What is the MFN principle?
What is the MFN principle?
“Most-Favoured-Nation” (“MFN”) treatment requires Members to accord the most favourable tariff and regulatory treatment given to the product of any one Member at the time of import or export of “like products” to all other Members. This is a founding principle of the WTO.
What does the most-favored-nation principle of GATT Art 1 mean?
The basic idea of the MFN principle is that countries must not discriminate between trading part- ners; favorable treatment a country grants to its trading partner must also be granted to all other WTO members.
Which article of GATT defines MFN rule?
GATT Article XXVII obliges WTO Members to act in accordance with the rules of non-discrimination, including the MFN rule.
What is MFN in economics?
most-favoured-nation treatment (MFN), also called normal trade relations, guarantee of trading opportunity equal to that accorded to the most-favoured nation; it is essentially a method of establishing equality of trading opportunity among states by making originally bilateral agreements multilateral.
What is MFN in WTO example?
In international trade, MFN treatment is synonymous with non-discriminatory trade policy. For example, if a country belonging to the WTO reduces or eliminates a tariff on a particular product for one trading partner, the treaty’s MFN clause obligates it to extend the same treatment to all members of the organization.
What is the most-favored-nation principle how can it be applied in trade?
The most favoured nation principle prohibits discrimination in the application of customs duties and charges, subject to important exceptions and limitation. It also applies to any advantage, privilege, favour or immunity granted to a product which originates in another member state.
Which countries are MFN?
Customs Tariff 2017 List of Countries and Applicable Tariff Treatments
| Country Name | MFN | LDCT |
|---|---|---|
| Afghanistan | yes | yes |
| Albania | yes | no |
| Algeria | yes | no |
| American Samoa | yes | no |
What are the benefits of MFN?
Benefits of the Most-Favored-Nation Clause
- Increases free trade. The most-favored-nation clause increases trade creation and decreases trade diversion, essentially encouraging more free trade between countries.
- Equal treatment of disadvantaged countries.
- Simplifies trade laws.
What are the exceptions to MFN principle?
There are two exceptions to MFN’s application: When WTO members conclude free trade agreementsor set up customs unions, conditions regulating the trade between the parties to the free trade agreement or the customs union may be different (e.g. more favourable) to those applied to trade with the rest of WTO membership.
What is the meaning of most favored nation?
The most favoured nation (MFN) principle is based on the idea that countries should treat all their trade partners equally—that no one country should be “more favoured.” It means no country should give special treatment to goods or services coming from one particular trading partner.
How the concept of MFN give advantage to the developed countries?
The most-favored-nation clause increases trade creation and decreases trade diversion, essentially encouraging more free trade between countries. It allows more efficient outcomes since the lowest cost producers can export goods to areas with the highest demand without government intervention.
