TRADE PRINCIPLES

Most Favored Nation and National Treatment Principles

Most Favored Nation and National Treatment Principles

Introduction

The purpose of this study is to analyze and evaluate the two trading principles. These principles are most favored nation and national treatment principles. These two principles serve as key elements in the international trade among different nations. These trading principles are governed or applied through the world trade organization. The basic idea of both these principles is same that is to increase the international trade so that the needs and the wants of other countries can be fulfilled. Furthermore, it is understood that a country cannot meet its needs or requirements fully by itself, so there is a need of trading principles take place. So at the international level two vital trading principles were developed through the mutual understanding of different countries, WTO and by other appellate bodies. These principles provides as a bases for the development of trade which is based upon equal or fair chances, promoting fair competition, predictability, encouraging development and economic reform. However, these two principles differ in few ways of trading in respect of GATT that is General Agreement on Tariffs and Trade 1994 and the GATS that is General Agreement on Trade in Services.

Discussion

MFN (most favored nation)

International legal regime, under which each Contracting Party shall provide the other party, its natural and legal persons are the same conditions of economic, trade and other relations, what it provides or will provide in the future to any third State, its natural and legal persons. R.N.B. presupposes and privileges in customs duties and charges imposed on importation or exportation of goods, as well as the advantages of internal taxes on production, processing and handling of imported goods. Thus, R.N.B. means conventional, non-discriminatory conditions for cooperation, as opposed to specific (restrictive or, conversely, preferential) conditions, which may be imposed for individual countries. (Stewart, 1994)

Most favored nation and National treatment Principles

In view of the prevailing international practice, foreign investment may be granted one of these legal regimes: national treatment and most favored nation. In granting national treatment to foreign investment, national and foreign entrepreneurs appear on the market, with few exceptions, equal subjects that do not prejudice the interests of foreign investors. From this it follows that the "national treatment" means a regime in which the rights of foreigners in the host country are determined primarily by local (national) laws, and not by the laws of the country of origin of capital. In this mode of foreign investment cannot be less favorable than that accorded to domestic entities (national capital).

The principle of national treatment may provide some exceptions and exemptions. Restrictions on foreign investors are made to establish state control over the development of individual sectors in order to avoid weakening the competitiveness of domestic legal entities. In different countries, the terms of these sectors are different, but usually it is the mining and military industries, as well as the service industry (banking and insurance). Some of these branches are completely closed to foreign ...