International Trade is administered today by the World Trade Organization (WTO), which came

about through the Marrakesh Agreement. The WTO is the organization set up to administer the
different legal instruments related to international trade. The WTO Agreement has annexed to it
multilateral agreements which are the General Agreement on Trade and Tariffs (GATT), The
General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects
of Intellectual Property Rights (TRIPS) together with their dispute resolution mechanisms. 1
Nonetheless it will be observed in the ensuing debate of this paper that, the WTO together with
its annexed multilateral Agreements though forceful in regulating International trade are still not
sufficient to deal with the everyday evolving nature of international trade. For example, Jackson
observed thus, “The world was becoming increasingly complex and interdependent and it was
becoming more and more obvious that the GATT rules were not satisfactorily providing the
measure of discipline that was needed to prevent tensions and damaging national activity. “2

The function as stated under Article III of the WTO agreement is that, “The WTO shall facilitate
the implementation, administration and operation, and further the objectives, of this Agreement
and of the Multilateral Trade Agreements…. ““Also, the WTO shall administer the
understanding on rules and procedures governing the settlement of disputes”.3

Through these functions, the goal and objective sought to be achieved as stated under its
preamble include; ‘Recognizing that the relations in the field of trade and economic endeavor
should be conducted with a view to raising standards of living and expanding the production of
trade in goods and services…in a manner consistent with their respective needs and concerns at
different levels of economic development…..Also recognizing that there is need for positive
efforts designed to ensure that developing countries, and especially the least developed among
them, secure a share in the growth in international trade commensurate with the needs of their
economic development’.4

Gleaning from the above, Van Bossche(need for referencing) in his scholarly book teases out
the four main objectives as; Increase in the standard of living; The attainment of full
employment; The growth of real income and effective demand; and the expansion of production
of, and trade in, goods and services.

To achieve these objectives, there are five main principles underpinning the organization which
are; Trade without discrimination, promoting fair trade, free trade, Predictability, promoting
fair competition and Encouraging development and economic reform. 5

For the purpose of this paper, an attempt shall be made to briefly interrogate the above sated
principles as follows:

5
Promoting fair trade; Unfair trade is a conduct by a market participant which gains or seeks to
gain an undue advantage over its rivals.6 Unfair trade practices include cartel agreements, price
fixing, and the abuse of a dominant position on the market. 7 WTO is a system opened to
undistorted trade. This is seen in other principles like the MFN and National Treatment and anti-
dumping laws enshrined not only under GATT but also in other agreements covering specific
fields i.e agriculture and IPRs. This goes hand in hand with the principle of dealing with unfair
competition.

Encouraging development and economic reform; The WTO recognizes that developing states do
not have the infrastructure and legal framework to implement WTO agreements as quickly as
developed states. This is evident in the exceptions created for developing states under the GATT
and GATS, such as the Enabling Clause. All with the goal of promoting their sustainable
development.

Free trade occurs when goods and services can be bought and sold between countries without the
imposition of unapproved tariffs, quotas or other restrictions being applied. 8 One of the easiest
ways to promote trade is to lower trade barriers; Customs taxes as well as restrictions on certain
quantities, like import bans and quotas. The WTO agreements permit nations to gradually
liberalize in order to implement improvements. Trade restrictions must be lowered for all states
subject only to regional agreements. This is provided for under Article XXI V and V of the
GATS.9

Predictability; this goes together with Transparency.10 Governments are making an effort to
create a stable and predictable economic climate through the multilateral trading system.
Bounded rates that cannot be exceeded are established through the Trade Policy Review
Mechanism, which provides predictability. 11 Communication of information on important goods
will lead to certainty. It promotes investment, leads to the creation of jobs, and allows consumers
to fully benefit from competition.12

Discrimination is defined as the practice of treating a particular group in society less fairly than
others13. The discrimination of state is therefore the treatment of some states fairly than others
and non- discrimination is the equal treatment of states. This has been said to breed resentment
among states which poisons international relations and may lead to economic and political
confrontation and conflict.14 It distorts the market in favour of products and services that are
more expensive and or of a lesser quality. Due to its key essence in international trade, the
preamble of the Marrakesh agreement enshrines the need for non- discrimination, “…and the
elimination of discrimination in international trade relations.”15
6
https://www.concurrences.com/en/dictionary/unfair-competition
7
https://uk.practicallaw.thomsonreuters.com/
8
https://stats.oecd.org/glossary/detail.asp?ID=6265
9
Agreement
10
https://www.wto.org/
11
Ibid
12
Ibid
13

14

15
 Non- discrimination principles of the WTO come in two forms; The Most -Favored Nation
Treatment (MFN) and The National Treatment (NT). These two principles which will be argued
by this paper as forming a core principle of both the GATT and the GATS apply on the basis of
the ‘national origin or destination’ of a good or service.

