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MostFavouredNationTreatment

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MostFavouredNationTreatment
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Article:

ConceptOfMostFavouredNationTreatmentUnderGeneral
AgreementOnTariffsAndTrade

Star Health
Insurance

MostFavouredNationprincipleisoneofthemost
fundamentalprinciplesoftheWTO.Itrequiresmemberstates
toaccordthemostfavourabletariffandregulatorytreatment
giventotheproductofanyonememberand/ornonmember
atthetimeofexportorimportoflikeproductstoallother
WTOmembers.UndertheMostFavouredNationrule,should
WTOmemberstateAagreeinnegotiationwithstateB,which
needsnottobeaWTOmember,toreducethetariffonthe
sameproductXtofivepercent,thissametariffratemust
applytoallotherWTOmembersaswell.Inotherwords,ifa
countrygivesfavourabletreatmenttoonecountryregarding
aparticularissue,itmusthandleallmembersequally
regardingthesameissue.TheideaofMostFavouredNation
treatmenthasalonghistory.AnembryonicversionofanMFN
clausehasbeentracedasfarbackas1417,buttheoriginsof
theMostFavouredNationcommitmentininternationalcommercialmattersaregenerallyconsideredtostemmainly
fromtheseventeenthandeighteenthcenturies.PriortotheGATT,aMostFavouredNationclausewasoftenincludedin
bilateraltradeagreements,andassuchitcontributedgreatlytotheliberalisationoftrade.OneofthePresident
WoodrowWilsonsFourteenpointsin1918urgedtheestablishmentofanequalityoftradeconditionsamongallthe
nationsconsentingtothepeacewhichwasexplainedtomeanwhatevertariffanynationmightdeemnecessaryforits
owneconomicservice,bethattariffhighorlow,itshouldapplyequallytoallforeignnations.

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Citizens

TheLeagueofNationsCovenantlikewisementionedthegoalofequitabletreatmentforthecommerceofallmembers
andthe1919peacetreatiescontainedMostFavouredNationclauses.HoweverdespiteMFN,varioustraderestrictions
anddiscriminationsdidexist.AttheendoftheSecondWorldWar,oneoftheprimepostWorldWarIIobjectivesofthe
UnitedStateswasthedismantlingoftradepreferences,especiallythecommonwealthsystem.TheUnitedStates
preoccupationwithCommonwealthpreferenceswassointensethataUnitedStatesrepresentativeinLondonin1946
includedMostFavouredNationasoneofitsfivebasicprinciplesforthedevelopmentofanInternationalTrade
OrganizationanditisgenerallysaidthatfailuretoachievethisresultwasoneofthecausesforthefailureoftheUnited
StatestoaccepttheHavanaCharter,thuscausingtheInternationalTradeOrganizationtofailtomaterialize.However
learningformtheirmistakes,themajorpowersoftheworlddecidedtoincludeMostFavouredNationclausesinthe
GeneralAgreementonTradeandTariff(GATT)andtheincorporationofthisclauseinGATThascontributedtothe
stabilityoftheworldtradeandhence,againstthisbackground,MFNprinciplemustbeobservedasafundamental
principleforsustainingthemultilateralfreetradesystem.
TheconceptofMFNembodiestheprincipleofnondiscriminationwhichisabasicandkeyconceptofWorldTrade
Organization.Discriminationbetween,aswellasagainst,othercountrieswasanimportantcharacteristicofthe
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protectionisttradepoliciespursuedbymanycountriesduringtheeconomiccrisisof1930s.Historiansnowregardthese
discriminatorypoliciesasanimportantcontributingcauseoftheeconomicandpoliticalcrisesthatresultedinthe
SecondWorldWar.Discriminationintrademattersbreedsresentmentamongthecountries,manufacturers,tradersand
workers.Suchresentmentpoisonsinternationalrelationsandmayleadtoeconomicandpoliticalconfrontationand
conflict.Inaddition,discriminationmakesscanteconomicsense,generallyspeaking,sinceitdistortsthemarketin
favourofproductsandservicesthataremoreexpensiveand/orlesserquality.Eventually,itisthecitizensofthe
discriminatingcountrythatendsuppayingthebillforthediscriminatorytradepoliciespursued.Notonlythisprincipleis
justifiedbyhistoryanditspotentialforreducingtradefrictionsamongcountries,butalsobyitsutilityasatoolfor
buildingpeaceandsecurity.Withoutit,countriesmightretreatintotradingblocks,andthoseblocksmightbecome
armedfortress.Thus,unconditionalMFNtreatmentwasandremainsalegitimateeconomicmeanstoanoblepolitical
end.Itreducestradefrictionamongcountries,providestheirpeoplewiththeopportunitytogeneratejobsandincome
throughtrade,givingthemastakeinthemultilateraleconomicorder,andtherebycontributingtopeaceandstability.
Withunconditionally,thebenefitsofopentradewouldspreadmultilaterally.Eachcountrywouldcometorealiseits
stakeinnurturingtheglobaleconomy,giventheproductionandconsumptionbenefitsfromfreetrade.
Theendconsequenceofthisrealisationwouldbeheightenedaversiontomilitaryconflict,whichobviouslywould
destroytheeconomicgainsfromtrade.ThepeaceandsecuritylogicinfavourofunconditionalMFNtreatmentisthe
mostsophisticatedofallrationales.Generallyspeaking,themoresignificantthestakeacountryhasintheinternational
economicorder(i.e.themoreprosperityitscitizensderivefromcrossbordertradeandinvestmentrelationships,and
financialflows),thelesslikelyitistounsettlethatorderthroughviolentconflictwithothercountries.
EconomicImplicationsOfMostFavouredNationTreatment
Themostfavourednationhasseveralpositiveeconomicimplications,whicharediscussedbelow:
IncreasedEfficiencyInTheWorldTrade:
Firstly,mostfavourednationtreatmentmakesitpossibleforcountriestoimportfromthemostefficientsupplier,in
accordancewiththeprincipleofcomparativeadvantage.Forexample,ifcountryAdoesnotproduceproductX,andif
countryBcansupplyproductXatalowerpricethancountryC,countryAcanincreaseitseconomicefficiencyby
importingitfromcountryB.Ifhowever,countryAapplieshighertariffratestoproductXfromcountryBthanproductX
fromcountryC,countryAmayendupimportingproductXfromcountryC,eventhoughcountryCisnotasefficienta
supplier.Thisdistortstradeand,asaresult,reducesthewelfareofcountryAandtheeconomicefficiencyoftheentire
world.If,however,themostfavourednationprincipleisappliedbetweenthethreecountries,thencountryAwillapply
itstariffsequallytoallexportingcountriesandwillthereforenecessarilyimportproductXfromcountryBbecauseitis
cheapertodoso.Themostefficientresultisthusattained.
