Identify incorrect statement regarding certain principles of the Trading System under the World Trade Organisation:

Question

Accepted Answer

The correct option is 1:
The trading system should be without discrimination, however under the most-favoured nation (MFN) status the 'National Treatment' should not be granted.

This statement is the incorrect one regarding the principles of the WTO trading system, and therefore, it is the correct answer to the question "Identify incorrect statement." The statement attempts to conflate the WTO's two foundational non-discrimination principles: Most-Favored Nation (MFN) and National Treatment. The fundamental error lies in the latter part: the implication that 'National Treatment' should not be granted under MFN status. In reality, the WTO trading system is built upon **both** MFN and National Treatment, and they work together to ensure non-discrimination, although they apply at different stages. MFN (Article I of GATT) means treating other countries equally—a member must grant the same favorable treatment (e.g., in tariffs) to all other WTO members. National Treatment (Article III of GATT) means treating foreigners and locals equally *after* the foreign goods have entered the domestic market, meaning imported goods should not be discriminated against in favor of domestically produced goods (e.g., through internal taxes or regulations). To be fully compliant with WTO non-discrimination principles, both MFN status **and** National Treatment must be granted. The statement that National Treatment should *not* be granted under MFN status fundamentally misrepresents WTO law.

The incorrect option is 2:
The trading system should be free, which means the barriers should be coming down through negotiation.

This statement correctly describes the principle of Free Trade, a core objective of the WTO. The organization seeks to lower obstacles to international trade through a process of continuous, reciprocal negotiations among member countries, which is the historical basis for rounds like the Doha Development Agenda. The aim is to make global trade flow as freely as possible, provided there are no unjustifiable barriers. Therefore, this statement accurately reflects a key WTO principle and is not the incorrect statement sought by the question.

The incorrect option is 3:
It believes in the principle of predictability, which means trade barriers (including tariffs and non-tariff barriers) should not be raised arbitrarily.

This statement accurately captures the WTO's principle of Predictability. Predictability is vital for businesses, investors, and consumers, ensuring that they can make informed decisions based on stable, reliable market conditions. When countries bind their tariffs (commit not to raise them above a certain level) and ensure transparency in their regulations, they create a predictable environment. The WTO works to prevent the arbitrary raising of tariffs or the sudden introduction of non-tariff barriers, ensuring that trade rules are consistent and known. Because this is a true principle of the WTO, it is not the answer to the question asking for the *incorrect* statement.

The incorrect option is 4:
It advocates for more benefits for less developed countries giving them more time to adjust, greater flexibility and special privileges.

This statement correctly describes the WTO principle of Development, specifically through the provision of Special and Differential Treatment (S&DT). Recognizing that developing and least-developed countries (LDCs) face unique challenges and require time to integrate into the global economy, the WTO agreements contain special provisions. These provisions include longer implementation periods for commitments, technical assistance, trade preferences, and greater flexibility in using certain measures. This principle ensures the system is equitable and promotes the inclusion of poorer nations, thus making the statement correct and eliminating it as the answer.