Most Favoured Nation

Prime Minister Narendra Modi has called for a review meeting on Thursday in which Pakistan's MFN (Most Favoured Nation) status is likely to be withdrawn by India over the Uri attack. Most Favoured Nation principle is one of the most fundamental principles of the WTO. It requires member states to accord the most favourable tariff and regulatory treatment given to the product of any one member and/or non member at the time of export or import of “like products” to all other WTO members.

Under the Most Favoured Nation rule, should WTO member state A agree in negotiation with state B, which needs not to be a WTO member, to reduce the tariff on the same product X to five percent, this same tariff rate must apply to all other WTO members as well. In other words, if a country gives favourable treatment to one country regarding a particular issue, it must handle all members equally regarding the same issue, according to legalserviceindia.com.

Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods traded within the group discriminating against goods from outside. Or they can give developing countries special access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries.

And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions. In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners whether rich or poor, weak or strong.