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Unit 1 Handwritten Notes

The Most Favoured Nation (MFN) clause is a key principle of the WTO that mandates non-discrimination among member countries in trade. It requires that any trade advantage given to one member must be extended to all others immediately and unconditionally. The MFN clause aims to ensure equal trading opportunities, prevent discrimination, and promote transparency, with certain exceptions for Free Trade Agreements and preferential treatments for developing nations.

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55 views2 pages

Unit 1 Handwritten Notes

The Most Favoured Nation (MFN) clause is a key principle of the WTO that mandates non-discrimination among member countries in trade. It requires that any trade advantage given to one member must be extended to all others immediately and unconditionally. The MFN clause aims to ensure equal trading opportunities, prevent discrimination, and promote transparency, with certain exceptions for Free Trade Agreements and preferential treatments for developing nations.

Uploaded by

20lw1h1031
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Most Favoured Nation (MFN) Clause – 10 Marks

Introduction:
The Most Favoured Nation (MFN) clause is one of the fundamental principles of the World
Trade Organization (WTO). It is enshrined under Article I of the General Agreement on
Tariffs and Trade (GATT), 1947. This principle ensures non-discrimination among member
countries in international trade.

Meaning and Concept:


Under the MFN clause, if a country offers a trade advantage (like a lower tariff, less
restriction, or favourable regulation) to one WTO member, it must offer the same advantage
to all other WTO members immediately and unconditionally.

Example:
If India agrees to reduce import duty on machinery from Japan to 5%, it must apply the
same 5% rate for all WTO members, including the USA, Germany, and others — without
demanding anything in return.

Objectives of MFN Clause:


1. To ensure equal trading opportunities for all WTO members.
2. To prevent discrimination in trade relationships.
3. To encourage multilateralism over bilateral favoritism.
4. To ensure transparency and predictability in trade policies.

Legal Basis:
Article I of GATT states: “Any advantage, favour, privilege or immunity granted to a product
originating in or destined for any country shall be accorded immediately and
unconditionally to the like product originating in or destined for all other contracting
parties.”

Exceptions to MFN Rule:


1. Free Trade Agreements (FTAs) – Like SAFTA, EU, or NAFTA
2. Generalized System of Preferences (GSP) – Preferential treatment to developing countries
3. Special and Differential Treatment – For Least Developed Countries (LDCs)

Conclusion:
The MFN clause is a core principle of WTO law, aiming to create a level playing field in
international trade. It promotes fairness, equality, and transparency among all WTO
member nations, especially protecting the interests of developing countries.

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