Context: Reciprocal tariffs imposed by the US are seen as illegal under World Trade Organisation (WTO), especially as they violate the principle of Most-Favoured-Nation (MFN).
“MFN Principle, Reciprocity, and India’s Diplomatic Position on US Tariffs”
What is the Most Favoured Nation (MFN) Principle?
Core Principle of WTO Law:
MFN is a foundational rule under the World Trade Organization (WTO) framework.
It ensures non-discriminatory trade among WTO member countries.
Equal Treatment:
A country must extend the same trade benefits to all WTO members that it gives to any one country.
Example: If Country A lowers tariffs for Country B, the same concession must be extended to all other WTO members.
Principle of Reciprocity
Mutual Benefit (Quid Pro Quo):
Reciprocity means mutual exchange of trade privileges.
When one country grants MFN status, it expects the same treatment in return.
Operational in MFN Context:
Nations that reciprocate trade concessions help maintain a balanced and fair trading environment.
Illegality of US Reciprocal Tariffs
Violation of MFN Principle:
The US has imposed reciprocal tariffs targeting specific countries, rather than applying uniform tariffs to all WTO members.
This selective treatment violates the MFN obligation to treat all members equally.
Global Responses to US Tariffs
Open Criticism and Legal Action:
Countries like China, Canada, Brazil, Japan, and Singapore have:
Publicly condemned the tariffs.
Filed WTO disputes (e.g., China and Canada).
Imposed retaliatory tariffs (notably China and Canada).
Diplomatic Restraint:
Countries like Fiji and Italy have expressed diplomatic dissatisfaction.
They avoided direct confrontation, using terms like “unfair” or “mistaken policies.”
Strategic Silence:
Countries like India have abstained from public criticism or joining collective statements.
This approach is shaped by strategic calculations and diplomatic pragmatism.
India’s Diplomatic Posture: A Strategic Silence
Ongoing Bilateral Trade Talks with the US:
India is engaged in Bilateral Trade Agreement (BTA) negotiations with the US.
Criticizing US actions may jeopardize these sensitive talks.
Dysfunctional WTO Dispute Mechanism:
The WTO Appellate Body has been non-functional since 2019 due to US blocking appointments.
Filing a WTO case is largely symbolic and ineffective at present.
Criticism of India’s Strategic Silence
Erosion of Multilateral Credibility:
Critics argue that India’s silence weakens its image as a defender of multilateralism and rule-based order.
Principled Opposition vs. Retaliation:
Speaking out does not equate to retaliation.
It signals a commitment to legal norms and global trade justice.
Leadership Opportunity in the Global South:
By voicing opposition, India could:
Reinforce its normative leadership.
Strengthen solidarity with Global South countries.
Reaffirm its stance for a fair and equitable international trade system.