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

Country A is a WTO member and grants a low tariff on imported machinery from Country B, also a member. Under the most-favoured-nation principle, what must Country A do?

Country A must extend the same low tariff to machinery from all other WTO members, subject to permitted exceptions such as free trade areas. This is the most-favoured-nation principle of non-discrimination between trading partners, not national treatment.

  1. AGive the same low tariff to machinery imported from all other WTO members, subject to permitted exceptionsCorrect
  2. BApply the low tariff only to Country B, because it was negotiated bilaterally
  3. CCharge the same tariff on imported machinery as it charges on its own domestic machinery

Explanation

Most-favoured-nation requires that an advantage given to one member be given to all members, subject to exceptions such as customs unions and free trade areas. Treating imports like domestic goods is national treatment, a different principle, and that is why the third option is wrong.

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