The WTO's non-discriminatory MFN trading principle warrants members to extend any trade advantage granted to one trading partner to all other partners.
PTAs encompass hundreds of bilateral and regional agreements, while unilateral schemes like the Generalised System of Preferences allow developed economies to grant preferential tariffs to imports from developing economies.
There are also trade policy measures that may diverge from the MFN principle, as they apply to specific WTO members rather than to the entire WTO membership.
However, a new dataset from the WTO's integrated database (IDB), including detailed statistics on preference utilisation and supplementary sources, shows that MFN trade is still very largely prevalent, a WTO release said.
The dataset categorizes global imports in 2022 into four segments: MFN duty-free trade; MFN dutiable trade; MFN dutiable trade eligible for, but not using, preferential market access; and trade under preferential duty regimes. The scale of trade remedy measures like anti-dumping and countervailing duties as well as trade tensions between China and the United States are quantified.
Fifty-three per cent of global imports in 2022 were subject to MFN duty-free treatment, 25 per cent were subject to positive MFN duties and 17 per cent benefited from PTAs.
It is notable that 5 per cent of MFN dutiable trade was potentially eligible for preferential tariffs but did not utilise them for reasons that included complex rules of origin requirements, administrative burdens and business decisions, thereby increasing the overall MFN trade share.
What this indicates is that 83 per cent of global merchandise trade occurs under non-preferential, MFN terms.
Given that trade remedy measures and unilateral tariffs resulting from geopolitical tensions are estimated at less than 3 per cent, it may be concluded that more than 80 per cent of world merchandise trade is conducted under MFN terms, WTP notes.
Hong Kong conducts its imports entirely under MFN duty-free terms, while almost all of Singapore's imports are conducted under these terms.
Fibre2Fashion News Desk (DS)