You are a trainee at NewLaw LLP. The United Kingdom's (UK) Government is considering whether the benefits of their World Trade Organization (WTO) membership outweigh the sacrifice in terms of the restriction on imposing trade barriers.

The Government is aware of the downsides of an overly protectionist attitude towards trade and the general benefits of free trade. However, given the current cost of living crisis, the Government is thinking about ways to reduce the cost of products and boost the country's economy. The Government has been in extensive negotiations with the US Government regarding concessions which could be granted with regards to trade. Both governments believe that this collaboration would benefit individuals that live in, or visit, the UK and US. The governments hope to work together to reduce domestic product prices and improve the competitive positions of UK and US companies across the globe.

The Government initially planned to impose a 35% tariff on all imported goods, with the exception of US products, to encourage consumers to purchase domestic products. US importers would be charged a 500 licensing fee and could then import as many goods as they wanted to. However, the Government have been advised that this would not be permissible under the WTO's rules and would likely cause significant political backlash.

The Government's current plan is to provide subsidies to domestic manufacturers, in an attempt to develop local industries. The Government plans to retain their plan to remove all trade barriers for US importers, with the exception of the 500 licensing fee.

The Government believe that this would cause consumers to purchase domestic products, rather than foreign products; thereby, improving the profits of domestic manufacturers. If manufacturers increase their profits, the tax they will pay to the Government will also then increase.

The Government have been advised that their existing plans may contravene some of the WTO's rules in GATT, in particular the principle of Most Favoured Nation. The Government therefore wish to clarify their understanding of the principle of Most Favoured Nation and have reached out to your firm for advice.

Sam Supervisor has asked that you draft a brief letter which he can forward onto the UK Government detailing the following:

1. What the principle of Most Favoured Nation is;
2. Whether an exception under Article XX GATT may theoretically apply; and
3. Whether the UK would have to respect the award/outcome of the Panel if a dispute went through the Dispute Settlement Understanding.

Please note, the Government do not need an extensive discussion regarding the case law under GATT at this stage.