ReductionOfTheCostOfMaintainingTheFreeTradeSystem:
Thirdly,MFNreducesthecostofmaintainingthefreetradesystem.Theequaltreatmentdemandedbythemost
favourednationprincipletendstoactasaforceforunifyingtreatmentatthemostadvantageouslevel(whichintrade
meansthemostliberal).TheestablishmentandmaintenanceofthemostfavourednationruleenablesWTOMembers
toreducetheirmonitoringandnegotiatingcoststhecostofwatchingandcomparingtreatmentreceivedwiththat
giventothirdcountries.Inshort,themostfavourednationrulehastheeffectofreducingthecostofmaintainingthe
freetradesystem.Finally,aslongasthemostfavourednationruleishonoured,importsfromallWTOMembersare
treatedequally,whichreducesthecostofdetermininganimportsoriginandthereforeimproveseconomicefficiency.
AdvantagesForSmallerCountries:
MFNallowssmallercountries,inparticular,toparticipateintheadvantagesthatlargercountriesoftengranttoeach
other,whereasontheirown,smallercountrieswouldoftenbenotpowerfulenoughtonegotiatesuchadvantagesby
themselves.Apartfromthat,GrantingMFNhasdomesticbenefits:havingonesetoftariffsforallcountriessimplifiesthe
rulesandmakesthemmoretransparent.Italsolessensthefrustratingproblemofhavingtoestablishrulesoforiginto
determinewhichcountryaproduct(thatmaycontainpartsfromallovertheworld)mustbeattributedtoforcustoms
purposes.MFNrestrainsdomesticspecialinterestsfromobtainingprotectionistmeasures.E.g.,butterproducersin
countryAmaynotbeabletolobbyforhightariffsonbuttertopreventcheapimportsfromdevelopingcountryB,
because,asthehighertariffswouldapplytoeverycountry,theinterestsofA'sprincipalallyCmightgetimpaired.
Article1Para1OfGATT
Article1oftheGATT1994,entitledGeneralMostFavouredNationTreatment,statesinparagraph1:
Withrespecttocustomdutiesandchargesofanykindimposedonorinconnectionwithimportationorexportationor
imposedontheinternationaltransferofpaymentsforimportorexports,andwithrespecttothemethodoflevyingsuch
dutiesandcharges,andwithrespecttoallrulesandformalitiesinconnectionwithimportationandexportation,and
withrespecttoallmattersreferredtoinparagraphs2and4ofArticleIII,anyadvantage,favour,privilege,orimmunity
grantedbyanyMembertoanyproductoriginatinginordestinedforanyothercountryshallbeaccordedimmediately
andunconditionallytothelikeproductoriginatinginordestinedfortheterritoriesofallotherMembers.
EssentialRequirementsOfArticleI:1
UnderArticleI:1therearethreequestionsthatmustbeansweredtodeterminewhetherthereisaviolationoftheMFN
treatmentobligationofArticleI:1,namely:
WhetherthemeasureatissueconfersatradeadvantageofthekindcoveredbyArticleI:1;
Whethertheproductsconcernedarelikeproducts;and
Whethertheadvantageatissueisgrantedimmediatelyandunconditionallytoalllikeproductsconcerned.
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AnyAdvantageTheMFNtreatmentobligationconcernsanyadvantage,favour,privilegeorimmunitygrantedbyany
membertoanyproductoriginatingin,ordestinedfor,anyothercountrywithrespectto1)customduties;2)chargesof
anykindimposedonexportationorimportation(e.g.import,surchargesorconsulartaxes);3)chargesofanykind
imposedinconnectionwithimportationorexportation(e.g.customsfeesorqualityinspectionfees);4)chargesimposed
ontheinternationaltransferofpaymentsforimportsorexports;5)themethodoflevyingsuchdutiesorcharges,such
asthemethodofassessingthebasevalueonwhichthedutyorchargeislevied;6)allrulesandformalitiesinconnection
withimportationandexportation;7)internaltaxesorotherinternalcharges;and8)laws,regulationsandrequirements
affectinginternalsale,offeringforsale,purchase,transportation,distributionoruseofanyproduct.UnderArticleI:1,if
advantagesaregrantedtoallothercountries,includingnonWTOmembers,thenthememberhastograntthat
advantagesalsotoallWTOmembers.Inotherwords,theMFNtreatmentobligationrequiresthatanyadvantage
grantedbyamembertoanyproductfromorforanothercountrybegrantedtoalllikeproductsfromorforallother
members.TheArticleI:1castsaverywidenetanditisofverywideapplicability.Somecaseexamplesare:
InUSMFNFootwearcase,alsoreferredtoasUSNonRubberFootwearcase,thePanelfound:therulesand
formalitiesapplicabletocountervailingduties,includingthoseapplicabletotherevocationofcountervailingdutyorders,
arerulesandformalitiesimposedinconnectionwithimportation,withinthemeaningofArticleI:1.
ThePanelinUSCustomerUserFeecasestated:Themerchandiseprocessingfeewasachargeimposedonorin
connectionwithimportationwithinthemeaningofArticleI:1.Exemptionsfromthefeefellwithinthecategoryof
advantage,favour,privilegeorimmunitywhichArticleI:1requiredtobeextendedunconditionallytoallother
contractingparties.
InCanadaAutoscase,theAppellateBodyusefullyclarifiedthescopeofArticleI:1byruling:ArticleI:1requiresthat
anyadvantage,favour,privilegeorimmunitygrantedbyanyMembertoanyproductoriginatinginordestinedforany
othercountryshallbeaccordedimmediatelyandunconditionallytothelikeproductoriginatinginordestinedforthe
territoriesofallothermembers.ThewordsofArticleI:1refernottosomeadvantagesgrantedwithrespecttothe
subjectsthatfallwithinthedefinedscopeoftheArticle,buttoanyadvantage;nottosomeproducts,buttoany
product;andnottolikeproductsfromsomeotherMembers,buttolikeproductsoriginatinginordestinedforall
otherMembers.
Similarly,inEECImportsofBeefcase,thepanelappliedArticleI:1toEuropeanCommunitiesregulationsmakingthe
suspensionofanimportlevyconditionalontheproductionofacertificateofauthenticity.
