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DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : M. Narsimham
Designation : senior Lecturer in CCP
Institute : Govt. Poly. For women (M)
LB Nagar, Hyderabad
Branch : D.C.C.P
Semester : VI Semester
Subject : Business Economics --II
Sub-Code : CCP-602
Topic : International Trade
Duration : 50 minutes (2 classes)
Sub Topic : Social clauses in GATT (most
favored nations clause)
Teaching Aids : PPT, animations
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Objectives

On completion of this period you would be


able to :

 Explain the social Clauses in GATT (most favored


nations clause)

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Recap:

In the last class you have studied about :

 The meaning of GATT


 Evolution of GATT

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Known To Unknown

 Do you know that there is a Special clause called


most favored Nations clause in GATT ?
 Why it was introduced?

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Most favored Nations clause

Members of GATT agree :


 For reduction in tariffs and
 Eliminations of discrimination in international
commerce on a reciprocal and mutually
advantageous basis
 To ensure against discrimination, members
agree to grant to each other unconditional most
favoured nation status

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Most favoured Nations clause
 Most favoured nation status is given in all import
and export duties with certain exceptions
 Article I of the GATT deals with the most
favoured nation clause
 The principle of most favoured nation implies
that each nation should be treated as the most
favoured nation

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Contd..

 Contracting parties are forbidden from granting


new preference
 Negations and concessions materialized under
bilateral agreements should be extended to all
member countries on equal basis
 Permitted quantitative restrictions should be
administered without favouring any party

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Contd..

GATT permits such restrictions only for:

 Safeguarding exchange reserves when a


country has balance of payments difficulties
 Restricting imports that would harm domestic
price supports and production control
programmes of a country

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Contd..

 State trading should be non-discriminatory

 Underdeveloped countries to further economic


development under procedures approved by GATT

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Summary

 By virtue of its membership in the GATT, India


automatically entitled to enjoy the benefit of the
Most favoured nation (MFN) treatment

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Quiz

1. Article I of the GATT deals


Most favoured
with____________________ clause.

3. Eliminations of discrimination in international


commerce is on
a reciprocal and mutually advantageous basis
____________________________________.

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Contd..
Quiz
3. The principle of most favoured nation implies
that each nation should be treated as
______________________.
the most favoured nation

4. Negations and concessions materialized under


bilateral agreements should be extended to all
member countries on ________
equal basis

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Frequently asked questions

1.Explain the salient features of favoured nation


clause in GATT ( 12 marks)

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Assignment

1. Explain :

(a) Most favoured Nations clause


(b) Restrictions permitted by GATT

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