 
The Most -Favored Nation (MFN) Treatment under the GATT.
The Most-Favored Nation (MFN) treatment is found under Article 1:1 of the GATT(need for
referencing). The MFN treatment obligation prohibits a country from discriminating between
countries; this means that a member state is not allowed to discriminate against one state while
favoring the other. The Canada-Autos case (need for referencing) puts it as “Article I:1 of the
GATT ‘prohibits discrimination between like products originating in, or destined for, different
countries.16
 For instance, Country A is required to treat country B and C equally. It is therefore designed to
ensure that each party will be treated on the same footing as the favored third country. 17 It is
defined by the International Law Commission of the United Nations (need for
referencing)as; “a treatment accorded by the granting state to the beneficiary state…in
determined relationship with the state no less favorable than the treatment extended by the
granting state to the third party…in the same relationship with that third state. In “EC-Tariff
Preferences (need for referencing) it was well settled that Article I:1 is a "cornerstone of the
GATT" and "one of the pillars of the WTO trading system"  18

The scope of the MFN is broad, it encompasses de jure and de facto forms of discrimination 19 De
jure discrimination is discrimination expressly provided for by the law. Such is the kind of
discrimination that relates to the actions by the state and not stated by law. For instance, in the
case of EEC – Imports of Beef20 the European Commission held that regulations making the
suspension of an import levy conditional on the production of a certificate of authenticity only
given by an agency in the US was inconsistent with the MFN obligation of Article I:1.
BRIEFLY EXPLAIN DE FACTO FORM OF DISCRIMINATION AS WELL

There is a four-tier test in establishing violation of Article I:1 of the GATT or an act of a state as
falling under the principle of Most-Favored Nation Treatment. These are outlined below;

Firstly, whether the measure is a measure covered by Article I:1. Article I:1 covers “any
advantage, favor, privilege or immunity’ granted by any Member to any product originating in,
or destined for any other country with respect to: custom duties; charges of any kind imposed on
or in connection with importation or exportation the method of levying such duties and charges;
all rules and formalities in connection with imports and exports, among others.

16

17

18

19

20
The Panel in US – Customs User Fee 21: stated that the merchandise processing fee was a
‘‘charge imposed on or in connection with importation’’ within the meaning of Article I:1.
Exemptions from the fee, fell within the category of ‘‘advantage, favor, privilege or immunity’’
which Article I:1 required to be extended unconditionally to all other contracting parties. 

Secondly, whether that measure grants an ‘advantage’. Advantage is defined as a thing that
benefits one but not the opponent. Inferring from its literal meaning Article 1:122 speaks of any
form of such benefit given to one country but not the other and in this circumstance, it includes
tariffs, import and export duties. Case law has given a broad interpretation of what advantage
means. In EC-Bananas III (need for referencing)it was held that a measure granting an
‘advantage’ within the meaning of Article I:1 creates “more favorable competitive opportunities”

In addition, whether the products concerned are ‘like products. The concept of ‘like products’ is
not defined in the GATT. However, likeness is defined as the fact of being similar to a thing 23. 
Thus, it can be inferred that like products are products that are similar in nature. This echoes the
language of the French version of Article III:4, ‘produits similaire’ in EC- Asbestos.(need for
referencing) However, it is generally accepted that the concept of ‘like products’ has different
meanings in the different contexts in which it is used. Thus, likeness is not given a strict
constructive meaning but a purposive meaning depending on the scope and context. As
emphasized in Japan-Alcoholic Beverages, (need for referencing) that “The accordion of
‘likeness’ stretches and squeezes in different places as different provisions of the WTO
Agreement are applied. The width of the accordion in any one of those places must be
determined by the particular provision in which the term ‘like’ is encountered as well as by the
context and the circumstances that prevail.  Nonetheless, the case of The Working Party Report
in Border Tax Adjustments and Alcoholic Beverages (need for referencing)have identified four
criteria to examine like Products which are; product characteristics, end uses, consumer choices
and tariff classification24.