LikeProducts...ArticleI:1concernsanyproductoriginatinginordestinedforanyothercountryandrequiresthatan
advantagegrantedtosuchproductsshallbeaccordedtolikeproductsoriginatinginordestinedfortheterritoriesofall
othermembers.Itmustbenotedthatitisonlywhentheproductsarelike,theMFNtreatmentobligationappliesand
thatdiscriminationisprohibited.Productsthatarenotlikemaybetreateddifferently.Theconceptoflikeproductsis
usedinvariousArticlesofGATTbutitisnowheredefinedintheGATT1994.Thedictionarymeaningoflikeproducts
suggeststhatlikeproductsareproductsthatshareanumberofidenticalorsimilarcharacteristics.However,the
AppellateBodynotedinCanadaAircraftcasethatthedictionarymeaningsleavemanyinterpretativequestionsopen.
Withregardtotheconceptoflikeproducts,therearethreequestionsofinterpretationthatneedtoberesolved:
1.whichcharacteristicsorqualitiesareimportantinassessinglikeness;
2.towhatdegreeorextentmustproductssharequalitiesorcharacteristicsinordertobelikeproducts;
3.fromwhoseperspectiveshouldlikenessbejudged?
ThePanelandAppellateBodyhasacceptedthattheconceptoflikeproductshasdifferentmeaninginthedifferent
contextsinwhichitisused.InJapanAlcoholicBeveragesIIcase,theAppellateBodyillustratedthepossibledifferences
inthescopeoftheconceptoflikeproductsbetweendifferentprovisionsoftheWTOAgreementbyevokingtheimage
ofanaccordion.TheAppellateBodysaid:Theaccordionoflikenessstretchesandsqueezesindifferentplacesas
differentprovisionsoftheWTOAgreementareapplied.Thewidthoftheaccordioninanyoneofthoseplacesmustbe
determinedbytheparticularprovisioninwhichthetermlikeisencounteredaswellasbythecontextandthe
circumstancesthatprevailinanygivencasetowhichthatprovisionmayapply.Themeaningofthephraselike
productsinArticleI:1wasaddressedinanumberofGATTworkingpartyandpanelreports.InSpainUnroastedCoffee
case,thePanelhastodecidewhethervarioustypesofunroastedcoffee(Colombianmild,othermild,unwashed
Arabica,Robustaandother)werelikeproductswithinthemeaningofArticleI:1.Spaindidnotapplycustomduties
onColumbiamildandothermild,whileitimposedasevenpercentcustomsdutyontheotherthreetypesof
unroastedcoffee.Brazil,whichexportedmainlyunwashedArabica,claimedthattheSpanishtariffregimewas
inconsistentwithArticleI:1.Inexaminingwhetherthevarioustypesofunroastedcoffeewerelikeproductstowhich
theMFNtreatmentobligationapplied,thePanelconsidered:
thecharacteristicsoftheproducts;
theirenduseand
tariffregimeofothermembers.
Thepanelstatedasfollows:ThePanelexaminedallargumentsthathadbeenadvancedduringtheproceedingsforthe
justificationofadifferenttarifftreatmentforvariousgroupsandtypesofunroastedcoffee.Itnotedthatthese
argumentsmainlyrelatedtoorganolepticdifferencesresultingfromgeographicalfactors,cultivationmethods,the
processingofthebean,andthegenericfactor.ThePaneldidnotconsiderthatsuchdifferencesweresufficientreasonto
allowforadifferenttarifftreatment.Itpointedoutthatitwasnotunusualinthecaseofagriculturalproductsthatthe
tasteandaromaoftheendproductwoulddifferbecauseofoneorseveraloftheabovementionedfactors.ThePanel
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furthermorefoundrelevanttoitsexaminationofthematterthatunroastedcoffeewasmainly,ifnotexclusively,soldin
theformofblends,combiningvarioustypesofcoffee,andthatcoffeeinitsenduse,wasuniversallyregardedasawell
definedandsingleproductintendedfordrinking.ThePanelnotedthatnoothercontractingpartyapplieditstariff
regimeinrespectofunroasted,nondecaffeinatedcoffeeinsuchawaythatdifferenttypesofcoffeeweresubjectto
differenttariffrates.Inthelightoftheforegoing,thePanelconcludedthatunroasted,nondecaffeinatedcoffeebeans
listedintheSpanishCustomsTariffshouldbeconsideredaslikeproductswithinthemeaningofArticleI:1.
InadditiontothethreecriteriausedbythePanelinSpainUnroastedcoffeecase,thereisonemorecriteriathathas
assumedimportanceandthatisconsumerstastesandhabits.
AdvantageGrantedImmediatelyAndUnconditionallyArticleI:1requiresthatanyadvantagegrantedbyaWTO
memberstoimportsfromanycountrymustbegrantedimmediatelyandunconditionallytoimportsformallother
WTOMembers.OnceaWTOMemberhasgrantedanadvantagetoimportsfromacountry,itcannotmakethegranting
ofthatadvantagetoimportsofotherWTOmembersconditionaluponthoseotherWTOMembers.Inalegalopinionof
1973inthecontextoftheaccessionofHungarytotheGATT,theGATTSecretariatnotedthat:theprerequisiteof
havingacooperationcontractinordertobenefitfromcertaintarifftreatmentappearedtoimplyconditionalmost
favourednationtreatmentandwould,therefore,notappeartobecompatiblewiththeGeneralAgreement.Some
caseexamplesare:
InIndonesiaAutoscase,thePanelfoundwithrespecttotherequirementunderArticleI:1thatadvantagesare
grantedunconditionallyandimmediately,asfollows:undertheFebruary1996carprogrammethegrantingof
customsdutybenefitstopartsandcomponentsisconditionaltotheirbeingusedintheassemblyinIndonesiaofa
NationalCar.ThegrantingoftaxbenefitsisconditionalandlimitedtotheonlyPioneercompanyproducingNational
Cars.Andthereisalsoathirdconditionforthesebenefits:themeaningofcertainlocalcontenttargets.Indeedunderall
thesecarprogrammes,customdutyandtaxbenefitsareconditionalonachievingacertainlocalcontentvalueforthe
finishedcar.TheexistenceoftheseconditionsisinconsistentwiththeprovisionsofArticleI:1whichprovidesthattax
andcustomdutyadvantagesaccordedtoproductsofoneMember(hereonKoreanproducts)beaccordedtoimported
likeproductsfromotherMembersimmediatelyandunconditionally.
InCanadaAutoscase,theAppellateBodyalsodiscussedtheconceptsofimmediatelyandunconditionally,andfound:
ThemeasuresmaintainedbyCanadaaccordstheimportdutyexemptiontocertainmotorvehiclesenteringCanada
fromcertaincountries.Theseprivilegedmotorvehiclesareimportedbyalimitednumberofdesignatedmanufacturers
whoarerequiredtomeetcertainperformanceconditions.Inpractice,thismeasuredoesnotaccordthesameimport
dutyexemptionimmediatelyandunconditionallytolikemotorvehiclesofallotherMembers,asrequiredunderArticleI:
1oftheGATT1994.Theadvantageoftheimportdutyexemptionisaccordedtolikemotorvehiclesfromallother
Members.Accordingly,wefindthatthismeasureisnotconsistentwithCanadasobligationsunderArticleI:1ofthe
GATT1994.
