Favour a Major Economy, Favour Me: Most Favoured Nation
Clause in ACP-EC EPAs
ABSTRACT: The Most Favoured Nation clause is a pivotal building block of the rules-based multilateral trading system, a bulwark against protectionism and a vehicle for enhancing economic efficiency. However, when incorporated in a North-South Free Trade Agreement, it could present an unanticipated dilemma by constituting a formidable barrier to facilitating the gradual economic integration of countries at the periphery of the multilateral trading system by fostering shallow liberalisation and limiting the opportunities that could be optimally derived from deeper integration agreements. This template of liberalisation, without depth or scope, would be pre-emptive and usually envisage future Free Trade Agreements in which any concessions made will have to be automatically extended to the current trading partner seeking the Most Favoured Nation treatment without any concession in return. The article argues that the multilateral Most Favoured Nation clause is accompanied by mechanisms which stimulate reciprocity. The article then posits, by means of the application of the theoretical framework of economic contract theory and an analysis of the concept of development, that the Most Favoured Nation clause in the Economic Partnership Agreements may render a counter-intuitive result by the manner of its inclusion in a North-South Free Trade Agreement, such as that between the European Union and the African, Caribbean and Pacific States.