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Trade Act Restrictions on the Extension of Most-Favored-Nation Rights

Date of Issuance:

A trade agreement negotiated with Canada to be implemented pursuant to the “fast track” authority provided by the Trade Act of 1974, as amended, is subject to § 102(b)(3) of the 1974 Act, 19 U.S.C. § 2112(b)(3). That section prohibits the extension to other countries of any trade benefits received by a country under a “fast track” agreement if such agreement provides for a reduction or elimination of any duty imposed by the United States. As a matter of domestic law, this prohibition was intended to, and does, impair the automatic operation of most-favored-nation clauses in various treaties to which the United States is a party. The impairment caused by § 2112(b)(3) can be reduced in this instance by simultaneously concluding an agreement with Canada addressing non-duty benefits and a separate agreement addressing duty reductions. Section 2112(b)(3) would prevent only the benefits given to Canada under the latter agreement from being extended to third countries enjoying applicable most-favored-nation rights. Furthermore, any legislation implementing the trade agreement with Canada would not operate to repeal the operation of § 2112(b)(3) in this case unless Congress expressly provided to that effect in the legislation. Finally, the United States’ international obligations with respect to most-favored-nation agreements have force even if such agreements were concluded after enactment of § 2112(b)(3).

Updated July 9, 2014