IntheBelgianFamilyAllowancescase,adisputeof1952concerningaBelgianLawprovidingforanexemptionfroma
levyonproductspurchasedformcountrieswhichhadasystemoffamilyallowancessimilartothatofBelgium,thePanel
heldthattheBelgianlawatissueintroducedadiscriminationbetweencountrieshavingagivensystemoffamily
allowancesandthosewhichhadadifferentsystemornosystematall,andmadethegrantingoftheexemption
dependentoncertainconditions.Thepanelconcludedthattheadvantagetheexemptionfromalevywasnotgranted
unconditionallyandthattheBelgianlawwas,therefore,inconsistentwiththeMFNtreatmentobligationofArticleI:1.
SomeCaseExamplesOnTheConceptOfMFNInDetail:
1998IndonesiaCarCase:InFebruaryandJune,1996,inanefforttodevelopNationalCar,theGovernmentof
Indonesiaintroduceddifferencesbetweenimportsofcarcomponentsinallocationoftaxandcustomdutybenefitsto
theseimports.Thebenefitstooktheformofdutyandsalesexemptions.TheIndonesiaCarpanelheldthattheNational
CarprogrammeblatantlyviolatedArticleI:1.TheCarPanelheldidentifiedfouranalyticalquestions:
I)whetherthereisanadvantagecreatedbyameasure?
II)Whethertheproductsaffectedbythemeasurearelike?
III)WhetherdisputedmatterisatyperegulatedbytheMFNprovision?
IV)Whethertheadvantageisofferedtoalllikeproductsunconditionally?
Onlyiftheanswertoallfourquestionsisyes,thereisaviolationofArticleI:1.ThePanelansweredthefirsttwo
questionsintheaffirmativewithoutanydifficulty.ThePanelfoundthatNationalCarsandtheirpartsandcomponents
importedfromKoreaarelikeanymotorvehicleandpartsandcomponentsimportedfromotherWTOmembers.Asto
thethirdquestion,theIndonesiaCarPanelqueriedwhetherthecustomandtaxbenefitsoftheFebruaryandJune1996
carprogrammeareadvantagesofthetypescoveredbyArticleI.Itreplied,
TheCustomdutybenefitsofthevariousIndonesiacarprogrammesareexplicitlycoveredbythewordingofArticleI.As
tothetaxbenefitsoftheseprogrammes,wenotethatArticleI:1refersexplicitlytoallmattersreferredtoinparagraphs
2and4ofArticleIII.WehavealreadydecidedthatthetaxdiscriminationaspectsoftheNationalCarprogrammewere
matterscoveredbyArticleIII:2ofGATT.ThereforethecustomdutyandtaxadvantagesoftheFebruaryandJune1996
carprogrammesareofthetypecoveredbyArticleIofGATT.
Onthefourthquestion,PanelfoundthatIndonesiadidnotconferunconditionallytoalllikeproductstheadvantages
fromitscustomdutyandtaxtreatmentmeasures.ThepanelheldthatGATTcaselawiscleartotheeffectthatanysuch
advantages(heretaxandcustomdutybenefits)cannotbemadeconditionalonanycriteriathatisnotrelatedtothe
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importedproductitself.ThecourtheldthatitappearsthatthedesignandstructureoftheJune1996carprogrammeis
suchastoallowsituationswhereanothermemberslikeproductissubjecttomuchhigherdutiesandsalestaxesthan
thoseimposedonproductsimportedfromKorea.ThePanelfoundthatcustomdutiesashighas200%canbeimposed
onfinishedmotorvehicleswhileanimportedNationalCarbenefitsfroma0%customsduty.Further,notaxesare
imposedonaNationalCarwhileanimportedlikemotorvehiclefromanothermemberwouldbesubjectedtoa35%
salestax.ThePanelfurtherfoundthatdistinctionastowhetheroneproductissubjecttoa0%dutyandtheotheroneis
subjectto200%dutyorwhetheroneproductissubjectto0%salestaxandtheotherissubjecttoa35%salestax,
dependonwhetherornotIndonesiahasmadeadealwiththatexportingcompanytoproducethatNationalCar,andis
coveredbytheauthorizationofJune1996withspecificationsthatcorrespondtothoseoftheKiacarproducedbythe
Korea.ThePanelheldthat,inWTO/GATT,therightofMemberscannotbemadedependentupon,conditionaloreven
affectedby,anyprivatecontractualobligationsinplace.ThePanelheldthatexistenceoftheseconditionsis
inconsistentwiththeprovisionsoftheArticleI:1whichprovidesthattaxandcustomsdutybenefitsaccordedto
productsofoneMember(hereonKoreanproducts)beaccordedtoimportedlikeproductsfromotherMembers
immediatelyandunconditionally.Therefore,thePanelheldthatFebruaryandJune1996carprogrammewhich
introduceddiscriminationbetweenimportsintheallocationoftaxandcustomsdutybenefitsbasedonvarious
conditionsandothercriterianotrelatedtotheimportthem,areinconsistentwiththeprovisionsofArticle1ofGATT.
