Explain the principles of 'most favoured nation' and 'national treatment' in the International Trade Law. Is it permissible for a WTO member state to impose different rates of (reciprocal) tariffs on other member states of WTO ? Can a member state affected by the higher tariffs file a complaint with the Dispute Settlement Body of the WTO? Discuss.
The Most Favoured Nation (MFN) principle, under GATT Article I, requires that any advantage, favour, privilege, or immunity granted by a WTO member to a product from one country must be immediately and unconditionally extended to like products originating from all other WTO members. In essence, if a state reduces a tariff or grants preferential treatment to one trading partner, it must do so for all other WTO members, ensuring non-discriminatory trade.
The National Treatment principle, under GATT Article III, mandates that imported goods, once they have crossed the border and paid applicable tariffs, must be treated no less favourably than domestically produced ‘like products’ regarding internal taxes, laws, regulations, and requirements. This prevents protectionism through internal measures that discriminate against imports.
Tariff Differentiation and WTO: Generally, WTO members cannot impose different rates of reciprocal tariffs on other members due to the MFN rule. Any lowered tariff extended to one member must apply unconditionally to all. Exceptions exist under WTO provisions:
- Regional Trade Agreements (RTAs)/Free Trade Agreements (FTAs): Members may grant preferential treatment to partners in such agreements (GATT Article XXIV).
- Generalized System of Preferences (GSP): Developed countries can provide non-reciprocal preferential tariffs to developing countries.
If a member believes it is subjected to higher tariffs in violation of MFN or other WTO agreements, it may file a complaint with the Dispute Settlement Body (DSB). The DSB provides a formal, rules-based mechanism for resolving disputes, beginning with consultations and potentially proceeding to panel and Appellate Body proceedings if unresolved. This ensures compliance with WTO obligations and safeguards non-discriminatory trade practices.
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