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1 Introduction
This paper analyzes differences in average tariff rates applied to imports under the most favored-nation (MFN) provision of international trade law. Two empirical methods are used:
an analysis of variance (ANOVA) to estimate significant differences in tariff rates between high-income members and least-developed members of the World Trade Organization (WTO); and
fixed-effects regression model to determine the effect of national output on the marginal propensity to import (MPM).
The paper identifies some of the problems that are associated with the development of free trade theory historically and legally. These problems include: structural asymmetries, political accommodations, and fundamental changes in circumstances.
This paper maintains that the MFN provision is applied loosely with unintended consequences. The least-developed states of the WTO are not made better off by enabling conditions without real prospects of increasing their national output. Increases in national output are needed to reduce tariffs and increase the propensity to import. This paper concludes that tariff reduction is inextricably linked with national income and policies that are designed to reduce tariffs must take such a correlation seriously.
This section of the paper provides historical background of free trade theory in addition to the difficulties of removing trade restrictions. It ends with the compelling factors that influenced the decisions of nations to make free and fair trade an embodiment of multilateral trade law. The second part of the paper traces the evolution and principles of modern trade law, that is, the law that has evolved from the 1940s, and the challenges that it is confronted with (as it is written, lex lata ). These challenges come in the form of subsidies, dumping, circumstantial changes, but most importantly, the smallness of the economies of some members and the underdevelopment that encourage enabling conditions in international trade law under Article 1.1.
The data and methodology of the paper are discussed in Section 3. They are designed to deal with the prospects of tariff reduction, disparities in income between high-income countries and least-developed economies, and the propensity to import or reduce tariff. Empirical findings and conclusions are provided at the end of the paper.
Finding a theory of international trade is not a very precise undertaking for the simple reason that nations trade for a variety of...