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MOST FAVOURED NATION PRINCIPLES

i. Non-discrimination is a key concept in WTO law and Policies.


ii. There are two main principles of non-discrimination i. Most Favoured Nation
Treatment Principle and National Treatment Obligation.
iii. Most Favoured Nation Principle prohibits a country from discriminating between
countries.
iv. Discrimination was one of the most characteristic of protectionist trade policies
pursued by countries during economic crisis of 1930. Historians later came to
conclude that this was one of the factors that led to Second World War.
v. The importance of eliminating discrimination in the context of the WTO is
highlighted in the Preamble to the WTO Agreement, where the elimination of
discriminatory treatment in international trade relations is identified as one of the two
main means by which the objectives of the WTO may be attained.
vi. MFN principle strictly provided that there should be no discrimination in the product
on the basis of its nationality or nation origin.
vii. However, the above principles are not absolute principles. They are certain Articles
which provide for exception to the above principles. As for instance, Article XX of
GATT provides certain circumstance under which legislation can be made even if t
violates MFN principles.
viii. Other multilateral agreements on trade in goods such as the TBT Agreement, the SPS
Agreement and the Agreement on Import Licensing Procedures likewise require MFN
treatment

NATURE OF MFN OBLIGATION UNDER GATT

1. MFN obligation under GATT, 1994 is contained in Article I:1.

2. In EC Tariff Preference case, the Appellate Body highlighting its importance held
that Article I: 1 of GATT, 1994 is one of the pillars of WTO trading system.
3. The principle purpose of MFN treatment obligation is equality of opportunity to all
WTO Members.

4. Under GATT, there is not only prohibition on de jure prohibition but also de facto
prohibition.

5. As for instance in Canada Autos, the Appellate Body rejected, as the Panel had
done, Canadas argument that Article I:1 does not apply to measures which appear, on
their face, to be origin-neutral. Also, measures which appear, on their face, to be
origin-neutral can give certain countries more opportunity to trade than others and
can, therefore, be in violation of the non-discrimination obligation of Article I:1. The
measure at issue in Canada Autos was an import duty exemption accorded by
Canada to imports of motor vehicles by certain manufacturers. Formally speaking,
there were no restrictions on the origin of the motor vehicles that were eligible for this
exemption. In practice, however, the manufacturers imported only their own make of
motor vehicle and those of related companies. As a result, only motor vehicles
originating in a small number of countries benefited de facto from the exemption.

6. In EEC Imports of Beef found that EC regulations making the suspension of an


import levy conditional on the production of a certificate of authenticity were
inconsistent with the MFN obligation of Article I:1 after it was established that the
only certifying agency authorised to produce a certificate of authenticity was an
agency in the United States.

ELEMENTS TO CONSIDER WHEN THE QUESTION OF CONSISTENCY ARISES

There are three factors to be considered when the question regarding consistency with Article
I:1 arises:-

1. Whether any advantage has been granted to any Member?


2. Whether the products in question are like products
3. Whether the advantage granted is immediately and unconditionally applicable?
The above factors can be analysed in detail as under :-

1. ADVANTAGE

i. The advantage in question can be conferred by way of exemption from customs,


internal regulation, internal taxes, charges on importation or exportation, the
method of levying charges and so on.
ii. Under MFN, if any advantage is granted to a non- Member then there is an
obligation under MFN that similar advantage be granted to a Member.
iii. The agreement of Safeguard has made it clear that MFN treatment principle
applies to safeguard measure.
iv. Plurilateral Agreement refers to agreement between more than 2 more countries
but not as many as Multi-lateral Agreement. MFN principle provide that where
any advantage is granted by a party to another party under Plurilateral Agreement
then similar advantage is to be granted to all WTO Members.

2. LIKE PRODUCTS

i. Under MFN, like products must be accorded like treatment.


ii. However, there is no definition of like products under GATT.
iii. The Working Party on Border Tax Adjustment laid down three different criteria to
determine like products. They are : products end use in the market, consumers
taste and habits and Products property
iv. The EC Asbestos case and Japan Alcoholic Beverages cases affirming the above
test added a fourth criteria namely evaluation of tariff classification.

3. ABSOLUTE AND UNCONDITIONAL

i. Once a WTO Member has granted an advantage to imports from a country, it


cannot make the granting of that advantage to imports of other WTO Members
conditional upon those other WTO Members giving something in return or
paying for the advantage.
ii. There cannot be any condition imposed upon such grant.
iii. Belgium- Family Allowance. A legislation was passed providing for exemption on
levy on products purchased from which had system of family allowance as that of
Belgium. It was held to be inconsistent with the principle of MFN enshrined under
Article I: 1 as the advantage granted was not unconditional