Favored Nation Research Articles

Implementing Tariff Commitments in the EVFTA

The study introduces the process of implementing tariff commitments in free trade agreements (FTAs) and applying tariffs in implementing Vietnam’s international trade policies. At the same time, evaluates the Factors affecting these tariffs in the context of Vietnam’s extensive participation in international integration and signing of bilateral and multilateral trade agreements. Along with modernizing customs procedures to meet the FTAs, Vietnam’s tariff policies are also promptly completed to be compatible with commitments. The authors use qualitative research methods to collect data in ‘non-numerical’ form to evaluate the research object, which are new types of preferential tariffs and special incentives. Data is collected from government agencies and businesses that directly enforce import tariffs. Within the framework of the research, the author has delved into the fundamental legal principles of the WTO: favoured nation, national treatment, market openness and fair competition, practicality on Vietnam’s import tax policy, thereby serving as a basis for comparing promulgated tax policies and proposing perfect solutions implementation of preferential tariffs and special preferential tariffs for trade agreements.

VCLT and the Peaceful Coexistence of Tax and Investment Treaties: A Case Study of Limited MFN Clauses and the FET Standard

The general purpose of this article is to demonstrate that customary international law (CIL) has a significant role to play in connecting international tax law and international investment law. Bridging a gap between those sources of international law is not only an important endeavour in the theory of law but also in practice. This article purports to achieve the abovementioned general purpose by focusing on the application of the rule and principles of interpretation under the Vienna Convention on the Law of Treaties (VCLT), which represent a codification of CIL, to limited most favoured nation (MFN) clauses in tax treaties. The hypothesis of the authors is that a serious failure in a proper application of the VCLT to interpret the MFN clauses in tax treaties may lead to a violation of international investment agreements (IIAs), in particular the fair and equitable treatment (FET) standard. The analysis and conclusions are relevant to all tax treaties and IIAs containing the MFN clause and FET standard, respectively. They are also of relevance for the interpretation of all provisions of tax treaties, not only the limited MFN clauses, in accordance with the VCLT. Examining tax treaties through the lens of the FET standard allows the FET standard to be seen as a gateway for the systemic integration of tax treaties in accordance with the principle enshrined in article 31(3) (c) of the VCLT, because some of core elements of that standard are deeply rooted in sources of international law (general principles of law and custom).

Rebalancing Investment Protection Standards

Abstract Treaty reform has largely focused on refining the various investment protection standards under IIAs to achieve a more appropriate balance between investment protection and preserving the state’s right to regulate. This article takes stock of the treaty language used to recalibrate investment protection standards and evaluates their effectiveness in preserving policy space. The article ultimately concludes that greater precision in the various investment protection standards has been effective in preserving regulatory space in some cases, notably in the case of indirect expropriation. By contrast, reform of the fair and equitable treatment may be of limited effectiveness, whereas the reforms of national treatment clauses and most favoured nation clauses have yet to be tested by arbitral treatment. While in principle the latter reforms appear to directly address the concerns raised by previous arbitral authority, it remains to be seen whether they will prove to be effective.

The politics of tariff cooperation in the presence of trade costs

AbstractThis study explores how income inequality among individuals in each country and trade costs depicting geographic distance between countries impact economic welfare and regime choice under representative democracy, comparing three trading regimes: most favored nation, customs union, and free trade agreement. We examine two cases: one in which trade costs are incurred symmetrically among all countries, and the other in which no trade costs are incurred among the potential member countries, but only between them and nonmembers. In each case, we identify the political feasibility of each regime as well as the impact on the average welfare levels.

Negotiating over the rules of origin in regional trade agreements in Asia

AbstractIn regional trade agreements (RTAs), member countries choose a common rule of origin (RoO) for each product. This study examines the factors that influence RoOs in four ASEAN‐plus‐one RTAs, which are agreements between ASEAN and four individual countries. One unique feature is that ASEAN as a whole negotiates with a plus‐one country, which may dilute the interests of individual ASEAN countries at large. Our findings are summarised as follows. First, the more restrictive RoOs are set in the products where plus‐one countries are less competitive against most ASEAN countries. Second, the more restrictive RoOs are likely to be imposed in products that plus‐one countries protect with higher most favoured nation tariffs. These two results reflect the bargaining power among a plus‐on country and ASEAN countries and indicate that plus‐one's preference influences RoOs more strongly. Third, we find contrasting results between intermediate and final products. RoOs are likely to be less restrictive in intermediate products and more restrictive in final products when plus‐one countries have higher export competitiveness or when the majority of ASEAN countries have higher MFN tariffs.