Lastly, whether the advantage is ‘accorded immediately and unconditionally’ to all like products,
irrespective of their origin or destination. “Immediately” means without delay. Therefore, no
time should lapse between granting an advantage to a product and according that advantage to all
like products. “Unconditionally” is defined by the Oxford dictionary to be without condition
while condition is any situation that must exist in order for something else to happen. Thus, a
state is entitled to any advantage granted to the other without the need for any requirement by the
grantor. In  EC-Tariff Preferences ( need for referencing)the Panel stated that “the panel sees no
reason not to give that term its ordinary meaning under Article I:1, that is, ‘not limited by or
subject to any condition”.25

The import of the above element (MFN) as derived from Article 1:1 of the GATT Agreement is
that, any advantage, favour in terms of tariffs and duties on all importations and exportations
21

22

23

24

25
should be applied equally to all WTO members immediately and unconditionally. There is no
MFN obligation towards non-parties. Thus, any advantage, favour in terms of tariffs and duties
on all importations and exportations should be applied equally to all WTO members immediately
and unconditionally.

The Most -Favored Nation (MFN) Treatment under the GATS.

The MFN treatment provision does not only appear under GATT but also under General
Agreement on Trade in Services (GATS)26. A key distinction between the MFN under the GATT
and that of GATS is the use of no less favorable instead of any advantage. Also, it caters for
service suppliers27.  Article II (1) of GATS provides that, with respect to any measure covered
by this Agreement, each member shall accord immediately and unconditionally to services and
service suppliers of any other member treatment no less favorable than what it accords to like
services and service suppliers of any other country’. Article XXVIII(g) provides that a ‘service
supplier’ is ‘any person who supplies a service’, including natural and legal persons as well as
service suppliers providing their services through forms of commercial presence 28. Article I(3)
(c) states that ‘services’ includes ‘any service in any sector except services supplied in the
exercise of governmental authority29.’

To determine a non-violation of the MFN obligation under GATS, the following test should be
complied with; whether the measure is covered by the GATS, whether the services or service
suppliers are ‘like’; and, whether less favorable treatment occurs with regard to the services or
service suppliers of a member30.

‘Like services’ was not defined in the GATS agreement, nonetheless, ‘services’ is provided for
in the GATS. The case of EC- Bananas (need for referencing) set out the criteria to determine
the ‘likeness’ or ‘services’ and ‘service suppliers as the characteristics of the service or the
service supplier; the classification and description of the service in the United Nations Central
Product Classification system; and consumer habits and preferences regarding the service or the
service supplier.

Moreover, The elements of Article II (1), dictated by Article I(1) of the GATS, needs to
establish whether the measure is a measure by a member and a measure affecting trade in
services. A measure by a Member is broad. Article XXIII(a) of the GATS defines ‘measure’ for
the purposes of the GATS as “any measure by a Member, whether in the form of a law,
regulation, rule, procedure, decision, administrative action, or any other form.
Article I:3(a) of GATS states what measure affects trade in services31. In EC-Bananas III.
(need for referencing) The use of the term “affecting” reflects the intent. The ordinary meaning
26

27

28

29

30

31
of the word “affecting” implies a measure that has “an effect on”, which indicates a broad scope
of application’32. 

National Treatment (NT) under the GATT.

This deals with what happen in the domestic market and not at the borders as concerned with
MFN. Under NT, Internal taxes imposed on imported product, cannot be in excess of the taxes
imposed on the domestic “like” product. There need not be any actual domestic product, if the
law is facially in violation of Art. III 33. e.g., imports will be sold 10% higher than domestic
products.  This is provided for under Article III: 1 of the GATT Agreement (need for
referencing). That; “The Members recognize that ...internal laws, regulations and requirements ...
should not be applied to imported or domestic products so as to afford protection to domestic
production. “The key objective and purpose of Article III is to avoid protectionism by
eliminating “hidden” domestic barriers to trade by WTO Members, by according imported
products treatment no less favourable than that accorded to products of national origin.
In the case of Italian Discrimination Against Imported Agricultural Machinery, (need for
referencing) it was stated that, the intent of the drafters was to provide equal conditions of
competition once goods had been cleared through customs34. 
This is not to say that the government is prevented from giving subsidies to its citizens.
However, any help that affects the choice of the consumers is inconsistent with the GATT
Agreement, as upheld in cases such as japan-Alcoholic Beverages II and Korea-Alcoholic
Beverages. (need for referencing)

The second paragraph of Article III:2 (need for referencing)stipulates that ‘The products of the
territory of any contracting party imported into the territory of any other contracting party shall
not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in
excess of those applied, directly or indirectly, to like domestic products. Elite (need for
referencing, the book title, page, et.c)provides that the 2nd paragraph on NT with regard to
‘internal taxation’ covers two types of products, namely ‘like products’ and ‘directly competitive
or substitutable products. Therefore, WTO Members shall not apply standards higher than those
imposed on domestic products between imported goods and “like” domestic goods, or between
imported goods and “a directly competitive or substitutable product.”  Thus, the two-tier test as
provided for in the Appellate Body case of Canada-Periodicals (need for referencing )pointed
out that; 
There are two questions which need to be answered to determine whether there is a violation of
Article III:2 of the GATT 1994: (a) whether imported and domestic products are like products?
(b) whether the imported products are taxed in excess of the domestic products. 

