Most favoured nations

A status or level of treatment accorded by one state to another international trade.

1. Prestige Institute of Management & Research Presented By – Guided By – Isha Joshi Prof. Nidhi Sharma MOST FAVOURED NATIONS

2. INTRODUCTION “Most Favoured Nation” is a status or level of treatment accorded by one state to another international trade. Recipient country must receive equal trade advantages as the MFN by the country granting such treatment (trade advantages include low tariffs or high import quotas)

3. Together with the principal of “National Treatment”, MFN is one of the cornerstones of WTO trade law. Today’s concept of MFN starts to appear in the 18 th century, which is when the division of Conditional and Unconditional most favoured nation status also began

4. MOST FAVOURED NATIONS CONDITIONAL MFN STATUS UNCONDITIONAL MFN STATUS

5. WHY “MOST-FAVOURED ”? Sounds like contradiction suggesting special treatment But, actually means non – discrimination – treating virtually everyone equal Each member treats all other members equally as trading partners If a country improves the benefits given to one trading partner, it has to provide the same “best” treatment to all other WTO members.

6. ADVANTAGES CRITICALLY IMPORTANT FOR SMALLER & DEVELOPING COUNTRIES – Larger market access Lower export cost due to low tariff barriers Helps in making the product competitive Receive the benefits of economies of scale Increases the country’s economic growth

7. It cuts down on red tape . Different tariffs and customs don’t have to be calculate for each import since they all are the same. Reduces the ill effects of trade protectionism.

8. Due to MFN status, countries’ cannot protect their industries from cheaper goods produced by foreign countries Some get wiped because they can’t compete Without tariffs, some countries subsidize their domestic industries – allows them to export at incredibly cheaper rates (also known as DUMPING) DISADVANTAGES

9. EXCEPTIONS Rule should be relaxed to accommodate the needs of developing countries UNCTAD (1964) has sought to extend “preferential treatment” to the exports of developing countries Trade agreements usually allow for exceptions to allow for “regional economic integrations”