MFN - Most Favoured Nation

MFN - Most Favoured Nation

Non-discriminatory trade policy commitment offered by one country to another on a reciprocal basis. Both countries apply that lowest import-duty and quota-restrictions on imports from each other which they apply on the similar imports from any other country. Under Article I of the General Agreement On Tariffs And Trade (GATT) and its successor World Trade Organization (WTO), all signatory states must extend this treatment to one another. common markets, customs unions, and free trade areas, however, are exempt from MFN provisions.

India revokes Pak.’s MFN status day after terrorist strike in J&K

Context

• India has revoked the Most Favoured Nation (MFN) status of Pakistan (bestowed in 1996) and warned of more measures in response to its support for terrorist groups targeting India.
• While Prime Minister Narendra Modi asserted that those responsible for the terrorist attack in Jammu and Kashmir would be given a “befitting reply,” the Opposition rallied behind the government in a show of solemn unity.

What does Most Favoured Nation mean?

• While the term suggests special preference for the country given MFN status, it actually means it would be treated equally as all others.
• According to the World Trade Organisation rules, countries cannot normally discriminate between their trading partners.
• If one country is granted a trade concession such as, for example, lower import duties, then all WTO members must be extended the same concessions. This principle is known as the Most Favoured Nation treatment. Despite repeated promises, Pakistan has never granted MFN status to India.

What does revoking MFN mean?

• Revoking it means India can levy whatever import tariffs it wants. India can now make it very expensive for Pakistan to export its goods or services to India.

Will this hurt Pakistan?

• So far, India has only revoked the MFN status. It has not altered the import duties on Pakistan. However, if it does hike them, then this will likely have an impact on that country.
• That said, the scale of that impact is questionable. India’s total trade with Pakistan stood at $2.4 billion in 2017-18, with just $488.56 million of this being imports from Pakistan, according to Commerce Ministry data.