On the likeness of the product the Working Party Report on ‘Border Tax Adjustments (need
for referencing) concluded that problems arising from the interpretation of the terms ‘like’ or
‘similar’ products should be examined on a case-by-case basis using three criteria, namely, the
product’s end-users in a given market; consumers’ tastes and habits, which change from country
to country; and the product’s properties, nature and qualities.

32

33

34
On the 2nd part of the Article III paragraph 2 (need for referencing); It has the potential of
affecting a large number of internal regulations and government measures in any country, thus
trading on national sovereignty and sensitivities, ranging from the way a country governs its
environment protection, consumer protection, food and drug measures, safety measures, to tax
laws and the likes. Obviously, an important policy behind this rule is to prevent domestic tax and
regulatory policies from being used as a protectionist measure that would defeat the purpose of
tariff bindings 

Paragraph 1 of Article I of the GATT is to avoid protectionism 35. It has been interpreted by the
Appellate Body that products are ‘directly competitive or substitutable’ when they are
interchangeable or when they offer alternative ways of satisfying a particular need or taste. In
the case of Japan-Alcoholic Beverage II, (need for referencing) the Appellate Body also agreed
with the panel’s view that the decisive criterion to determine whether two products are directly
competitive or substitutable is whether they have inter alia, as shown by elasticity of substitution.

Thus, the three tests are firstly, whether the imported products and the domestic products are
‘directly competitive or substitutable products’ which are in competition with each other.
The directly competitive or substitutable imported and domestic products are ‘not similarly taxed
and applied so as to afford protection to domestic production. 

On the fourth paragraph, Article III : 4 (need for referencing) provides that,  If any contracting
party establishes, or authorizes, formally or in effect, a monopoly of the importation of any
product described in the appropriate Schedule annexed to this Agreement, such monopoly shall
not, except as provided for in that Schedule or as otherwise agreed between the parties which
initially negotiated the concession, operate so as to afford protection on the average in excess of
the amount of protection provided for in that Schedule 36. The provisions of this paragraph shall
not limit the use by contracting parties of any form of assistance to domestic producers permitted
by other provisions of this Agreement. Though the paragraph 4 does not make any reference to
the Article 1 it must still be interpreted to give acknowledgement to the purpose of the Article
III Which is protection against protectionism and to ensure “equality of competitive conditions”
As provided for in the EC- Asbestos case. 37

National Treatment (NT) under the GATS.

Provision is made for the national treatment under the GATS. This is under Article XVII (need
for referencing)which addresses national treatment for services: In the sectors inscribed in its
Schedule, and subject to any conditions and qualifications set out therein, each Member shall
accord to services and service suppliers of any other Member, in respect of all measures affecting
the supply of services, treatment no less favorable than it accords to its own like services and
service suppliers. 

35

36

37
However, the national treatment obligation does not apply to laws, regulations or requirements
governing government procurement and that the national treatment obligation does not prevent
the payment of subsidies exclusively to domestic producers. If this provision were to be
interpreted broadly, any discrimination against imports could be qualified as a subsidy to
domestic producers.38

EXCEPTIONS

The Non-discriminatory principles are not absolute. They are therefore subject to some
exceptions. This is to allow members to justify on a limited number of policy grounds trade-
restrictive measures that would otherwise be inconsistent with the WTO. (Elite). (need for
referencing)

The purpose of the general exceptions is to allow members to adopt measures that pursue policy
objectives that are considered ‘legitimate’ and ‘important’. 39 This is provided for under Article
XX and Article XIV of the GATT and GATS, respectively. Article XX 40 gives states power to
implement measures that are necessary to protect public morals, to protect human, animal or
plant life or health, those necessary to ensure compliance with laws or regulations not
inconsistent with the GATT agreement and to protect exhaustible national resources when linked
to restrictions on domestic production or consumption. This is also not a wide discretion with no
bounds for it is subject to unarbitrary or justifiable and non-discriminatory act. public moral
under in In the US-Gambling;41 dictionary to define ‘public’ and ‘morals’ and concluded that the
compound phrase ‘public morals’ means ‘standards of right and wrong conduct maintained by or
on behalf to a community or nation.’ (the underlined sentence is not clear, kindly do have a
second look) US-Gambling 42pointed out a ‘two-tier analysis’ of a measure that a member seeks
to justify under that provision as contemplated in these two articles: firstly, it is necessary to
determine whether the measure at issue falls within the scope of one of the paragraphs of the
general exception article; and secondly, if the measure at issue has been found to fall within one
of the paragraphs of the article, then it is necessary to consider whether that measure satisfies the
requirements of the chapeau of the article.

