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ACCA Applied Skills · Corporate and Business Law (Global) · International trade, international legal regulation and conflict of laws

Country A and Country B are both WTO members. Country A grants a tariff reduction on imported machinery from Country B but does not give the same reduction to machinery from other WTO members. Which core WTO principle is Country A most likely to have breached?

Country A has most likely breached the most-favoured-nation principle. Under it, a trade advantage such as a tariff cut given to one WTO member must be extended to all other members, unless a recognised exception applies.

  1. AMost-favoured-nation treatment, which requires a member to give all other members the same trade advantages it gives to any one memberCorrect
  2. BNational treatment, which requires imported goods to be taxed at a lower rate than domestic goods
  3. CTransparency, which requires every tariff to be set at zero after a trade agreement is signed

Explanation

Most-favoured-nation treatment means an advantage given to one member must generally be extended to all members, so a selective tariff cut breaches it unless an exception such as a free trade agreement applies. National treatment concerns treating imports no less favourably than domestic goods once they have entered the market. Transparency does not require zero tariffs.

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