TRADE WITHOUT DISCRIMNATION import is not a violation of national treatment even
if locally-produced products are not charged an
1. Most-favoured-nation (MFN): treating other equivalent tax.
people equally Under the WTO agreements,
countries cannot normally discriminate between
their trading partners. Grant someone a special favor
Freer trade: gradually, through negotiation
(such as a lower customs duty rate for one of their
products) and you have to do the same for all other Lowering trade barriers is one of the most obvious
WTO members. means of encouraging trade. The barriers concerned
include customs duties (or tariffs) and measures such
as import bans or quotas that restrict quantities
This principle is known as most-favoured-nation selectively. From time to time other issues such as
(MFN) treatment (see box). It is so important that it red tape and exchange rate policies have also been
is the first article of the General Agreement on discussed.
Tariffs and Trade (GATT), which governs trade in
goods. MFN is also a priority in the General
Agreement on Trade in Services (GATS) (Article 2) Since GATT’s creation in 1947-48 there have been
and the Agreement on Trade-Related Aspects of eight rounds of trade negotiations. A ninth round,
Intellectual Property Rights (TRIPS) (Article 4), under the Doha Development Agenda, is now
although in each agreement the principle is handled underway. At first these focused on lowering tariffs
slightly differently. Together, those three (customs duties) on imported goods. As a result of
agreements cover all three main areas of trade the negotiations, by the mid-1990s industrial
handled by the WTO. countries’ tariff rates on industrial goods had fallen
steadily to less than 4%.
Some exceptions are allowed. For example,
countries can set up a free trade agreement that But by the 1980s, the negotiations had expanded to
applies only to goods traded within the group — cover non-tariff barriers on goods, and to the new
discriminating against goods from outside. Or they areas such as services and intellectual property.
can give developing countries special access to their
markets. Or a country can raise barriers against
products that are considered to be traded unfairly Opening markets can be beneficial, but it also
from specific countries. And in services, countries requires adjustment. The WTO agreements allow
are allowed, in limited circumstances, to countries to introduce changes gradually, through
discriminate. But the agreements only permit these “progressive liberalization”. Developing countries
exceptions under strict conditions. In general, MFN are usually given longer to fulfil their obligations.
means that every time a country lowers a trade
barrier or opens up a market, it has to do so for the
same goods or services from all its trading partners
Predictability: through binding and transparency
— whether rich or poor, weak or strong.
Sometimes, promising not to raise a trade barrier
can be as important as lowering one, because the
2. National treatment: Treating foreigners and locals promise gives businesses a clearer view of their
equally imported and locally-produced goods should future opportunities. With stability and
be treated equally — at least after the foreign goods predictability, investment is encouraged, jobs are
have entered the market. The same should apply to created and consumers can fully enjoy the benefits
foreign and domestic services, and to foreign and of competition — choice and lower prices. The
local trademarks, copyrights and patents. This multilateral trading system is an attempt by
principle of “national treatment” (giving others the governments to make the business environment
same treatment as one’s own nationals) is also stable and predictable.
found in all the three main WTO agreements (Article
3 of GATT, Article 17 of GATS and Article 3 of TRIPS),
although once again the principle is handled slightly
differently in each of these.
National treatment only applies once a product,
service or item of intellectual property has entered
the market. Therefore, charging customs duty on an
