There are two main elements to this principle – Most Favoured Nation (MFN) Treatment and National Treatment. MFN Treatment is a World Trade Organisation (WTO) agreement which states that during trade, countries are not permitted to discriminate between their partners i.e. special or preferential treatment cannot be given to another WTO member country. The MFN Treatment principle is a central element used in drawing up the GATT, GATS, and TRIPS agreements, and combined, cover all areas of trade documented by the WTO. There are exceptions to the MFN Treatment principle however, as free trade agreements can be set up between nations, which discriminate against outside goods. The North American Free Trade Agreement (NAFTA) is an example of a free trade agreement between nations, whereby Mexico, Canada, and the U.S. allow free trade between their countries, without restrictions or tariffs. An exception such as this will only be tolerable under very stringent conditions, as all partners must be treated equally.
The principle of National Treatment states that once an imported good or service enters a domestic market, then both the domestic good or service, and the imported good or service must be treated equally. Furthermore, this principle can be seen in all three main WTO agreements, as with the MFN Treatment principle, and both combine to form the “Without Discrimination” WTO principle.
The second fundamental principle on which the WTO is based is the strive for a freer trading system. Fewer quantity of barriers to trade will help to promote a more vibrant and rich trading system. There is currently still a plethora of barriers which restrict trade throughout certain parts of the world including custom tariffs, import bans or restrictive quotas. In some countries, overly abundant amounts of “red tape” intensify complications in possible trade agreements, therefore discouraging others from conducting business with them.... [continues]
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