MFN principle the key driver of global trade
The World Trade Organization’s (WTO) non-discriminatory “most-favoured-nation” (MFN) trading principle, whereby WTO members extend any trade advantage granted to one trading partner to all other partners, remains a cornerstone of global trade. More than four-fifths of international merchandise trade is conducted on this basis despite the proliferation of preferential trade agreements and other trade measures, as demonstrated by a recent WTO working paper.
The MFN principle ensures non-discrimination in global trade, fostering stability and fairness in the global trading environment. This principle has retained its centrality despite the rise of preferential trade agreements (PTAs) since the 1990s resulting in some divergence from MFN principles.
PTAs encompass hundreds of bilateral and regional agreements while unilateral schemes like the Generalized System of Preferences allow developed economies to grant preferential tariffs to imports from developing economies. There are also trade policy measures that may diverge from the MFN principle, as they apply to specific WTO members rather than to the entire WTO membership.
However, a novel dataset from the WTO’s Integrated Database (IDB), including detailed statistics on preference utilisation and supplementary sources, shows that MFN trade is still very largely prevalent.
The dataset categorises global imports in 2022 into four segments: (1) MFN duty-free trade; (2) MFN dutiable trade; (3) MFN dutiable trade eligible for, but not using, preferential market access; and (4) trade under preferential duty regimes. The scale of trade remedy measures (such as anti-dumping and countervailing duties), as well as trade tensions between China and the United States, are quantified, said a release.
Source: Exim News Service: Geneva, Jan. 23