Most-favored-nation

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Most Favored Nation

Summary of Most Favored Nation

A privilege granted to a nation to have customs duties levied upon its products at the lowest rate offered to any other nation. Customarily, the extension of most favored nation status is reciprocal. See tariff (Customs).

(Main Author: William J. Miller)

Conditional MFN and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Conditional Most-favored-nation: The granting of most favored-nation treatment subject to the recipient country’s compliance with specific terms or conditions. Because all members of GA TT are expected to accord unconditional MFN treatment to other members, conditional MFN is normally applied only to countries that do not belong to GATT.

Most-Favored-Nation (MFN) and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Most-Favored-Nation (MFN): The principle according to which each signatory of a trade agreement will apply its trade restrictions or concessions equally among all other signatories. MFN is the fundamental principle of the GATT; all Contracting Parties agree to apply MFN treatment to one another, although exceptions exist –for example, in granting preferential treatment to developing countries, or for members of a customs union or free trade area (see waiver). When a country agrees to reduce tariffs on a particular product imported from one country, the tariff reduction automatically applies to imports of that product from any other country eligible for MFN treatment. Because of this, MFN serves as a powerful inducement for countries to join GA 1T , as well as a facilitator of trade liberalization generally. MFN terminology dates from the sixteenth century –when it was used in commercial agreements according the most advantageous customs treatment extended by a government to any trading partner, i.e., to the “most- favored nation” –but in modern usage it refers to nondiscrimination in international trade relations. Despite occasional misinterpretation in press reports, MFN does not entail “favored” (i.e., preferential) treatment of a trading partner.

In the United States

For information about Most-favored-nation in the context of international trade, click here

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See Also

Further Reading

  • Information about Most-favored-nation in the Encyclopedia of World Trade: from Ancient Times to the Present (Cynthia Clark Northrup)

Most-favored-nation and the Laws of International Trade

Most-favored-nation duty rates

Labeling Requirements Trade Regulations

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