The derogation from the customs union was intended in part to take account of the creation of the European Economic Community (EC) in 1958. The EC, originally made up of six European countries, is now known as the European Union (EU) and has 27 European countries. The EU has gone beyond simply removing barriers to trade between Member States and creating a customs union. It has moved towards greater economic integration by becoming a common market – a regulation that removes barriers to mobility from factors of production such as capital and labour between participating countries. As a common market, the EU also coordinates and harmonizes each country`s tax, industrial and agricultural policies. In addition, many EU Member States have created a single currency area by replacing their national currencies with the euro. The most favoured nation clause prevents one of the parties to the current agreement from continuing to remove barriers to another country. For example, in exchange for reciprocal concessions, Country A could agree to reduce tariffs on certain products from Country B. In the absence of a clause of the most favoured nation, Country A could still reduce tariffs on the same goods from Country C in exchange for other concessions. As a result, consumers in Country A could purchase the products in question at a cheaper price in Country C because of the tariff difference, while Country B would get nothing for its concessions.
The status of the most favoured nation means that A is required to extend the lowest existing tariff to certain products to all its trading partners enjoying such status. If A later accepts a lower rate with C, B automatically gets the same lower rate. In 1995, GATT became the World Trade Organization (WTO), which now has more than 140 member states. The WTO controls four international trade agreements: the GATT, the General Agreement on Trade in Services (GATS) and the Trade-Related Intellectual Property Rights and Trade Investment Agreement (TRIPS and TRIMS). The WTO is now the forum for members to negotiate the removal of trade barriers; The most recent forum is the Doha Development Round, launched in 2001. USTR is primarily responsible for the management of U.S. trade agreements. These include monitoring the implementation of trade agreements with the United States by our trading partners, the application of U.S.
rights under those agreements, and the negotiation and signing of trade agreements that advance the President`s trade policy. The 2010 Affordable Care Act (ACA) was the largest expansion of the U.S. social safety net in decades, and trade advocates see it as a reduction of a significant barrier to worker mobility.2 Obamacare was a long-awaited policy to support the 21st century economy by making the U.S. labor market more responsive to all forces of change. Even in the absence of the constraints imposed by the most favoured nation and national treatment clauses, it is sometimes easier to obtain general multilateral agreements than separate bilateral agreements. In many cases, the potential loss resulting from a concession to a country is almost as great as that which would result from a similar concession to many countries. The benefits to the most efficient producers from global tariff reductions are significant enough to warrant substantial concessions. Since the implementation of the General Agreement on Tariffs and Trade (GATT, 1948) and its successor, the World Trade Organization (WTO, 1995), global tariffs have declined considerably and world trade has increased.
The WTO contains provisions on reciprocity, the status of the most favoured nation and the domestic treatment of non-tariff restrictions.