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

Zandia and Borland are both members of the World Trade Organization (WTO). Zandia grants a tariff concession on imported machinery to Borland and, without any special agreement, wishes to apply a lower tariff only to Borland while charging all other WTO members a higher tariff on the same machinery. Which WTO principle does this proposal most directly breach?

The proposal breaches the most-favoured-nation principle. A WTO member must generally extend any trade advantage, such as a lower tariff, given to one member to all other members, unless a recognised exception applies. National treatment deals with imported versus domestic goods, not discrimination between exporting countries.

  1. AThe most-favoured-nation principle, because a tariff advantage given to one member must generally be given to all membersCorrect
  2. BThe national treatment principle, because imported goods must be taxed the same as domestic goods once they have entered the market
  3. CThe principle of reciprocity, because Borland must give an equal concession in return
  4. DThe principle of transparency, because tariff changes must be notified to the WTO Secretariat

Explanation

The most-favoured-nation principle requires a WTO member to give any advantage granted to one member to all other members, unless an exception applies (such as a customs union or free trade agreement). National treatment concerns equal treatment of imported and domestic goods once in the market, so it is not engaged by a preference between foreign countries. Transparency and reciprocity are not the principle breached by discriminating between trading partners.

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