CanadaAutoPactCase2000:OneofthefewdisputesinwhichMFNwasacentralissuefortheAppellateBodyto
adjudicateistheCanadaAutoPactcase.InJanuary1965,PresidentLyndonJohnsonandCanadianPrimeMinisterLester
Pearsonsignedanagreementtoliberalisetradeinautosandautospartbetweentwocountries.UndertheAutoPact,
Canadaagreedtograntdutyfreetreatmenttovehiclesandoriginalequipmentmanufacturingparts(otherthantires
andtubes),butonlyiftheimporterofthecarsorpartsmetthedefinitionofamotorvehiclesmanufacturersetforth
intheAutoPact.Therewerethreeteststobemetbeforeapersoncanbequalifiedasamanufacturer.First,the
importermusthaveproducedinCanadaduringthebaseyear196364motorvehiclesofthecategoryitisimporting.In
otherwords,theimporterhadtohavebeenestablishedandmadecarsinCanadasincebeforetheAutoPactentered
intoforce.Ineffect,theseimporterswerealsoforeigndirectinvestors,suchasGeneralMotorsofCanada,Ltd,Ford
MotorCompanyofCanadaLtd,andChryslerCanadaLtdAmericanCompaniesthatimportedcarsintoCanadathatthey
madeintheUnitedStates(orelsewhere),andthatalsomadecarsinCanada.Secondly,theimportermustcomplywith
theratioof(1)thesalevalueofitslocally(Canadian)producedvehiclesofthatclassofvehicleto(2)thesalesitmakes
inCanadaofthattypeofvehicle.Theratioiscalledproductiontosalesratio,becauseitem(1)isthevalueofthe
importerslocalproduction,anditem(2)isthevalueofitslocalsales.Theproductiontosalesratioisexpressedas
follows:
Theproductionismeasuredonannualbasis.UndertheAutoPact,toreceivedutyfreetreatment,animporterhadto
keeptheratioaboveacertainminimumthresholdbecausetheratioisagaugeoftheextenttowhichtheimporteris
sellingthecarsitmakesinCanadatoCanadianconsumers,i.e.sellingitslocalproductionlocally,andpossiblyalsoselling
thecarsitmakeslocallytoforeigncountries.Putsuccinctly,theratioisameasureofanimporterscommitmentto
domesticcountries.Theproductiontosalesratioensuresthattheimporterdoesnotgettheentirevehicleitsellsin
Canadafromabroad.Rather,theimporterusesitslocalfactoriestosourceasizeablepercentage,ifnotall,ofthelocal
sales,andperhapsalsotosourceexportsfromthosefactories.Insum,theproductiontosalesrationissimplytodesign
toensuresomeproductionoccurslocally.ThePactspecifiestheproductiontosalesratiobycallingforcomparison
betweentheproductiontosalesratiointhecurrentyearwiththeproductiontosalesratioinabaseyear.Theratioin
thecurrentyearmustbeequaltoorgreaterthantheratiointhebaseyear.Moreover,theAutoPactspecifiedthatthe
ratiomustneverbelessthan75100percent.Thirdly,theimportermustachieveaminimumamountofCanadianvalue
added(CVA)initslocalproductionofvehicles.Thatis,theimportersCanadianproductionfacilitiesmustnotbemere
assemblyoperations.Theremustbesignificanteconomicactivitygoingon.Thus,includedintheCVAarethecostsof
partsandmaterialsthatareofCanadianorigin,Canadianlabourcosts,themanufacturingoverheadcosts,generaland
administrativeexpensesthatoccurredinCanadathatareattributabletotheproductionofvehicles,depreciationof
machineryandpermanentplantequipmentlocatedinCanadathatisdirectlyattributabletotheproductionofvehicles
andcapitalcostsforlandandbuildingsusedintheproductionofmotorvehicles.ThespecificCVArequirementwas
statedintermsofcomparison:howmuchCVAexistsinvehicleproducedinthecurrentyearincomparisonwiththeCVA
thatexistedinthevehiclesproducedinadefinedbaseyear.TherequirementwasthatCVAincurrentyearhadtobe
equaltoorgreaterthantheCVAinthebaseyear.
UnderthePact,CanadaagreedtoabolishitstariffsonimportsfromtheUnitedStatesofcertainfinishedvehicles,andon
importsofcertainpartsforuseasoriginalequipmentinvehiclestobeproducedinCanada.Canadaagreedthatauto
partscouldbeimporteddutyfreenotonlyfromtheUnitedStates,butalsofromthirdcountries.However,noteveryone
couldbenefitfromthedutyfreetreatmentforautosandautopartsonlyqualifyingpersoncouldandthequalifying
personswerenonotherthanthemajorAmericanmanufacturers,namelyFord,GeneralMotorsandChryslerand/or
theirCanadiansubsidiaries.
TheprincipallegalissuethatwasraisedinCanadaAutoPactcasewastheMFNtreatment.InJanuary,1998,the
EuropeanUnionandJapanchallengedtheAutoPactintheWTO,andinFebruary2000,aWTOPanelissueditsfinal
report,findinginfavourofthecomplainants.CanadaappealedandtheissuebeforetheAppellateBodywaswhether
CanadaviolatedMFNobligationbygivingdutyfreetreatmenttomotorvehiclesimportedfromcertainWTOMembers,
butnotextendingtheadvantagesimmediatelyandunconditionallytolikeproductsfromallotherMembers.ThePanel
answeredintheaffirmativeandsotoodidtheAppellateBody.TheEUandJapanarguedsuccessfullythatthe1965Auto
PactrunafouloftheobligationlaiddowninarticleI:1oftheGATT.TheComplainantsarguedthatPactdiscriminatesin
favourofAmericancarcompanies,andagainstallothercarcompanies.OnlytheAmericancompaniescanimportcars
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andcomponentsdutyfree.Incontrast,theCanadiancustomsauthoritiesimposeadutyontheseimportsbyaJapanese
orEuropeancarcompany.Thus,forexample,FordandGeneralMotorsneednotpayanydutyonimports,whereas
HondaCanada,IncandToyotaCanada,Incmustpayadutyontheirimports.TheAppellateBodyagreeingwiththe
PanelsreasoningsaidthatArticleI:1appliestodefactoaswellasdejurediscrimination.TheAppellateBodysaidthatit
istruethatPactdidnotcreatedejurediscriminationagainstimportofautoandautospartsbutthatisnottheonlyway
torunafoulofthelaw.Aslongastherewasdefactodiscrimination,thatisenoughfortheviolationofMFNobligation
undertheGATT.TheAppellateBodyfoundthatCanadahasgrantedanadvantageintheformofdutyfreetreatment.
Thisadvantageaccruestosomeproducts(autosandautoparts)fromsomeWTOMembers(principallytheUnited
States).Canadahasnotaccordedthisadvantageimmediatelyandunconditionallytothelikeproductsthatoriginatein
allotherMembers.Quitethecontrary,Canadahasimposedathreeparttestthateffectivelypreventstheextensionof
advantagetoallotherMembers.
1988JapanSemiconductorCase;ThisisacasewhichillustratesunsuccessfulefforttoinvoketheMFNobligationsof
ArticleI:1.Atthetimeofthefactsofthecase,JapanandU.Swerelargestproducersandexportersofsemiconductor
chipsintheworld.Beginningin1983,theAmericansemiconductorindustriesbegancomplainingthatnonJapanese
companiesdidnothavegoodaccesstotheJapanesesemiconductormarket.ThesemiconductorindustriesofU.Salso
complainedthatGovernmentofJapanengagedinunfairtradepracticesvisvisAmericancompanies,andJapanese
companieswereresortingtoantidumpingpractices.In1986,U.SSemiconductorIndustryAssociationfiledapetition
withtheUnitedStatesTradeRepresentatives(USTR)askingforunilateralactionunderSection301oftheTradeActof
1974.TheUSTRacceptedthepetitionandcarriedoutaninvestigation.Owingtotheinvestigation,theJapaneseand
AmericanGovernmententeredintonegotiations.Theresultofthenegotiationwasthe1986UnitedStatesJapan
ArrangementConcerningTradeinSemiConductorProducts.UndertheArrangement,theGovernmentofJapan
engagedtoimpressuponJapanproducersandusersofsemiconductorstheneedtotakeadvantageaggressivelyof
increasedmarketopportunitiesinJapanforforeignbasedfirmsseekingtoimprovetheirsalesperformanceand
position.Further,undertheArrangement,theGovernmentofJapanagreedtoprovidesupportintheformof
establishmentoforganizationtoprovidesalesassistance,qualityassessment,researchfellowshipprogrammesand
exhibitionforforeignsemiconductorproducts.
