By Tomasz Gonciarz and Thomas Verbeet
The WTO’s non-discriminatory “most-favoured-nation” (MFN) trading principle, whereby WTO members extend any trade advantage granted to one trading partner to all other partners, remains a cornerstone of global trade. More than four-fifths of international merchandise trade is conducted on this basis despite the proliferation of preferential trade agreements and other trade measures, as demonstrated by a recent WTO working paper.
The MFN principle ensures non-discrimination in global trade, fostering stability and fairness in the global trading environment. This principle has retained its centrality despite the rise of preferential trade agreements (PTAs) since the 1990s resulting in some divergence from MFN principles.
PTAs encompass hundreds of bilateral and regional agreements while unilateral schemes like the Generalized System of Preferences allow developed economies to grant preferential tariffs to imports from developing economies. There are also trade policy measures that may diverge from the MFN principle, as they apply to specific WTO members rather than to the entire WTO membership.
However, a novel dataset from the WTO’s Integrated Database (IDB), including detailed statistics on preference utilization and supplementary sources, shows that MFN trade is still very largely prevalent.
The dataset categorizes global imports in 2022 into four segments: (1) MFN duty-free trade; (2) MFN dutiable trade; (3) MFN dutiable trade eligible for, but not using, preferential market access; and (4) trade under preferential duty regimes. The scale of trade remedy measures (such as anti-dumping and countervailing duties), as well as trade tensions between China and the United States, are quantified.
Figure 1 shows global import shares for 2022: 53 percent of global imports were subject to MFN duty-free treatment, 25 percent were subject to positive MFN duties, and 17 percent benefited from PTAs. It is notable that 5 percent of MFN dutiable trade was potentially eligible for preferential tariffs but did not utilize them — for reasons that included complex rules of origin requirements, administrative burdens and business decisions — thereby increasing the overall MFN trade share.
What this indicates is that 83 percent of global merchandise trade occurs under non-preferential, MFN terms. Given that trade remedy measures and unilateral tariffs resulting from geopolitical tensions are estimated at less than 3 percent, it may be concluded that more than 80 percent of world merchandise trade is conducted under MFN terms.
All of the top 20 trading economies in Figure 2 conduct the majority of their imports under the MFN principle, with many offering a significant share of MFN duty-free trade. For example, Hong Kong, China conducts its imports entirely under MFN duty-free terms, while almost all of Singapore’s imports are conducted under these terms.
In Figure 3, global import values for 2022 are presented in terms of the “multilateral trade negotiation” product categories and are ranked by total import value. The leading category was “Minerals and metals”, which has a total trade value of US$ 3.8 trillion. Of this, US$ 2.4 trillion was traded MFN duty-free, US$ 0.7 trillion was MFN dutiable and US$ 0.15 trillion was eligible for preferential treatment but was traded under MFN terms. Together, these three MFN-based segments account for US$ 3.2 trillion — 85 percent of trade in this category.
Figure 3 also highlights the significance of certain sectors in global trade. The top five product categories — “Minerals and metals”, “Electrical machinery and electronic equipment”, “Chemicals”, “Petroleum” and “Mechanical, office and computing machinery” — represent over 70 percent of total global imports. For these categories, the share of trade conducted under MFN terms ranges from 80 percent to 94 percent.
In contrast, trade values for other categories, particularly those in the agricultural sector, are smaller. While “Cotton, silk and wool” stands out due to its MFN trade share of 95 per cent, many other agricultural categories have lower shares. For instance, “Fruits and vegetables” has an MFN share of just 48 percent.
Thus, although the proliferation of PTAs has raised some concerns about the continued relevance of the MFN principle, this analysis indicates that it continues to act as a critical pillar of the global trading system. More comprehensive discussion of this topic and more information about the data and methodology used can be found in the WTO working paper “Significance of Most-Favoured-Nation Terms in Global Trade: A Comprehensive Analysis”, published on 16 January 2025.
The WTO Blog is a forum for the views of WTO staff on pressing issues. The views expressed are those of the author(s) and do not necessarily reflect the opinions of members of the WTO.
