Principal supplier rule
Principal supplier rule: a major feature of the system governing tariff negotiations in the GATT, particularly in the earlier negotiating rounds. Under this rule, requests for tariff concessions to a particular GATT member could only be made by the principal supplier of the product in question. The rule is based on the assumption that the country making the concession will only be able to get compensated for it once, and that the country invited to make the concession will be able to maximize its returns by dealing with the largest supplier. It is also meant to reduce the unintended benefits free riders may otherwise obtain. In practice, reliance on this system alone led to the effective exclusion of smaller and developing countries from the negotiating process. The method of linear tariff reductions in the Kennedy Round and the Tokyo Round, as well as the practice of negotiations across broader product categories, such as the Information Technology Agreement, have reduced the importance of the principal supplier rule. See also initial negotiating rights, principal supplying interest and sectoral trade negotiations.
Source: http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf
Web site to visit: http://ctrc.sice.oas.org
Author of the text: W. Goode
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