7. ‘The WTO undermines local development and penalizes poor countries’

	The accusation “The WTO’s ‘most favored nation’ provisions require all WTO member countries to treat each other equally and to treat all corporations from these countries equally regardless of their track record [1]. Local policies aimed at rewarding companies who hire local residents, use domestic materials, or adopt environmentally sound practices are essentially illegal [2] under the WTO. Under the WTO rules, developing countries are prohibited from following the same polices that developed countries pursued, such as protecting nascent, domestic industries until they can be internationally competitive [3].”

The reality

Most-favoured-nation treatment means non-discrimination between countries. Equal treatment is an overwhelmingly important and useful principle for both fairness and efficiency.

1. Most-favoured-nation does not mean treating all corporations equally. A government can reward or penalize corporations, but the same criteria for doing this must normally apply to all foreign companies. (There are some constraints on what those rules might say.)

2. Policies for hiring local staff, using domestic materials or encouraging sound environmental practices are definitely not outlawed. However, countries have negotiated terms for allowing their professionals and other workers to work abroad. If they allow foreign workers in, it is because they want to learn from foreign expertise or they want their workers to be able to work abroad in exchange. This is not a principle of WTO law, but something countries (developed and developing alike) want to negotiate with each other.

3. The value of “infant-industry” protection is debated. However, developing countries are given longer timetables for implementing many important provisions and commitments precisely in order to allow them to protect nascent industries if they want to.

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