As a multilateral trade agreement, GATT obliges its signatories to extend most-favoured-nation status to other trading partners participating in the WTO. Most-favoured-nation status means that each WTO Member enjoys the same tariff treatment for its goods in foreign markets as the “most favoured” country competing in the same market, thus excluding preferences or discrimination for a Member country. While virtually all economists consider free trade to be desirable, they differ on how best to manage the transition from tariffs and quotas to free trade. The three fundamental approaches to trade reform are unilateral, multilateral and bilateral. First, the results of a model depend on the assumptions behind it, e.B. the extent to which imported and nationally produced products can be replaced or whether or not there is perfect or imperfect competition. Different assumptions can lead to a variety of outcomes, not only at scale, but sometimes in the direction of projected changes. Criticisms of bilateral and regional approaches to trade liberalization have many additional arguments. They suggest that these approaches could undermine and replace the WTO`s multilateral approach, which is preferable for global action on a non-discriminatory basis, rather than supporting and complementing it. Therefore, the long-term outcome of bilateralism could be a deterioration of the global trading system into competing and discriminatory regional trading blocs, resulting in additional complexity that would complicate the flow of goods between countries. In addition, the reform of issues such as agricultural export subsidies cannot be effectively addressed at the bilateral or regional level.

However, they also recognized a role for regional integration that would allow members of a trading bloc to remove barriers to trade among themselves while maintaining a discriminatory duty on imports from third countries. [18] Accordingly, Article XXIV of the GATT provides for a substantial exception to the principle of the most important remuneration, allowing countries to form customs unions or free trade areas (FTA) that may discriminate against non-members of the bloc. [19] In a customs union, members remove barriers to trade between themselves, but establish a Common Customs Tariff for imports from third countries. Members of a free trade area also remove barriers to trade with each other, but they each maintain their own tariff for imports from non-members. The theory of comparative advantage assumes a world in which trade between countries is balanced, or at least in countries has a trade surplus or a trade deficit that is cyclical and temporary. [29] Relaxing the assumption “that international trade between nations is balanced could cause a country with a trade deficit to import certain commodities where it would have a comparative advantage and would in fact export with balanced trade,” says Dominic Salvatore. .