Principle of Most Favoured Nation: Description, Modern Evolution, and Analysis of the Exceptionality of the Principle in A Contemporary World

The "most favoured nation" principle is the cornerstone of the modern international trading system. Each state is obliged to reflect the benefits it offers a nation over other WTO adherents as well. This system, however, although it proved effective until the last century for the creation of an international free trade system, today has lost its capabilities, mainly degraded by “private” international agreements between nations, such as RTA, FTA, PTA and REIO, who have torn apart the principle and created groups of nations, each with their own personal advantages which are bestowed only on the nations adhering to the agreement. The following sections aim to give a description of this phenomenon and its evolutions up to modern times, through an analysis of the various exceptionality of the "most favored nation" principle, of the situation of modern free trade agreements, and of the effects both for national legislations and markets, in order to be able to understand what are the conditions facing the global market today and, above all, if the principle of "non-discrimination" is still a cornerstone in the trade relations in the MFN.

Comparative Analysis of Bilateral Investment Treaties of the Russian Federation

The paper analyzes bilateral investment treaties, one of the parties to which is Russia. The article compares the provisions contained in the 1992 and 2001 model agreements of Russia, as well as the provisions of the 2016 Regulations. The concepts of “foreign investor” and “investment” are considered, discrepancies in the concepts and wording used in treaties with different states are revealed. In a comparative aspect, the authors explore the operation of treaties over time, the use of the standard of fair and equal treatment, and the application of provisions on expropriation. The features of the formulation of the national treatment standard and the most favored nation treatment standard, as well as the umbrella clause are revealed.

Interpretation of WTO's Panel Report on United States — Tariff Measures on Certain Goods from China and Its Enlightenment to China

The United States imposed a high tariff on importing goods from China which valued USD 34 billion and USD 200 billion respectively in 2018 and 2019. This measurement not only violated the most favored nation treatment principle, but also violated the tariff concession commitment which the US offered to China. With respect to the United States’ defence under Article XX(a) of the GATT 1994, the Panel adopted a holistic approach to determining whether the measures at issue were “necessary to protect public morals” and found that there were no relationship. The ruling has the following enlightenments: the enterprises should value the proof in WTO litigation and make use of the rules and procedures governing the settlement of disputes. Finally, the enterprises should pay more emphasis on the market of One Belt One Road to expand more trade benefits and enjoy the double win.

“Permanent Normal Trading Relations”

Chapter 6 considers the economic components of China’s grand strategy to blunt American power. It demonstrates that the “traumatic trifecta” at the end of the Cold War laid bare China’s dependence on US markets, capital, and technology. Beijing had previously been relatively unconcerned about the annual US congressional votes that granted China “most-favored nation” (MFN) trade status, but that changed overnight. Washington’s post-Tiananmen sanctions and its threats to revoke MFN trade status—which could have seriously damaged China’s economy—deeply concerned China’s leaders. Beijing sought not to decouple from the United States but instead to bind the discretionary use of American economic power, and it worked hard to remove MFN from congressional review through “permanent normal trading relations,” leveraging negotiations in APEC and the WTO to obtain it.

Most-Favored-Nation Clause in the Practice of Establishing the Jurisdiction of the International Center for the Settlement of Investment Disputes (ICSID)

Based on the analysis of arbitration practice and doctrine, the author identifies the principles of interpretation of the most-favored-nation clause in order to resolve the issue of the jurisdiction of the International Center for the Settlement of Investment Disputes (ICSID) by arbitration. The author concludes that the arbitration should be guided not only by the principle of literal interpretation of the international investment agreement and, in case of uncertainty, establish the intention of the contracting states to apply the most-favored-nation clause to the process of resolving investment disputes, but also take into account the public policy of the contracting states.

WTO Panel Rules Against U.S. Claim that Tariffs on Chinese Goods Are Justified as Necessary to Protect “Public Morals”

On September 15, 2020, a World Trade Organization (WTO) panel ruled that certain tariffs the United States imposed on Chinese products violated Articles I (most-favored-nation) and II (tariff bindings) of the General Agreement on Tariffs and Trade (GATT). The panel rejected the U.S. attempt to invoke a “public morals” defense pursuant to GATT Article XX, holding that although countries receive substantial deference in defining “public morals,” the United States failed to prove that the tariffs were necessary to achieve its stated public morals objective.

