mostfavourednations-advantages and disadvantages

why most favored, advantages, disadvantages

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

2. INTRODUCTION
“Most FavouredNation” 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 favourednation
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”