TheGovernmentalsoagreedtopromotelongtermrelationshipbetweenJapanesesemiconductorbuyersandforeign
producers,includingjointdevelopmentprogrammes.Inexchange,theU.SGovernmentaskedAmericansemiconductor
producerstoexploittheopportunityofincreasedmarketaccessinJapan.TheU.SGovernmentalsoagreedtosuspend
antidumpingcasesagainstJapanesechipmanufacturers,aftertheJapaneseGovernmentagreedtomonitorthecost
andpricesofsemiconductorproductsexportedtoU.S.Further,bothofthemalsoagreedtomonitorthirdcountry
markets,sayingthatdumpingshouldnotoccurinthirdcountrymarketsbecauseAmericansemiconductorproducers
usedtocompetewithJapanesefirmsinthethirdcountrymarkets,andaftertheArrangement,theAmericanfirmsdont
havetocompetewithdumpedproductsinthesemarkets.
Oneissuewhicharosein1988Semiconductorcasewaswhether1986ArrangementviolatedtheMFNprinciple
embodiedinArticleI:1bypreferringAmericansemiconductorproducersandexportersoverallothernonJapanese
producersandexporters.TheEuropeanEconomicCommunities(EEC),whichbroughtthecase,allegedtheviolationof
MFNprincipleandarguedthattheArrangementamountedtoBuyAmericanPolicyendorsedbyGovernmentofJapan
inordertogivepreferentialtreatmenttotheAmericansemiconductorproducers.Asforevidenceinsupportofits
argument,theEECsaidtheAmericansemiconductorindustryexpectedthemarketshareofitssalesinJapanwould
showasteadyincreaseandriseto20percentby1991,andthatJapanrecognisedthisexpectation.
TheGATTPanelruledagainsttheEECsargument,findingthatthe1986ArrangementdidnotviolatetheArticleIMFN
principle.ThePanelreachedtotheconclusionthatEECsevidencedoesnotsupportitsargument.
ThepanelheldthattherewasnothingintheArrangementtoshowthatJapanpromisedtoreserve20percentofthe
JapanesesemiconductormarketforAmericanfirms.ThePanelgavefourreasonsforthefinding:First,salesofnon
AmericanforeignsemiconductorsinJapanhadbeenexpandingsteadily,justlikesalesofAmericansemiconductors.
Indeed,thegrowthofsalesofsemiconductorsinJapanfromnonAmericansourceshasbeenhigherthanthatofsalesof
Americansemiconductors.Secondly,thePanelfoundthat1986Arrangementuniformlyappliestoallforeignbased
semiconductorcompanies.AlthoughthePanelfoundthattherewasonlyonesuchcompanynotofAmericanorigin,
therewasnothingtopreventanonAmericancompanyfromestablishingitselfinJapanonthesametermsanAmerican
company.Thirdly,theGovernmentofJapanimplementedtheArrangementinanimpartialmanner.Fourth,theEECs
argumentthatJapaneseusersandimportersofsemiconductorproductwouldperceivetheArrangementasaccording
preferencetotheU.Swasasheerspeculation.Thus,PanelrejectedthecontentionofEEC.
FurtherIllustrationOfTheConcept
AsafurtherexampleofthebroadtypeofmeasurescoveredbytheMFNobligation,letusconsiderthefollowing
hypotheticalillustration.AssumeIndiaimposesanMFNrateonturmericspiceof5percent.But,forturmericfrom
Thailand,Indiagenerallyimposesa10percentrate.NoIndianlaworregulationsetsoutthis10percentduty.Rather,
thecustomofficialatvariousIndianportsimposethe10percentduty.DoesThailandcanclaimthatIndiaviolateMFN
principle.Theanswerisintheaffirmative.ThailandcanarguethatIndianpracticeviolatestheMFNobligationofArticle
I:1.Thisprovisiondoesnotdistinguishbetweenlawsandregulations,ontheonehand,andpracticesontheotherhand.
Indeed,itspeaksofthemethodoflevyingdutiesandcharges.
Asanotherhypotheticalexample,consideranagencyanddistributionlawinKuwaitthatmandatesexclusivity.Thatis,
anyforeigncompanyseekingtoexportitsproducttoKuwaitmustdosothroughasingleKuwaitagent,andthatagent
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hasthesolerighttodistributetheproductinKuwait.Obviously,thislawprotectsKuwaitiholdersofexclusive
agreementsfromcompetingwithoneanother,andwithotherforeigners,foragencyanddistributionrights.Wouldthe
KuwaitlawviolateArticleI;1?Thefactthatthislawisanontariffmeasureisimmaterial.TheMFNobligationembraces
allmeasuresaffectingimports,exportsorpayments.
ThejurisprudenceofArticleI:1extendsnotonlytodejurediscriminationbutalsotodefactoevenifitisnotmanifest.
Inotherwords,anydefactodiscrimination,evenifitisnotmanifest(i.e.,potentialoractual)isenoughforconcern.
Thus,supposetheproductatissueisflatscreenTVsetsbetween35and40inches,andthatKuwaitimportsthesefrom
JapanesemanufacturerslikeSony,andKoreanproducerslikeLG.IftheKuwaitilawsomehowfavourstheJapanese
exportersattheexpenseoftheKoreanexporters(orviceversa),thenthatlawviolatesArticleI:1.Amongthescenarios
thatcouldgiverisetotheviolationwouldbethedifferencesintheadministrationofthelawbyKuwaitiofficials.
SupposetheypermitsubagreementswithrespecttoJapaneseimports,butnotKoreanimports.Therefore,
manufacturerslikeSonycanobtaintheservicesofvariousKuwaitisinmarketingtheTVs,bycallingonitsexclusive
representativetoenlistsubagentsandsubdistributors.Through,subrepresentation,SonysTVsarebroughttothe
attentionofKuwaiticonsumersmorepervasivelythanLGsTVs,whicharemarketedonlybyacentralrepresentative.
ThissimplyisaviolationofMFNobligation.Thus,ArticleI:1strikesnotonlyatpostborder,nontariffmeasures,butalso
atdefactodiscriminationthatisnotyetmanifest.
