Back to Basics: Reciprocity in Multilateral Trade Negotiations

The principal of reciprocity practiced in the GATT/WTO multilateral trading system has a number of important characteristics.

First, the reciprocal trade negotiations are deemed to advance trade liberalization, not the other way around. GATT Article XXVIII bis on tariff negotiations states:

The contracting parties recognize that customs duties often constitute serious obstacles to trade; thus negotiations on a reciprocal and mutually advantageous basis, directed to the substantial reduction of the general level of tariffs and other charges on imports and exports … are of great importance to the expansion of international trade. The CONTRACTING PARTIES may therefore sponsor such negotiations from time to time.

Unqualified reciprocity could become a double-edged sword: It may trigger an increase in tariff rates (“I raise my tariffs as you raise yours.”) or a reduction in customs duties (“I lower mine as you lower yours). The legal text of GATT Article XXVIII bis appears to limit reciprocity to lowering tariffs.

Second, reciprocity is pursued in exchange for concessions that allow marginal differences in the latest schedules of commitments, rather than strictly providing equal market access or identical tariff rates with trading partners. While GATT Article XXVIII still permits tariff renegotiations, it emphasizes that WTO members “shall endeavour to maintain a general level of reciprocal and mutually advantageous concessions not less favourable to trade than that provided for in this Agreement prior to such negotiations.” Thus, the baseline for balance of concessions should be the latest market access commitments bound at the WTO.

Third, in practice, reciprocity in concessions among trading partners tend to be loose, rather than precise. This is in line with what international relations scholar Robert Keohane coined “diffuse reciprocity,” as opposed to “specific reciprocity.” GATT has a clause on most-favored nation (MFN) treatment in Article I, which requires equal treatment of all trading partners. This principle of non-discrimination practically hinders setting one’s own tariff rates at the level bilaterally identical to those of each trading partner.

The economic theory of international trade shows that a country gains from trade by unilaterally dropping tariffs, without waiting for reciprocal tariff cuts by its trading partners, at least for small economies. Among Asian economies, Hong Kong, China and Singapore hold their MFN tariff rates at 0% on average as their own autonomous policy. Georgia’s average MFN tariff rate is also low at 1.4%, due to unilateral reforms that built further upon its earlier WTO accession commitments.

However, other economies still could not achieve free trade or nearly free trade. While a country as a whole gains from tariff cuts, thanks to lower prices for consumers, trade liberalization also brings about losses to import-competing industries. By conditioning wider market access abroad upon opening of the home market, reciprocity can mobilize the interest of export businesses as a counterweight against that of local industries that compete with imported products and resist market opening. Thus, reciprocity would allow a higher degree of trade liberalization than what could be achieved by unilateral reform alone.

Further, reciprocity can restrain the so-called terms-of-trade externality. While a small economy always gains from unilateral tariff cuts, the same cannot always be said for large economies that can affect terms of trade, or the ratio between the prices of exports and imports. Lower tariffs could result in efficiency gains, but at the same time, worsen terms of trade. To avoid this scenario, large economies may see it beneficial to raise tariffs unilaterally, possibly triggering the same response from its trading partners. In theory, such trade wars could be avoided through a coordinated and reciprocal exchange of concessions that restore efficiency gains from tariff cuts without adversely affecting terms of trade.

While real-world relevance of terms of trade externality has been often questioned, the role of reciprocity to mobilize export interests may be of practical interest. Unfortunately, however, the present GATT rule excludes developing countries from the reciprocity principle as part of their special and differential treatment. GATT Article XXXVI:8 states “developed contracting parties do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of less-developed contracting parties.” In effect, developing countries were partially allowed to free-ride tariff concessions made by developed countries.

Average tariff levels of developing countries tend to be higher than those of developed countries. WTO bound and the MFN tariff rates of advanced economies that led past GATT rounds, known as “Quad” (Canada, the European Union, Japan, and the United States), averaged 4.7% and 4.0% in 2024. Meanwhile, those of emerging market economies in BRICS, that are also WTO members, stood at 24.2% and 8.6% (see Table 1). Developing countries seem to have missed out on some of the benefits from reciprocity.

Table 1: Tariff Strictures of Selected WTO Members (%)

Notes: Only WTO members are presented in the table. Whereas original "BRICs" stood for Brazil, the Russian Federation, India, and the People's Republic of China, the current "BRICS" has broader membership. 
Article XII members are economies that joined the multilateral trading system after establishment of the WTO in 1995. WTO's Article XII Members that belong to BRICS include the PRC, the Russian Federation, and Saudi Arabia. 
*WTO Bound refers to the maximum duty level on a product listed in a WTO member's schedule of commitments. 
Source: WTO, International Trade Centre, and United Nations Conference on Trade and Development. 2025. World Tariff Profiles 2025. WTO.

Developing countries are not entirely forced to commit to non-reciprocity. The legal text of GATT only refers to expectation on the part of developed countries, not obligation on developing countries. Thus, developing countries are free to pursue reciprocity at their own will and retrieve its benefits. In September 2025, the PRC announced the renouncement of special and differential treatment for it as a developing country. As WTO Director General Ngozi Okonjo-Iweala stated, PRC’s initiative marked “a pivotal moment for the WTO.” It indeed did, particularly at the crossroad of present debate on reciprocity.

General Agreement on Tariffs and Trade (GATT). 1986. Address by Mr. Arthur Dunkel, Director-General, GATT at Ostasiatisches Liebesmahl. Hamburg, 5 March 1982. News Release. GATT/1312. 6.

J.N. Bhagwati and D.A. Irwin. 1987. The Return of the Reciprocitarians — US Trade Policy Today. World Economy, 10 (2): 109–130.

R.E. Baldwin. 2006. Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade. World Economy. 29. 1451–1518.

World Trade Organization (WTO), International Trade Centre, and UN Conference on Trade and Development. 2025. World Tariff Profiles 2025. WTO.