Most-favoured-nation treatment and national treatment

1. Non-discrimination: two directions

The WTO forbids discrimination in two directions. MFN forbids discrimination between foreign suppliers: imports from country A may not be treated better than imports from country B. National treatment forbids discrimination between imported and domestic goods once the imports have entered. MFN operates at the border and inside; national treatment operates only inside, after customs clearance. Tariffs themselves are not covered by national treatment, because a tariff is by definition a charge on imports only; they are controlled by Article II.

2. MFN: GATT Article I:1

With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation, the method of levying them, all rules and formalities, and the matters covered by Article III:2 and III:4, any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.

• “Any advantage” is read widely: lower duties, faster procedures, exemptions.
• “Any other country” includes non-members. A concession to a non-member must be extended to all members.
• “Immediately and unconditionally”: the advantage cannot be made conditional on reciprocity or on conduct unrelated to the product. In Canada – Autos (Appellate Body, 2000), an import duty exemption available only to manufacturers meeting certain conditions, in practice benefiting a few makers' imports, was held to violate Article I:1.
• De facto discrimination is caught as well as discrimination on the face of the measure. In EC – Bananas III (1997), the EC's licensing rules favoured bananas from African, Caribbean and Pacific countries and were held inconsistent with MFN.

MFN appears elsewhere too: GATS Article II (services and service suppliers, subject to listed exemptions) and TRIPS Article 4 (nationals of other members). It also governs quantitative restrictions (GATT Article XIII, non-discriminatory administration).

3. Exceptions to MFN

• Historical preferences (Article I:2 to I:4): preferences existing in 1947, such as Commonwealth preferences, could be kept but not increased. They are now of historical interest.
• Customs unions and free-trade areas (GATT Article XXIV; GATS Article V for services): members may give each other duty-free treatment denied to others, provided duties are eliminated on substantially all the trade between them and barriers to outsiders are not on the whole raised. Turkey – Textiles (1999) held the defence is available only for measures introduced on formation of a union that meets these conditions, and only if formation would otherwise be prevented. India's agreements with ASEAN, Japan, Korea, the UAE, Australia and the EFTA States rely on this exception.
• Special and differential treatment: the Enabling Clause (1979) permits the Generalised System of Preferences and preferential agreements among developing countries. In EC – Tariff Preferences (Appellate Body, 2004), brought by India, the EC's “drug arrangements” giving extra preferences to twelve countries were held not justified: GSP preferences may differ between beneficiaries only on objective criteria applied to all similarly placed developing countries.
• General exceptions (Article XX): measures necessary to protect public morals, human, animal or plant life or health, compliance with WTO-consistent laws, conservation of exhaustible natural resources, and others, provided the chapeau is satisfied (no arbitrary or unjustifiable discrimination, no disguised restriction). US – Shrimp (1998), on a complaint by India, Malaysia, Pakistan and Thailand, failed the chapeau.
• Security exceptions (Article XXI). Russia – Traffic in Transit (panel, 2019) held that the invoking member's judgment is subject to a good-faith review by a panel.
• Trade remedies: anti-dumping and countervailing duties (Article VI) are imposed on goods from particular exporters or countries, which is a lawful departure from MFN.
• Waivers (Marrakesh Agreement, Article IX:3), for example the LDC services waiver of 2011.
• Balance-of-payments provisions (Article XIV, limited) and frontier traffic (Article XXIV:3).
• Plurilateral agreements in Annex 4 (Government Procurement) bind only parties, and benefits need not be extended to non-parties.
• Non-application between particular members (Marrakesh Agreement, Article XIII) at the time of accession.

4. National treatment: GATT Article III

Article III:1 states the general principle: internal taxes and regulations should not be applied to imported or domestic products so as to afford protection to domestic production. It informs the two operative paragraphs.

• Article III:2, first sentence: imported products shall not be subject to internal taxes in excess of those applied to like domestic products. Even a slight excess is a violation.
• Article III:2, second sentence: internal taxes shall not be applied to directly competitive or substitutable products so as to afford protection. In Japan – Alcoholic Beverages II (Appellate Body, 1996), vodka was a like product to the Japanese spirit shōchū, and whisky, brandy and other spirits were directly competitive; Japan's much higher tax on them violated both sentences.
• Article III:4: imported products shall be accorded treatment no less favourable than that accorded to like domestic products in respect of all laws, regulations and requirements affecting their sale, purchase, transport, distribution or use. In Korea – Beef (2001) a dual retail system requiring imported beef to be sold in separate shops was held to modify the conditions of competition to the detriment of imports. In US – Gasoline (1996), stricter baseline rules for imported gasoline violated Article III:4 and were not saved by Article XX because of the chapeau.
• Article III:8 excludes government procurement and payment of subsidies to domestic producers.

5. The like-product test

The criteria come from the Border Tax Adjustments Working Party report (1970) and were confirmed in EC – Asbestos (Appellate Body, 2001): (i) the physical properties, nature and quality of the products; (ii) their end-uses; (iii) consumers' tastes and habits; and (iv) tariff classification. Likeness is about the competitive relationship between the products. EC – Asbestos held that health risk may be considered under the physical-properties and consumer-preference criteria, so asbestos fibres and safer substitute fibres were not shown to be like.

6. National treatment in services and intellectual property

Under GATS Article XVII national treatment applies only in sectors a member has inscribed in its schedule, and subject to the conditions it has listed. Under TRIPS Article 3 it applies generally to the protection of intellectual property. The difference is worth a line in any essay: in goods national treatment is general; in services it is a negotiated commitment.

How this is examined

For an essay on national treatment (January 2026): the purpose, Article III:1, the two sentences of III:2 with Japan – Alcoholic Beverages II, III:4 with Korea – Beef, the like-product test, and the services and TRIPS versions. For MFN and its exceptions (June and February 2025): quote Article I:1, explain “immediately and unconditionally”, then list the exceptions with the GATT Article for each. The Article XXIV and Enabling Clause exceptions carry the most marks; give an Indian example of each.