The Most-Favored-Nation Clause Of Reciprocal Trade Agreements

The first form of status of the most favoured nation is as early as the 11th century. The current concept of the status of the most favoured nation began to emerge in the 18th century, when the division of the conditional and unconditional status of the most favoured nation began. [3] In the early days of international trade, the status of “most favoured nation” was generally used on a bipartisan and state basis. A nation could enter into a treaty with another nation on the most favored nation. In the Treaty of Madrid (1667), Spain granted England the commercial status of the “most favoured nation.” [4] With the Jay Treaty in 1794, the United States also granted the same to Great Britain. The MFN clauses in the EPAs are limited to tariffs on products, with the exception of the EU-CARIFORUM EPA. It is a comprehensive agreement which contains, in addition to trade in goods, provisions relating to cross-border services and investment and contains MFN clauses similar to these. There are specific conditions under which the MFN clauses discussed above no longer apply and are summarized in Table 2. The new agreement BETWEEN the EU and Mexico has been excluded, as the text is at an early stage and is not comprehensive enough to draw reliable conclusions about the exceptions that may apply. Like the EU MFN clauses in the EPAs, these provisions of the MFN oblige both parties to give the other party more favourable treatment to a third country, whether or not this is done through a trade agreement. The agreements with Canada, South Korea and Japan contain all these clauses and, as has already been mentioned, the EPA with CARIFORUM also has a similar clause, asymmetrical to the application of the parties to CARIFORUM. According to the draft text, the EU`s proposed agreement with Vietnam and the update of the EU-Mexico agreement under negotiation will include similar provisions on the MFN.

All of these agreements have entered into force or have been under negotiation since the introduction of the new EU strategy. The only exception seems to be the EU-Singapore agreement (yet to be signed), which is part of the “new generation” agreements, but does not appear to contain general clauses on the MFN. [8] For the same reason, given that the UK is considered an “important trading partner”, the commitments made by the MFN in the EU EPAs would almost certainly prevent the ACP parties from granting further tariff reductions to the UK when the EU has already benefited. As a result, the UK, although it will be able to negotiate alone after Brexit, where the MFN clauses apply, is unlikely to be able to improve the terms of existing agreements. The rules on non-discrimination in the use of MFNs and national treatment are designed to ensure a fair trading conditions. In addition, dumping (export at a loss to gain market share) and subsidies. The issues are complex and the rules attempt to determine what is right or wrong and how governments can respond, including by imposing additional import duties, which are calculated to compensate for the damage caused by unfair trafficking.