italian Discrimination Against Imported Agricultural Machinery (U.K. v. Italy), GATT Panel Report, L/833, BISD 7S/60 (Oct. 23, 1958)