What is ‘Most Favoured Nation’ Status?

Q What is the context  ?

A The United States, the European Union, Britain, Canada and Japan are to move jointly to revoke Russia’s “most favoured nation” (MFN) status over its invasion of Ukraine.

Q What is Most Favoured Nation status?

A 

• The World Trade Organization’s 164 members commit to treating other members equally so they can all benefit from each other’s lowest tariffs, highest import quotas and fewest trade barriers.
• This principle of non-discrimination is known as most favoured nation (MFN) treatment.
• There are some exceptions, such as when members strike bilateral trade agreements or when members offer developing countries special access to their markets.
• For countries outside the WTO, such as Iran, North Korea, Syria or Russian ally Belarus, WTO members can impose whatever trade measures they wish without flouting global trading rules.

 Q What is procedure for removal of  MFN status ?

A 

• There is no formal procedure for suspending MFN treatment and it is not clear whether members are obliged to inform the WTO if they do so.
• India suspended Pakistan’s MFN status in 2019 after a suicide attack by a Pakistan-sponsored group.
• Pakistan never applied MFN status to India.

Q What does losing MFN status mean?

A

• Revoking Russia’s MFN status sends a strong signal that the US and its Western allies do not consider Russia a economic partner in any way, but it does not in itself change conditions for trade.
• It does formally allow the Western allies to increase import tariffs or impose quotas on Russian goods, or even ban them, and to restrict services out of the country.
• They could also overlook Russian intellectual property rights.
• Ahead of MFN status removal, the United States had already announced a ban on imports of Russian oil and gas.