Wartime Trade Policy Measures in Comparison of the Historical Periods of the First World War and the Special Military Operation

With the beginning of the special military operation (SMO), a new type of foreign trade policy is forming, based on restrictions. History shows that the practice of restrictions on trade operations is not new. The article compares Russia’s trade policy measures introduced during the First World War of 2014–2018 and the SMO, which began in 2022. The goal is to identify tools that are not currently used. Restrictions on exports and imports, measures to stimulate imports, and measures to build new trade routes are considered. Even before the start of the SMO, from the moment of political aggravation, Russia limited the export of wood and fertilizers, which contradicted the Protocol on Accession to the WTO and the refusal of quantitative restrictions. Unfriendly countries that applied preventive sanctions against Russia, with the beginning of the SMO, denied Russia most favored nation treatment. As during the First World War, grains, flour and sugar were among the food products subject to government export restrictions. Both periods were characterized by measures to stimulate imports in an effort to provide industry with raw materials and equipment. Import restriction measures in the first period applied to luxury goods, in the second they took the form of sanctions against unfriendly countries. The war period was characterized by growing interest in the northern sea routes. Compared with World War I, modern export restriction policies were more varied in terms of product coverage, but lacked the specific details by export directions that were developed a century ago. Many of the modern measures allow exemptions only in relation to EAEU countries. In our opinion, exemptions from restrictions on the export of humanitarian goods could be made for the developing countries which are most in need of grain or fertilizers.

Secret diplomacy of the US President T. Roosevelt during the Peace Conference in Portsmouth (August 1905)

The author discusses the mediation mission of the US President T. Roosevelt, who made a significant contribution to the end of the bloody Russian-Japanese war of 1904-1905. Having offered assistance to the conflicting parties in search of a mutual compromise, he sought to use the contradictions between the great powers through skillful maneuvering in the interests of the increased influence of his own country on world politics. In the theory of the "balance of power" formulated by him, the main attention is paid to the distribution of control zones between major geopolitical players, while a significant place in international relations was given to the United States, which at the turn of the XIX-XX centuries actively joined the struggle for sales markets. When considering the "good deeds" of the President, the main emphasis is placed on the analysis of the various diplomatic means used by him to achieve his goals. He was one of the first to resort to the so-called "multilateral" diplomacy, which involved the complex application of both conventional and non-traditional measures of mediation. By assuming the role of an intermediary, he was able not only to achieve the delimitation of spheres of influence with Japan in East Asia, but also to "open the doors" for American capital to Northern China on the basis of the principle of the most favored nation. The Portsmouth Peace led to a change in the balance of power in the Asia-Pacific region, in which the United States, thanks to the successful mediation of Roosevelt, became the main player in international diplomacy. .

Application of most favoured nation clause of India -Netherlands treatyrequires reconsideration

Application of most favoured nation clause of India -Netherlands treatyrequires reconsideration

Trade Liberalization, IMF Conditionality, and Policy Substitution in Developing Countries

AbstractSubstantial tariff reductions and increased usage of non‐tariff measures (NTMs) have been key dynamics of global trade policy in recent decades. We use highly disaggregated data on applied most favored nation tariffs, NTMs, and trade to investigate how International Monetary Fund (IMF) conditionality as a form of external pressure to reduce tariffs contributed to this dynamic in developing countries. Our results show that structural adjustment programs (SAPs) effectively lowered tariffs without increasing the usage of NTMs. A typical three‐year program containing tariff conditionality decreased tariff rates in the range of 2.0 to 3.8 percentage points in total. Furthermore, IMF programs reduced NTM initializations significantly. We also show that tariff conditionality was more effective in initiating tariff cuts for countries without previous greater globalization efforts than being a “catalyst” for ongoing liberalization efforts.

