National treatment is the principle of treating imported goods the same as domestic goods. It is applied to various trade agreements and intellectual property. Most favored nation status means treating all member countries equally and is incorporated into trade agreements. Exceptions include free trade agreements and special market access for developing countries. The goal is to promote fair competition and allow less developed countries to enter the global market.
National treatment means giving imports from other countries the same treatment as your own nationals’ domestic goods. This trade principal is used by the World Trade Organization (WTO) in all trade agreements of its members. It is applied in various trade agreements to domestic and foreign goods and services, trademarks, patents and copyrights.
Under the General Agreement on Tariffs and Trade (GATT), domestic taxes and charges on imported goods must be levied in the same way as domestic goods. Laws, regulations and requirements for the sale and purchase of domestic goods cannot be less favorable for imported goods. National treatment only applies once a product has entered the market of the receiving country. Therefore, the levying of customs duties on imports is not considered unfavorable treatment even if domestic products are not charged an equivalent local tax.
The General Agreement on Trade in Services (GATS) requires member countries to give foreign services and service providers the same treatment as their own domestic providers. Treating all other member countries identically to each other but differently from one’s own is also considered unfavorable treatment. The Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) imposes national treatment for trademarks, patents and copyrights. Intellectual property can be treated no less favorably than that owned by citizens. Exceptions are made for specific provisions of previous international conventions on intellectual property, such as the Paris Convention (1967) and the Bern Convention (1971).
Most favored nation status is similar in intent to national treatment. While the term “most favored nation” may seem discriminatory, it is not. It means treating all member countries equally and most favored nation principles are incorporated into the GATTS, GATT and TRIPS agreements. Under WTO agreements, a member country cannot normally discriminate between trading partners. If some members are given special commercial considerations, they must be given to all.
There are exceptions to most favored national treatment. For example, countries can establish a free trade agreement that applies only to goods traded within the group, which in effect discriminates against goods outside the group. A member country can also grant special market access to developing countries. A country that regards specific countries as trading products unfairly can create barriers to importing those products.
The intent of most favored nation and national treatment is to ensure a level playing field for global trade. The WTO believes its rules promote open, fair and undistorted competition. They also allow more developed countries to import products from less developed countries. The least developed countries therefore have the opportunity to make their way into the global market.
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