The Most Favored Nation clause refers to a level of status given to a country by another and is enforced by the World Trade Organization. When a nation grants this clause to its trading partner, it means that the state seeks to increase trade with the other country. Through Most Favored Nation countries can offer each other specific trading advantages such as reduced tariffs, fewer trade barriers, and better import quotas (Acconci, 2005). These are also the factors that countries consider when giving MFN status to the other nation.
If it would result in increased efficiency
The MFN treatment cates room for most countries to acquire goods from the most reliant supplier and this is in line with the principle of comparative advantage. In case, …show more content…
An excellent example of duty is the recent case where the U.S. imposed tariffs of 30 percent on imported solar panels from China. On the other hand, quotas are numerical limits on the number of imported products that can be sold in the domestic market of a country. In 2013, the U.S. increased its sugar-import quota to help offset potential crop shortage in the country. There are several economic reasons why governments seek to restrict importation.
One of the economic argument that justifies the use of tariffs and quotas is anti-dumping duties of the governments. Dumping of products is a predatory pricing behavior of foreign producers in new markets as well as a price discrimination strategy. Dumping occurs when goods for exports are sold at fewer prices than their standard value. The standard value is the price of similar products in the exporter’s market. Consumers in the countries that import these goods will benefit from the lower rates in the short-term. However, in the long-term, due to persistent price undercutting by the foreign entity, the domestic industry may be forced out of the market, and the international producer establishes as a monopoly. When the producer achieves monopoly status, it starts to exploit the customers by increasing the prices. Tariffs and quotas are protective measures against dumping (Jørgensen, …show more content…
Dumping occurs when a company charges lower prices for its exports than it costs in the local market. The WTO Anti-Dumping Agreement regulates how governments react to dumping. Rules of origin allow customs officers to levy additional tax only on imported products from countries found to be dumping goods. Sanitary inspection is a second test to determine the source. If meat from China is found to be contaminated, the test requires the prohibition of meat imports from China. However, the ban should not affect meat imports from other countries where contamination was found (Augier, Gasiorek, & Lai Tong, 2005). Preferential and non-preferential rules of origin are the third test of the source of products. This test is also known as reciprocal and non-reciprocal trade regimes. In the complementary system, all parties reduce their tariffs like in the case of bilateral agreements and free trade zones. In non-reciprocal regimes, only one member reduces or eliminates the
If it would result in increased efficiency
The MFN treatment cates room for most countries to acquire goods from the most reliant supplier and this is in line with the principle of comparative advantage. In case, …show more content…
An excellent example of duty is the recent case where the U.S. imposed tariffs of 30 percent on imported solar panels from China. On the other hand, quotas are numerical limits on the number of imported products that can be sold in the domestic market of a country. In 2013, the U.S. increased its sugar-import quota to help offset potential crop shortage in the country. There are several economic reasons why governments seek to restrict importation.
One of the economic argument that justifies the use of tariffs and quotas is anti-dumping duties of the governments. Dumping of products is a predatory pricing behavior of foreign producers in new markets as well as a price discrimination strategy. Dumping occurs when goods for exports are sold at fewer prices than their standard value. The standard value is the price of similar products in the exporter’s market. Consumers in the countries that import these goods will benefit from the lower rates in the short-term. However, in the long-term, due to persistent price undercutting by the foreign entity, the domestic industry may be forced out of the market, and the international producer establishes as a monopoly. When the producer achieves monopoly status, it starts to exploit the customers by increasing the prices. Tariffs and quotas are protective measures against dumping (Jørgensen, …show more content…
Dumping occurs when a company charges lower prices for its exports than it costs in the local market. The WTO Anti-Dumping Agreement regulates how governments react to dumping. Rules of origin allow customs officers to levy additional tax only on imported products from countries found to be dumping goods. Sanitary inspection is a second test to determine the source. If meat from China is found to be contaminated, the test requires the prohibition of meat imports from China. However, the ban should not affect meat imports from other countries where contamination was found (Augier, Gasiorek, & Lai Tong, 2005). Preferential and non-preferential rules of origin are the third test of the source of products. This test is also known as reciprocal and non-reciprocal trade regimes. In the complementary system, all parties reduce their tariffs like in the case of bilateral agreements and free trade zones. In non-reciprocal regimes, only one member reduces or eliminates the