The impact of policy uncertainty on foreign direct investment: Micro‐evidence from Japan's international investment agreements

AbstractThis study proposes an empirical strategy to identify the impact of policy uncertainty (PU) at the host economy‐sector‐reservation level on foreign direct investment (FDI) by exploiting sectoral differences in PU before and after the entry into force of international investment agreements (IIAs). These sectoral differences arise because IIAs mitigate PU in host economies, but sectors included in negative lists of IIAs continue to face different degrees of PU owing to exemptions from certain obligations, such as national treatment and the most favored nation in IIAs. Using this empirical strategy, we evaluate how the activities of Japanese multinational enterprises and their foreign affiliates are affected by Japan's 22 IIAs, including bilateral investment treaties and economic partnership agreements with investment provisions, during 1995–2016 at the microdata level. We find that PU regarding a combination of national treatment and most favored nation has a negative impact on FDI. In particular, PU discourages the establishment of new foreign affiliates. However, PU does not necessarily induce affiliates to exit the market.

The Substitution Effect of Preferential Tariffs on Nontariff Measures: Evidence from Vietnam

This study empirically investigates the effects of ASEAN Trade in Goods Agreement (ATIGA) tariffs on nontariff measures (NTMs) in Vietnam from 2012 to 2018. Our findings reveal the following: First, our gravity estimation demonstrates that although the reduction of ATIGA tariffs increases Vietnam's imports, the introduction of certain NTM types, particularly price control and finance measures, decreases them. Second, the reduction of ATIGA tariffs tends to introduce price control measures in particular. Third, when ATIGA tariffs decrease, the pre‐shipment inspection, nonautomatic licensing, and finance measures are more likely to be eliminated for products in which Vietnam has high export competitiveness. Fourth, both ATIGA tariffs and ASEAN+1 free trade agreement tariffs have significant effects on the introduction of NTMs in Vietnam. Finally, we found that the reduction in ATIGA tariffs also results in decreasing most favored nation tariffs.

The Belt and Road Initiative in Nepal: Potential impacts and implications

The Belt and Road Initiative is emerging as a global phenomenon with a potential of bearing on almost all nations on Earth in different ways. In this context, this article, generally, is an attempt to demonstrate that impacts and implications of the BRI in Nepal will be governed by important national (Chinese) and international factors. Specifically, it argues that factors that have high developmental potential for Nepal include China's persistent rise and concomitant creation of the multipolar world, China's upholding of its international polices and the BRI principles, reproduction of the BRI experiences of other countries in Nepal, China's continuous pursuit of its socialism-aspiring path of development, its potential embarkment on a predominantly socialist path in the future. It argues that China’s future embarkment on a predominantly capitalist path can have ambivalent impacts ranging from highly appropriative to highly supportive. Likewise, the US–China conflict can also have ambivalent impacts ranging from boosting of Nepal’s negotiating power between the two powers to compromising of Nepal’s sovereignty and stability. The US–China conflict can also push China to treat Nepal as strategically highly important and, therefore, as a favored nation, pouring massive investments. It shows that the Chinese investment will enhance Nepal’s status vis-a-vis the US, the EU and India by cutting down its age-long dependencies on them; and will be conducive to the geographically-distributed development and capital accumulation.

The legal aspects of hotel rate parity

This research note delineates the conflict of hotel rate parity and key clauses of competition laws in both Europe and the U.S. We trace the origin of hotel rate parity to the principle of most favored nation (MFN) in international trade agreements. We show that rate parity challenges two pillars of competition law. Under rate parity agreements, it is travel intermediaries—not hotels—that demand rate parity, which comes down to the dominance of travel intermediaries over small and independent hotels. The courts view MFN status as a hindrance to competition and therefore in violation of competition law. The trend and message in Europe are clear: the clause is most likely to be judged as not complying with EU competition law and its national equivalents. In the U.S. though, a lack of case decisions precludes us from reaching any conclusion about the fate of the MFN clause.