OtherProvisionsReflectingMFNPrinciple
ApartfromArticle1Para1,thereareotherprovisionsinGATT1994thatrequiresMFNorMFNliketreatment.Theseare:
ArticleIIIPara7:ItprovidesforgrantingMFNstatusregardinginternalquantitativeregulations.
ArticleV:ItprovidesforgrantingMFNstatusregardingfreedomoftransit.
ArticleIXPara1:ItprovidesforgrantingMFNstatusregardingmarkingrequirements.
ArticleXIII:Itprovidesfornondiscriminatoryadministrationofquantitativerestrictions.
ArticleXVIIPara1:ItprovidesforgrantingMFNstatusregardingstatetradingenterprises.
ArticleXVIIIPara20:Itconcernsgovernmentalassistancetoeconomicdevelopment.
ArticleXX(j):Itconcernsgoodsinshortsupply.
ExceptionsToTheMostFavouredNationPrinciple
TheGATTprovidesforcertainexceptionstotheMostFavouredNationrule.
RegionalTradingAgreements(GattArticleXXIV)
RegionalTradeAgreements(RTAs)havebecomeinrecentyearsaveryprominentfeatureoftheMultilateralTrading
System(MTS).ThesurgeinRTAhascontinuedunabatedsincetheearly1990s.Some380RTAshavebeennotifiedtothe
GATT/WTOuptoJuly,2007.Regionalintegrationliberalizestradeamongcountrieswithintheregion,whileallowing
tradebarrierswithcountriesoutsidetheregion.Regionalintegrationthereforemayleadtoresultsthatarecontraryto
theMostFavouredNationprinciplebecausecountriesinsideandoutsidetheregionaretreateddifferently.Thismay
haveanegativeeffectoncountriesoutsidetheregion,andthusleadtoresultscontrarytotheliberalizationoftrade.
Regionalintegration,thus,hasagreatimpactontheworldeconomytodayandisthesubjectoffrequentdebateina
varietyofforums,includingtheWTOCommitteeonRegionalTradeAgreements.Oneofthemostfrequentlyasked
questioniswhethertheseregionalgroupshelporhindertheWTOsmultilateraltradingsystem.TheWTOCommitteeon
RegionalTradeAgreementsiskeepinganeyeonthedevelopment.TheregionaltradinggroupssuchastheEuropean
Union(EU),theNorthAmericaFreeTradeAgreement(NAFTA),theAssociationofSoutheastAsianNations(ASEANS),the
SouthAsianAssociationforRegionalCooperation(SAARC),theSouthernCommonMarket(MERCOSUR),theCommon
MarketofEasternandSouthernAfrica(COMESA),etchaveposedagreatchallengetotheMostFavouredNation
principlewhichhaveloweredoreliminatedtariffsamongthememberswhilemaintainingtariffwallsbetweenmember
nationsandtherestoftheworld.ThegroupingsthatareimportantfortheWTOarethosethatabolishorreduce
barriersontradewithinthegroup.TheWTOagreementsrecognizethatregionalarrangementsandclosereconomic
integrationcanbenefitcountries.Italsorecognizesthatundersomecircumstancesregionaltradingarrangementscould
hurtthetradeinterestsofothercountries.Normally,settingupacustomsunionorfreetradeareawouldviolatethe
WTOsprincipleofequaltreatmentforalltradingpartners(mostfavourednation).
ButGATTsArticle24allowsregionaltradingarrangementstobesetupasaspecialexception,providedcertainstrict
criteriaaremet(asmentionedabove).Inparticular,thearrangementsshouldhelptradeflowmorefreelyamongthe
countriesinthegroupwithoutbarriersbeingraisedontradewiththeoutsideworld.Inotherwords,regionalintegration
shouldcomplementthemultilateraltradingsystemandnotthreatenit.Article24oftheGATTsaysthatifafreetrade
areaorcustomsunioniscreated,dutiesandothertradebarriersshouldbereducedorremovedonsubstantiallyall
sectorsoftradeinthegroup.Nonmembersshouldnotfindtradewiththegroupanymorerestrictivethanbeforethe
groupwassetup.On6February1996,theWTOGeneralCouncilcreatedtheRegionalTradeAgreementsCommittee.Its
purposeistoexamineregionalgroupsandtoassesswhethertheyareconsistentwithWTOrules.Thecommitteeisalso
examininghowregionalarrangementsmightaffectthemultilateraltradingsystem,andwhattherelationshipbetween
regionalandmultilateralarrangementsmightbe.
WaiverOfMFNPrincipleInFavourOfDevelopingCountries:
GATTprovidesforexceptiontotheMostFavouredNationprincipleinfavourofthedevelopingcountries.Historically,
developingcountrieswerecriticaloftheGATTbecausethetradeofthedevelopingcountrieswerenotgrowingasfastas
developedcountrieswithintheframeworkoftheGATT.SuchdissatisfactionledtoastudycalledtheHaberlerReport,
whichsupportedtheperceptionthattheexportearningsofdevelopingcountrieswerenotsatisfactory.Later,the
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formationofUnitedNationConferenceonTradeandDevelopment(UNCTAD)spurredseveralinitiativeswithinthe
GATT.First,in1965,theGATTcontractingpartiesadoptedPartIVoftheGATTtodemonstrateanewconcernforthe
interestsofthedevelopingcountries.Second,in1971,theGATTadoptedtwowaiversfortwotypesofpreferencesto
favourdevelopingcountries:1)asetasideoftheMFNobligationtopermitageneralisedsystemofpreferences;and
2)permissionfordevelopingcountriestoexchangetariffpreferencesamongthemselves.In1979,bothwaiverswere
madepermanentthroughthesocalledEnablingClause.TheEnablingClausecontinuestoguideWTOpolicy.The
EnablingClausesettledadebatewithintheGATTandestablishedthepolicyofspecialandpreferentialtreatmentfor
developingcountries.Atthesametime,theEnablingClausecontainsasocalledgraduationclause(Para7)whichisthe
policythateventuallypreferentialtreatmentshouldend.ArticleXXXVI,whichisincorporatedinPartIVoftheGATT,isa
hortatoryprovisionofPrinciplesandObjectivesstatingtheneedtoraisestandardsoflivingindevelopingcountries,
theneedforrapidandsustainedexpansionoftheirexportearningsandincreasedaccesstoworldmarketfortheir
products.ArticleXXXVIsetsouttheprinciplethatdevelopedcountriesdonotexpectreciprocityfortheircommitments
toremoveorreducetariffsandothertradebarriers.