The GATS agreement has similar provisions under its Article XIV but in respect of services and
service suppliers. Despite the textual differences between Article XX and Article XIV, as the
Appellate Body in the US-Gambling observed, these two articles boast similar structured,
language and functions and thus can be cross- referenced in their analyses

Security exceptions; security concerns are superior to trade concerns and the law will allow such
trade exceptions when the security of a state is in question. 43 This is provided for under. Article
XXI of the GATT44. It provides that; A state cannot be obliged to furnish information contrary to
38

39
Textbook on International Trade and Business Law edited by Prof Dr. Sunya P. Subedi
40
GATT Agreement
41
US- Gambling Case- Appellate Body
42
Ibid
43
Textbook on International Trade and Business Law edited by Prof Dr. Sunya P. Subedi

44
GATT Agreement
its essential security interest, be prevented from protecting its security interest in relation to arms,
fissionable material and in times of war or emergency in international relations or be prevented
from maintaining international peace and security. This is also provided for under Article XIV(b)
of the GATS45 in relation to trade in services and service supplies.

A key difference between the security exception and the general one is the absence of chapeau
under the security exception, which suggests that they might not be subject to a prohibition on
arbitrary or unjustifiable discrimination. And the members need only to consider that their
essential security.

The Decision on Differential and More Favorable Treatment, Reciprocity and Fuller
Participation of Developing Countries, also known as the Enabling Clause, is another significant
exception to MFN treatment. The GATT currently includes this. The Enabling Clause's first
paragraph declares that members may treat developing countries differently and more favorably
than other nations, despite the prohibition in Article I of the General Agreement. This should be
created with the intention of facilitating and promoting commerce between developing nations
while lowering barriers for other members and positively addressing the development, financial,
and trade requirements of developing nations.46

Application and Conclusion

The MFN and NT principles only begun as guides under the GATT to prevent discrimination.
However, today due to their general application and recognition by states they are regarded as
Customary International Laws.
The MFN obligation is generally included in most Bilateral treaties between states and this is
ensuring that they enjoy benefits which are accorded to third parties on third party agreements to
which they are not a part of. This to a great extent has extended to the adoption by the parties of
the dispute resolution mechanism of the third-party agreement. This has however been criticized
whilst some have given immense support to same. The author agrees with Judge Schwabel that a
dispute resolution clause is a separate clause and does not form a part of the agreement thus it
cannot be a part of the benefits under the general agreement unless in some instances expressly
stated so. In line with the decision in Salin v. Jordan47.

The National Treatment Principle is also applied the most under Intellectual Property Law. As
nations may treat the intellectual property of their own citizens more or less favorably than they
treat the intellectual property of noncitizens48.
With National Treatment, foreign right holders are guaranteed of the enjoyment of the same right
nationals of a particular state so enjoy. This accounts for the effectiveness of the Paris
Convention49.

45
GATS Agreement
46
Textbook on International Trade and Business Law edited by Prof Dr. Sunya P. Subedi
47

48

49
From the above, today the two non- discriminatory provisions under the WTO annexed
Agreement have become a blessing to which the world is benefiting without any discrimination.
It is only right to reiterate the statement by Jackson that”

QUOTATION NEEDED

The MFN      

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


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
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$
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           
          '
(
$

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 
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
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('
      )   
         
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)
$
&
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$&

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Treatment of Trademarks. AMY M. AU Trademarks, April 2000)))).
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$$
"$
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,  $    )  
***( Paris Convention for the
Protection of Industrial Property, Art. 2 § 1. This statement of the
"national treatment" principle is buttressed by the rest of Article 2:))))
From the above, today the two non-
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%
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#

'./
The MFN      
          




          
      !   

"
#

$

% %    
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
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           
          '
(
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
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      $    #  
 


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('
      )   
         
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&
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$&

*(((("National Treatment" and the International Recognition and
Treatment of Trademarks. AMY M. AU Trademarks, April 2000)))).
+$
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$$
"$

,  $    )  
***( Paris Convention for the
Protection of Industrial Property, Art. 2 § 1. This statement of the
"national treatment" principle is buttressed by the rest of Article 2:))))
From the above, today the two non-
+-
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#
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