Opening Pandora’s Box: Strict Liability Under Unqualified Extended War Clauses in International Investment Law

There has been a growing interest in the extent to which international investment law imposes an obligation on the state to compensate for losses arising from an armed conflict. This contribution explores the prevalence of war clauses that hold the state liable to pay compensation for war losses without the investor needing to prove fault. The contribution considers a recent case against Syria in which an investor was permitted to rely on such a war clause in another treaty through the most favoured nation (MFN) clause. The contribution finds that MFN clauses substantially increase the number of investors who can rely on unqualified extended war clauses. It considers unqualified extended war clauses and the extent to which other investors can rely on them through an MFN clause in Cameroon, Syria and Yemen. It then considers the role that the BRICS countries can play in bringing about the necessary reforms to unqualified extended war clauses. It argues that these reforms are urgently needed as these states emerging from armed conflict can scarcely afford to meet their people’s most essential developmental needs, let alone virtually unlimited liability to foreign investors.

Economic and Humanitarian Cooperation Between the Russian Federation and the IRA (2001–2021)

The article is devoted to trade, economic and humanitarian cooperation and cooperation in the field of education between Russia and the Islamic Republic of Afghanistan. The main obstacle to economic interaction was removed: the debt problem was settled, which opened up opportunities for state financing of economic projects. Russian firms have taken an active part in the revival of Afghanistan. The creation of a number of joint organizations and the most favored nation treatment led to the fact that in 2011 and 2014 trade between Russia and Afghanistan reached its peak. Humanitarian cooperation also developed. Russia provided assistance to Afghanistan in the field of education.

Impact of China’s Foreign Direct Investment on The Rwandan Economic Growth

The purpose of this study was to investigate the exact impact in quantitative terms of China’s FDI on the Economic development of the African continent with reference to Rwanda. The target population comprised 10 staff members of National Institute of Statistics of Rwanda, Rwanda Development Board, Ministry of Trade and Industry, Ministry of Finance and Economic Planning, United Nations (UN) Statistics, and World Bank's World Development Indicators. The sample size was 10 key informants. The researcher used questionnaire, interview guide and desk review as data analysis tools. The SPSS was used to analyze data into descriptive and inferential statistics. Results discover that in Rwanda a foreign direct investment depends on the consumer prices index. The study found out that 54.3% agreed with the consumer prices index, foreign direct investment is influenced by owner-occupiers' housing costs as it was evidenced by 62.8%, it was seen the retail prices index, where 56.7% agreed. Correlation analysis between the Owner-occupiers' housing costs and economic growth show a significant correlation between owner-occupiers' housing costs and job creation (r=.206; p-value=.000). This was statistically correlated given the p value was <0.005 proposing that increase in owner-occupiers' housing costs has led to a job creation in Rwanda. The study demonstrated that 64.6% agreed that the nominal effective exchange influence foreign direct investment, 45.1% strongly agreed with the real effective exchange rate. Correlation results felt that choice of price or cost felt that it is significantly correlated with a growth domestic product (r=0.123*; p value=0.034). The study sought to evaluate the effect of Balance of Trade on the economic growth of Rwanda. The study evidenced that participants agreed that the financial account statements by 55.5% while the study found that capital account is affecting foreign direct investment. It was shown by 53.0%. Results show a significant correlation between capital account and poverty reduction (r=0.105, p-value=0.071). The correlations were statistically significant given that the p value was < 0.05 proposing that an increase in capital account was insignificant with the economic growth and vice versa. The study concludes that inflation rate, exchange rate and balance of trade and thus FDI, have a significance effect on the economic growth in Rwanda. The study recommends that foreign direct investment strategies could be adopted in everyday activities. It would be appropriate to consider most favored nation and trade liberalization and investment as a criteria of exporting companies for improving economic growth. Future research can be conducted using longitudinal research to identify factors which contribute to economic growth. Keywords: Foreign Direct Investment, Economic Growth, Rwanda.

