Background to M.F.N. Clause in Gatt

Abstract

Before the First World War, the unconditional most-favoured-nation clause was employed by most of the European countries and Great Britain in their treaties of commerce among themselves. Discrimination in tariffs was practiced by some of the European States, notably France and Spain. The United States’ acceptance of the most-favoured-nation clause was conditional, or on the basis of reciprocity. This led to numerous complaints from countries with which the United States had most-favoured-nation treaty rights.¹ It is generally conceded that the conditional most-favoured-nation clause is, in a way, the negation of the principle of equality of treatment underlying the clause. The essence of the clause lies in its exclusion of every sort of discrimination whereas the conditional clause constitutes, by its very nature, a method of discrimination. It does not offer any of the advantages of the most-favoured-nation clause proper, which seeks to eliminate economic conflicts, to simplify international trade and to establish it on firmer foundations. Moreover, it is open to the very grave objection of being unfair to countries which have very few, or very low, duties, and which are thus less favourably situated than those which possess heavy duties.²