Problem: Germany is a developed country and Egypt is a developing country. Both countries are member states of World Trade Organisation (WTO). Egypt imposes a 10% tariff to all agricultural products from other countries. Recently, Egypt established a free trade area (FTA) with Algeria and Tunisia who are also the member states of WTO. No tariff is imposed for agricultural products that are traded within the said FTA. Germany used to be one of the major exporters to Egypt for agricultural products. After Egypt has established the said FTA, customers in the country now prefer to purchase agricultural products that are from the member states of the said FTA, which adversely affect the export of Germany for agricultural products. Germany would like to commence a proceeding against Egypt under the WTO dispute settlement system on the ground of violation of most-favoured-nation principle.
(a) Explain the most-favoured-nation principle. Illustrate three (3) exceptions of the most-favoured-nation principle based on the General Agreement on Tariffs and Trade (GATT).
(b) Indicate whether Germany is likely to succeed in the proceeding.