Impact of China’s Foreign Direct Investment on The Rwandan Economic Growth

The purpose of this study was to investigate the exact impact in quantitative terms of China’s FDI on the Economic development of the African continent with reference to Rwanda. The target population comprised 10 staff members of National Institute of Statistics of Rwanda, Rwanda Development Board, Ministry of Trade and Industry, Ministry of Finance and Economic Planning, United Nations (UN) Statistics, and World Bank's World Development Indicators. The sample size was 10 key informants. The researcher used questionnaire, interview guide and desk review as data analysis tools. The SPSS was used to analyze data into descriptive and inferential statistics. Results discover that in Rwanda a foreign direct investment depends on the consumer prices index. The study found out that 54.3% agreed with the consumer prices index, foreign direct investment is influenced by owner-occupiers' housing costs as it was evidenced by 62.8%, it was seen the retail prices index, where 56.7% agreed. Correlation analysis between the Owner-occupiers' housing costs and economic growth show a significant correlation between owner-occupiers' housing costs and job creation (r=.206; p-value=.000). This was statistically correlated given the p value was <0.005 proposing that increase in owner-occupiers' housing costs has led to a job creation in Rwanda. The study demonstrated that 64.6% agreed that the nominal effective exchange influence foreign direct investment, 45.1% strongly agreed with the real effective exchange rate. Correlation results felt that choice of price or cost felt that it is significantly correlated with a growth domestic product (r=0.123*; p value=0.034). The study sought to evaluate the effect of Balance of Trade on the economic growth of Rwanda. The study evidenced that participants agreed that the financial account statements by 55.5% while the study found that capital account is affecting foreign direct investment. It was shown by 53.0%. Results show a significant correlation between capital account and poverty reduction (r=0.105, p-value=0.071). The correlations were statistically significant given that the p value was < 0.05 proposing that an increase in capital account was insignificant with the economic growth and vice versa. The study concludes that inflation rate, exchange rate and balance of trade and thus FDI, have a significance effect on the economic growth in Rwanda. The study recommends that foreign direct investment strategies could be adopted in everyday activities. It would be appropriate to consider most favored nation and trade liberalization and investment as a criteria of exporting companies for improving economic growth. Future research can be conducted using longitudinal research to identify factors which contribute to economic growth. Keywords: Foreign Direct Investment, Economic Growth, Rwanda

The Long and Short (Run) of Trade Elasticities

When countries change most favored nation (MFN) tariffs, partners that trade on MFN terms experience plausibly exogenous tariff changes. Using this variation, we estimate the trade elasticity at short and long horizons with local projections. We find that the elasticity of tariff-exclusive trade flows is −0.76 in the short run, and approximately −2 in the long run. Our long-run estimates are smaller than typical in the literature, and it takes 7 to10 years to converge to the long run, implying that (i) the welfare gains from trade are high and (ii) there are substantial convexities in the costs of adjusting exports. (JEL C51, F13, F14)

중재조항의 물적 관할 제한과 관련된 포괄적 보호 조항 및 최혜국대우조항 적용에 관한 연구

Purpose: This study analyses the umbrella clause and the most favored nation clause by focusing on A11Y Ltd. v. Czech Republic issued under international commercial arbitration.
 Research design, data, and methodology: Typical case analysis deals with the issues surrounding the selection of applicable cases for international commercial arbitration.
 Results: Under the arbitration clause, which explicitly excludes disputes regarding the FET clause and the non-discrimination clause, it is not acceptable to invoke both clauses through an umbrella clause.
 Conclusions: Above all, from the facts of this case, it is thought that even if the jurisdiction is expanded, difficulties accompany the complete citation of a claim on the merits. Regarding a non-discrimination obligation, the Tribunal denies the distinction of administrative rules in the context of expropriation. On the other hand, the inappropriate behavior of the Labor Bureau is acknowledged, and there is room for violation of FET or the obligation to prohibit investment damage.

자유무역협정상 물품무역의 수입국 조치와 관련된 투자협정중재에 관한 고찰

Purpose: This study analyzes issues over the national treatment clause, the most favored nation clause, and jurisdiction in international commercial arbitration under free trade agreements. Based on these clauses, implications after analyzing Vento v. Mexico are presented.
 Research design, data, and methodology: Adopting the literature research method, this study utilizes major related papers and Internet data.
 Results: For discriminatory application of an import restriction, an investor would need to identify other investors using the same trade agreement on which it is based, and must demonstrate that the import restriction does not likewise apply to these other investors. However, in this case, there is also a limitation in that it is more difficult for an investor who uses a unique business model that other investors do not use, to make a claim based on discriminatory treatment.
 Conclusions: The claimant in this case filed for ① discriminatory treatment by the Mexican government (breach of NT/MFN) and ② MST breach (lack of due process, etc.) by the Mexican government, but all of them were rejected.