Question 1

The principle behind the MFN rule stated that if a member of WTO A negotiates with country B, which may or may not be a WTO member to reduce tariff on a product to X percentage, this same rate must also be extended to all other WTO members.

• Article I.1 of the General Agreement on Tariffs and Trade (GATT) embodied the principle of the Most Favoured Nation (MFN) for the world to trade. Outline MFN’s political and economic rationales in the GATT context. You should expand your answers using illustrations and examples wherever appropriate.
• The risk of free-riding is a challenge associated with the principle of MFN. Explain the mechanism of MFN resulting in free-riding and how this can be circumvented. You should provide an example and support your answer with reference to the GATT Article as appropriate.

Question 2

Assuming you are now working as a Senior Manager for International Business in a Singapore-owned and operated engineering firm (Company A) that specializes in the supply of “design” and “assembled” in Singapore air-conditioning system (HS code 84158300) for large residential and commercial development. Your immediate task is to research and propose 3 key export markets where the cost of goods is the key to competing for businesses to thrive applying FTA.

• Show a listing of Singapore’s Preferential Trade Agreements within the context of the ASEAN FTA.
• Assuming the cost of goods is $100 per unit, and the key export markets identified are Indonesia, Vietnam, and the Philippines, calculate the tariff savings for Company A in value and percentage per unit by applying ACFTA. You should quote the source of the rate applied and present the result in a table format accordingly.
• Due to Company A importation of components from lower-cost producers and value-added in design and assembly, the export process method in relation to the Rules of Origin (ROO) applies. Explain how the ROO process works and illustrate how ROO improves the living standard for society in lower-cost-producing countries.