In 1979, as part of the
Tokyo Round
The Tokyo Round was a multi-year multilateral trade negotiation (MTN) between 102 nation-states that were parties to the GATT. The negotiations resulted in reduced tariffs and established new regulations aimed at controlling the proliferation of ...
of the
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its pre ...
(GATT), the enabling clause was adopted in order to permit trading preferences targeted at developing and least developed countries which would otherwise violate Article I of the GATT. Paragraph 2(a) provides a legal basis for extending the
Generalized System of Preferences
The Generalized System of Preferences, or GSP, is a preferential tariff system which provides tariff reduction on various products. The concept of GSP is very different from the concept of " most favored nation" (MFN). MFN status provides equal tre ...
(GSP) beyond the original 10 years. In practice it gave a permanent validity to the GSP. The enabling clause permits developed countries to discriminate between different categories of trading partners (in particular, between
developed,
developing and
least developed countries) which would otherwise violate Article I of the GATT which stipulates that no GATT contracting party must be treated worse than any other (this is known as
most favoured nation treatment). In effect, this allows developed countries to give preferential treatment to poorer countries, particularly to least developed countries. Paragraph 2(c) permits developing countries to enter into preferential trade agreements which do not meet the strict criteria laid out in GATT Article XXIV for regional free-trade agreements. It allows developing countries to enter into agreements which may be
non-reciprocal, or cover a very limited range of products (which would otherwise contravene the GATT).
External links
Legal text of the enabling clause
General Agreement on Tariffs and Trade
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