MOST-FAVOURED-NATION TREATMENT

guarantee of trading opportunity equal to that accorded to the most-favoured nation; it is essentially a method of establishing equality of trading opportunity among states by making originally bilateral agreements multilateral. As a principle of public international law, it establishes the sovereign equality of states with respect to trading policy; as an instrument of economic policy it provides a treaty basis for competitive international transactions. Attempts to guarantee such equality of trading opportunity were incorporated into the provisions of commercial treaties and agreements as early as the beginning of the 17th century. The Anglo-French treaty negotiated in 1860 by Richard Cobden and Michel Chevalier became the model for many later agreements. They established a set of interlocking tariff concessions that were extended by most-favoured-nation treatment worldwide. Such treatment has always applied primarily to the duties charged on imports, but specific provisions have extended the most-favoured-nation principle to other areas of international economic contactfor example, the establishment of enterprises of one country's nationals in the territory of the other; navigation in territorial waters; real and personal property rights; intangible property rights such as patents, industrial designs, trademarks, copyrights, and literary property; government purchases; foreign-exchange allocations; and taxation. There are two forms of most-favoured-nation treatment: conditional and unconditional. The conditional form grants gratuitously to the contracting party only those concessions originally made gratuitously to a third party and grants concessions originally obtained as part of a bargain only under equivalent conditions or in return for equivalent gains. Under the unconditional form, any tariff concession granted to a third party is granted to the contracting party, a principle that was included in the 1948 General Agreement on Tariffs and Trade (GATT). Application of most-favoured-nation treatment was limited in the past by the practice of granting concessions to the principal supplier country in an effort to obtain reciprocal concessions or by reclassifying and minutely defining items in the customs tariff so that a duty concession, while general in form, applies in practice only to one country. International concern with most-favoured-nation treatment decreased as new devices of trade regulation (import quotas, exchange control, and state trading) became greater obstacles to trade than tariffs. The discretionary and often arbitrary nature of such regulations rendered any specific guarantee of equal trading opportunity impossible. Most-favoured-nation treatment came under concerted attack with the rise of the European Economic Community, which reduced duties among its members only.