Totakeanhypotheticalexample,assumethattheUnitedStatesgrantsdutyfreetreatmenttoricefromLaos,whichis
notyetaWTOmember.TheUnitedStatesdoessobecauseLaosisalessdevelopedcountryinneedofhelp.TheUnited
Satesmakesthesamedecision,forthesamereason,forriceimportedbytheUnitedSatesfromCambodia,whichisa
WTOmember.ThenormalMFNrateof15percentcontinuestoapplytoriceimportedbytheUnitedStatesfromJapan,
whichisalsoaWTOmember.WouldJapanhaveanMFNgrievanceagainsttheAmericandecision?Theanswerisno.
TheUnitedStatescangrantdutyfreetreatmenttodevelopingcountriesunderitsGeneralisedSystemofPreferences
program,whethertheyareWTOmembersornotbyvirtueofParagraph1ofEnablingClausewhichprovidesforthe
generalMFNwaiver.
OtherExceptions
Apartfromtheabovementionedexceptions,thereareotherprovisionsintheGATTwhichcanbeconstruedas
exceptionstotheMostFavouredNationrule.ArticleI:2providesforexceptiontotheMostFavouredNationprinciple
regardinghistoricalpreferenceswhichwereinforceatthetimeofthesigningoftheGATT,suchastheBritish
Commonwealth.ArticleXX,whichprovidesforGeneralExceptionstotheGATT,saysthatnothinginthisAgreementshall
beconstruedtopreventtheadoptionorenforcementbyanycontractingpartiesofmeasures:necessarytoprotect
publicmorals;necessarytoprotecthuman,animalorplantlifeorhealth;relatingtotheimportationsorexportationsof
goldorsilver;necessarytosecurecompliancewithlawsorregulationswhicharenotinconsistentwiththeprovisionsof
theGATT;relatingtotheproductsofprisonlabour;relatingtotheconservationofexhaustiblenaturalresources,etc.
ArticleXXI,whichprovidesforSecurityExceptionstotheGATT,saysthatnothinginthisAgreementshallbeconstrued:
a)torequireanycontractingpartytofurnishanyinformationthedisclosureofwhichitconsiderscontrarytoitsessential
securityinterests;
b)topreventanycontractingpartyfromtakinganyactionwhichitconsidersnecessaryfortheprotectionofitsessential
securityinterestsrelatingtofissionablematerialsorthematerialsfromthematerialsfromwhichtheyarederived;
relatingtotrafficinarms,ammunitionandimplementsofwarandtosuchtrafficinothergoodsandmaterialsasis
carriedondirectlyorindirectlyforthepurposeofsupplyingamaterialestablishment;takenintimeofwarorother
emergencyininternationalrelations;
c)topreventanycontractingpartyfromtakinganyactioninpursuanceofitsobligationsundertheUnitedNations
Charterforthemaintenanceofinternationalpeaceandsecurity.ArticleXIVprovidesforexceptionstotheruleofnon
discriminationinordertoenablethemembercountriestodealwiththebalanceofpaymentdifficulties.ArticleXIX,
whichdealswithEmergencyActiononImportsofParticularProducts(SafeguardMeasures),providesthatif,asaresult
ofunforeseendevelopmentsandoftheeffectoftheobligationsincurredbyacontractingpartyunderthisAgreement,
includingtariffconcessions,anyproductisbeingimportedintotheterritoryofthatcontractingpartyinsuchincreased
quantitiesandundersuchconditionsastocauseorthreatenseriousinjurytodomesticproducersinthatterritoryoflike
ordirectlycompetitiveproducts,thecontractingpartyshallbefree,inrespectofsuchproduct,andtotheextentandfor
suchtimeasmaybenecessarytopreventorremedysuchinjury,tosuspendtheobligationinwholeorinpartorto
withdrawormodifytheconcession.
Conclusion
TheMostFavouredNation(MFN)principleisacornerstoneofthemultilateraltradingsystemconceivedafterWorldWar
II.Itseekstoreplacethefrictionsanddistortionsofpowerbased(bilateral)policieswiththeguaranteesofarulesbased
frameworkwheretradingrightsdonotdependontheindividualparticipantseconomicorpoliticalclout.Rather,the
bestaccessconditionsthathavebeenconcededtoonecountrymustautomaticallybeextendedtoallotherparticipants
inthesystem.Thisallowseverybodytobenefit,withoutadditionalnegotiatingeffort,fromconcessionsthatmayhave
beenagreedbetweenlargetradingpartnerswithmuchnegotiatingleverage.AlthoughtheformationofRegional
TradingBlockshaserodedthefundamentalimportanceoftheconcepttosomeextent,itisstillthemostfundamental
obligationonwhichtheentirefoundationofGATTandWTOrests.TheMFNprinciplemustbeobservedasa
fundamentalprincipleforsustainingthemultilateralfreetradesystem.Regionalintegrationandrelatedexceptionsneed
tobecarefullyadministeredsoasnottounderminetheMostFavouredNationprincipleasafundamentalprincipleof
theWTO.
References
Books
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1)TheLawandPolicyoftheWorldTradeOrganization,Text,CasesandMaterialsbyPeterVanden,Maastricht
University,CambridgeUniversityPress.
2)LecturesonInternationalTradebyJagdishNBhagawati,ArvindPanagariyaandT.N.Srinivaasan,SecondEdition,
OxfordUniversityPress.
3)StatutesandConventionsonInternationalTradebyIndiraCarrandRichardKidner,FourthEdition,Cavendish
PublishingLimited.
4)TheRegulationofInternationalTradebyMichaelJ.TrebilcockandRobertHowse,ThirdEdition,RoutledgeTaylorand
FrancisGroup.
5)InternationalTradeLaw:CasesandMaterialsbyRajBhala,MichieLawPublishers.
6)InternationalTradeandBusiness:Law,PolicyandEthicsbyGabrielMoensandPeterGillies,CavendishPublishing
PrivateLimited.
7)TheEconomicsandIdeologyofFreeTrade:AnHistoricalReviewbyLeonardGomes,PublishedbyEdwardElgarHouse.
8)DalhouisenonInternationalCommercial,FinancialandTradeLawbyHartPublishingOxfordandPortland,Oregon,
2000.
9)InternationalTradeLaw:TheoryandPracticebyRajBhala,SecondEdition,LexisPublishing.
10)TheGeneralAgreementonTariffsandTrade:Law,EconomicsandPoliticsbyAutarKrishenKoul,SatyamBooks
Publishers.
Websites:
1)WorldTradeOrganization.
2)CentreForTradeAndDevelopment

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AbouttheAuthor:AmitBhaskar
IamaStudentofNationalLawSchoolofIndiaUniversity,Bangalore,PursuingLL.MinBusinessLaws.

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