A WTO working paper of 15 January 2025, written by Tomasz Gonciarz and Thomas Verbeet, has the title Significance of most-favoured-nation terms in global trade: A comprehensive analysis.

Under the WTO’s MFN trading principle, member countries of the WTO extend any trade advantage granted to one trading partner to all the other partners. The MFN principle ensures non-discrimination in global trade, fostering stability and fairness in the global trading environment. The principle has been very important for the world trading system.

Recent decades have seen the rise of preferential trade agreements (PTAs), resulting in some divergence from MFN principles. PTAs include bilateral and regional agreements that grant more favourable tariff treatment to specific treaty partners. Also, unilateral schemes like the Generalized System of Preferences allow developed economies to grant preferential tariffs to imports from developing economies. Some trade policy measures may diverge from the MFN principle, applying to particular WTO member countries rather than to the whole WTO membership.

Using a dataset based on information collected for the WTO’s Integrated Database (IDB), including detailed statistics on preference utilization and supplementary sources, the authors provide an in-depth analysis of global merchandise trade flows under both MFN and preferential tariffs. They use a methodology that includes data for anti-dumping and countervailing duties, additional duties in the US and China, preferential tariffs and bilateral trade flows for 184 economies.

The results of the research show the effects of MFN trade across different economies, regions and products and compare MFN treatment on imports and exports. Analysis of global import shares for 2022 indicates that 53% of global imports were subject to MFN duty-free treatment, 25% were subject to positive MFN duties, and 17% benefited from PTAs. Also, 5% of MFN dutiable trade was potentially eligible for preferential tariffs but these were not used, for example because of the complex rules of origin requirements and administrative burdens, so this further increased the share of MFN trade.

These statistics indicate that 83% per cent of global merchandise trade is carried out under non-preferential, MFN terms. Trade remedy measures and unilateral tariffs resulting from geopolitical tensions are estimated to apply to less than 3% of world trade. The authors therefore conclude that more than 80% of global trade in goods is carried out on MFN terms, confirming the continuing relevance of the multilateral framework in the global trading system.

The study also indicates that all the top twenty trading economies conduct the majority of their imports under the MFN principle, including a significant share of MFN duty-free trade. For example, Hong Kong SAR conducts all its merchandise imports under MFN duty-free terms, and almost all of Singapore’s imports are carried out under MFN terms.

The results of the study therefore indicate that, although the increase in the number of PTAs has given rise to some concern about the continued significance of the MFN principle, this principle is still an important pillar of the global trading system.