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Economy and Finance

Economy and Finance

What is Most favored nation (MFN)?

28 Mar 2023 Zinkpot 151
  1. Most Favoured Nation treatment (MFN) also called normal trade relations is based on the idea that countries should treat all their trade partners equally, that no one country should be more favoured.
  2. It means that one WTO member country should extend the same benfits to all other member nations what it gives to it's most favored one. E.g If India extends special privileges to Japan, it should be extended to all nations including Pakistan.
  3. It means no country should give special treatment to goods or services coming from a particular trading partner. It is synonymous with non-discriminatory trade policy. 
  4. In other words, the country which is the recipient of this treatment must nominally receive equal trade advantages as the ‘most favoured nation’ by the country granting such treatment.
  5. The World Trade Organization (WTO) has made the most favoured nation principal part of its rules. WTO members are not allowed to favour any one country with, for example, lower tariffs on particular products without giving all members the same benefits.
  6. MFN allows smaller countries, in particular, to participate in the advantages that larger countries often grant to each other, whereas on their own, smaller countries would often not be powerful enough to negotiate such advantages by themselves.
  7. As MFN clauses promote non-discrimination among countries, they also tend to promote the objective of free trade in general.
  8. However MFN status can also be withdrawn in case of war or contingency.

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