Reading Room Document

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

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). The OLC does not provide release dates for its opinions, so the release date listed is the date on which the opinion was authored. The original opinion is available at www.justice.gov/file/23986/download.

August 31, 1987