
What is ‘Most Favoured Nation’ Status?
Apr 20, 2022
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.