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General Obligations and Disciplines

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Chapter Summary

Art. II contains a general most-favoured-nation (MFN) clause. The clause has been adopted in numerous bilateral agreements, mostly concerning economic and commercial inter-state relations, and in particular in investment agreements. The economic rationale for the MFN commitment is that discrimination may lead to wasteful trade diversion: without the benefit of the MFN principle, the most efficient service provider or the best service may not have access to a foreign market because of discriminatory trade preferences in that market in favour of less efficient service providers from other countries. In the General Agreement on Trade in Services (GATS) draft of December 1990 there were different approaches to the MFN clause. The several possibilities of limiting the applicability of the MFN clause reflect the economic heterogeneity of the service sector and the different level of development in that sector.

Keywords: GATS; most-favoured-nation (MFN) clause

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