Beijing's Pain Points – 2 (Glance from mid-2020)

In China, the topics of pandemic and economic recovery gradually lose their importance and give place to another deterioration in U.S.–China relations due to pressure from the United States on Hong Kong, Xinjiang Uygur Autonomous region, and the insufficient, according to the American side, pace of implementation of China’s first phase of commercial transactions with the United States. Beijing takes Washington’s threats to deprive Hong Kong of the status of a special customs territory in trade and economic cooperation with the U.S. quite seriously. However, Chinese experts note that the implementation of these threats will not lead to the collapse of the Hong Kong economy, since the most-favored-nation regime applies to about 5% of Hong Kong’s exports to the United States. At the same time, Beijing is trying to find an alternative to Hong Kong as a financial center in the face of Macao. However, the main characteristics of the Macao economy do not yet allow us to seriously talk about a full-fledged replacement, since most of the GDP of this special administrative region is formed by the gaming, tourism and restaurant industries. To a certain extent, the “position” of Hong Kong is claimed by Shanghai, but the extent of its claims is limited by the Chinese legal system, which is less flexible and liberal than that of Hong Kong. In May 2020, the so-called “Two sessions” were held in Beijing: the national Committee of the People’s Political Consultative Council of China (CPPCC) and the National People’s Congress (NPC). The latter presented a report on the government’s work in 2019 and the first quarters of 2020. The report contains the main guidelines and targets for the country’s socio-economic development for the current year, as well as a list of measures to support the economy in the so-called “post-crisis” period. Most of the mechanisms for stimulating growth are of a fiscal nature: the authorities do not want to inflate the amount of debt owed by public and private companies too much, and they go, first of all, for tax breaks. At the same time, the Central budget deficit is expected to increase to 3.6% due to reduced tax revenues because of quarantine measures and increased government spending to support consumer demand. At the same time, Beijing announced a reduction in spending by the central and provincial governments on “unimportant” and “non-priority items”: construction of buildings, business trips, celebrations, etc. The report on the government’s work reflected the desire of the Chinese leadership to accelerate the ongoing work on “launching” a new economic model of China’s development, aimed not at achieving high growth rates, but at quality indicators. For the first time, the NPC session did not specify the expected GDP growth rate in 2020. However, the main characteristics of this model have not yet been fully clarified. In the first approximation, it is a bet on the production of high-tech products, the implementation of traditional infrastructure projects within China and the expansion of domestic consumption – while maintaining the strategy of going outside in the format of the “Belt and Road” (or the “Silk Road Economic Belt”). The so-called “separation” of China and the United States in the financial and economic spheres, which is widely discussed in the world press, has not yet taken place. D. Trump’s “return of American business to the United States” is not yet perceived by the American private business itself, which is interested in expanding its presence in Chinese financial and other markets. China, for its part, by opening previously closed sectors of its economy is trying to provide new business opportunities to American companies in a “compromise” way, in contrast to military and political issues, where Beijing acts extremely harshly. In Russian-Chinese relations, there is still a trend to deepen strategic partnership in the military-political sphere and, if possible, in the economy – taking into account the negative consequences of the pandemic and adjusting for the scale of the Russian economy.

Investment arbitration and the MFN conundrum: The long and winding road from Maffezini to Içkale

Interpretation of the most-favored nation clause in investment treaty arbitration has been sparking debates for the better part of two decades. The paper examines the issue from the perspective of two opposing ends-a broad stance of the seminal decision in Maffezini Case and a recent more restrictive approach undertaken by the arbitral tribunal in Içkale decision, in order to paint in broad strokes the outlines of a balancing act mechanism in interpretation that author puts forward.

Quantitative Analysis of Multiparty Tariff Negotiations

We develop a model of international tariff negotiations to study the design of the institutional rules of the GATT/WTO. A key principle of the GATT/WTO is its most‐favored‐nation (MFN) requirement of nondiscrimination, a principle that has long been criticized for inviting free‐riding behavior. We embed a multisector model of international trade into a model of interconnected bilateral negotiations over tariffs and assess the value of the MFN principle. Using 1990 trade flows and tariff outcomes from the Uruguay Round of GATT/WTO negotiations, we estimate the model and use it to simulate what would happen if the MFN requirement were abandoned and countries negotiated over discriminatory tariffs. We find that if tariff bargaining in the Uruguay Round had proceeded without the MFN requirement, it would have wiped out the world real income gains that MFN tariff bargaining in the Uruguay Round produced and would have instead led to a small reduction in world real income relative to the 1990 status quo.