Most-Favored-Nation Clause

Commercial Treaties: Most-Favored-Nation Clause

The most-favored-nation clause stipulates that a nation will extend to other signatories treatment comparable to that accorded any other nation with which it has, or may have in the future, a commercial treaty. Under such a clause, all existing rights and privileges granted to other nations became immediately applicable to the signatory nations, and all rights and privileges granted to other nations in later treaties become applicable to the parties to the most-favored-nation agreement as soon as those treaties take effect. The clause may be either unconditional, that is, applicable to all subjects omitted from the negotiations as well as to those included; or conditional, that is, limited to particular items or areas of trade. The basis for restriction of the applicability of the clause is the theory, once widely held, that concessions granted to one nation in return for special advantages should not be granted to other nations without similar considerations. Although a conditional form of the most-favored-nation clause was at one time included in most commercial treaties made by the United States, the simpler unconditional and mandatory form has been used in all U.S. commercial treaties concluded since 1922. (1)

In this Section: Commercial Treaties, Commercial Treaties Conditions, Trade Agreements, Commercial Treaties History (including National Treatment, Protectionism and Freer Trade) and Most-Favored-Nation Clause.

Resources

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Notes and References

1. Encarta Online Encyclopedia

See Also