The Most Favoured Nation (MFN) Clause under WTO regime is based on the principle of
- A.non-discrimination between nations
- B.discrimination between nations
- C.differential treatment between locals and foreigners
- D.uniform tariff across commodities
Correct answer
Explanation
The correct answer is A, non-discrimination between nations. Under MFN, a favour given to one trading partner must be given to all WTO members.
The MFN rule is Article I of the General Agreement on Tariffs and Trade (GATT), and it also appears in the services and intellectual property agreements of the WTO. If a country cuts its import duty on a product from one member, it must apply the same lower duty to that product from every other member. The WTO allows a few exceptions, such as free trade agreements, customs unions and special treatment for developing countries. MFN works alongside the national treatment principle, which bars discrimination between imported and local goods once they enter a market.
Option B is wrong because MFN is meant to stop discrimination between nations, not allow it. Option C is wrong because treatment of locals and foreigners falls under the separate national treatment rule, which requires equal treatment. Option D is wrong because MFN does not require the same tariff on every commodity; tariffs can differ by product.
Exam tip: WTO's two non-discrimination pillars are MFN and national treatment.
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