MFN (Most Favored Nation) status

Extracted Attributes

• Scope

  International economic relations, international politics, international trade

• Impact

  Prevents favoritism, makes trade more stable and predictable

• Purpose

  Ensures equal trade advantages (e.g., low tariffs, high import quotas)

• Legal Basis

  First article of GATT; priority in GATS (Article 2) and TRIPS (Article 4)

• Key Principle

  Non-discriminatory trade policy

• Alternative Terms

  Most favored customer, best-in-class pricing (in other contexts)

• Application Areas

  Goods, services, tariffs

Timeline

• The first bilateral MFN treaties were established, often setting up exclusive clubs among a country’s 'most-favored' trading partners. (Source: Web Search)

  Historical

• The MFN principle, under GATT and later the WTO, evolved to ensure that each member country treats its fellow members equally, making the 'MFN club' non-exclusive. (Source: Web Search)

  Post-GATT/WTO

• Donald Trump's administration issued an Executive Order on pharma benefits, aiming to use MFN status to lower drug prices in the United States. This policy sparked debate regarding potential consequences for pharmaceutical R&D and the role of Pharmacy Benefit Managers (PBMs). (Source: Related Document d21f5f84-dde9-4973-a073-9504b1796edb)

  Undated (Trump Administration)

Most favoured nation

In international economic relations and international politics, most favoured nation (MFN) is a status or level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must nominally receive equal trade advantages as the "most favoured nation" by the country granting such treatment (trade advantages include low tariffs or high import quotas). In effect, a country that has been accorded MFN status may not be treated less advantageously than any other country with MFN status by the promising country. There is a debate in legal circles whether MFN clauses in bilateral investment treaties include only substantive rules or also procedural protections. The members of the World Trade Organization (WTO) agree to accord MFN status to each other. Exceptions allow for preferential treatment of developing countries, regional free trade areas and customs unions. Together with the principle of national treatment, MFN is one of the cornerstones of WTO trade law. "Most favoured nation" relationships extend reciprocal bilateral relationships following both the General Agreement on Tariffs and Trade (GATT) and WTO norms of reciprocity and non-discrimination. In bilateral reciprocal relationships a particular privilege granted by one party only extends to other parties who reciprocate that privilege, while in a multilateral reciprocal relationship the same privilege would be extended to the group that negotiated a particular privilege. The non-discriminatory component of GATT/WTO applies a reciprocally negotiated privilege to all members of GATT/WTO without respect to their status in negotiating the privilege. Most favoured nation status is given to an international trade partner to ensure non-discriminatory trade between all partner countries of the WTO. A country which provides MFN status to another country has to provide concessions, privileges, and immunity in trade agreements. It is the first clause in the GATT. Under rules of WTO, a member country is not allowed to discriminate between trade partners and if a special status is granted to one trade partner, the country is required to extend it to all members of WTO. In a nutshell, MFN is a non-discriminatory trade policy as it ensures equal trading among all WTO member nations rather than exclusive trading privileges.

Web Search Results

• Most favoured nation - Wikipedia

  In international economic relations and international politics, most favoured nation (MFN) is a status or level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must nominally receive equal trade advantages as the "most favoured nation" by the country granting such treatment (trade advantages include low tariffs or high import quotas). In effect, a country that has been accorded MFN status may not be [...] Most favoured nation status is given to an international trade partner to ensure non-discriminatory trade between all partner countries of the WTO. A country which provides MFN status to another country has to provide concessions, privileges, and immunity in trade agreements. It is the first clause in the GATT. Under rules of WTO, a member country is not allowed to discriminate between trade partners and if a special status is granted to one trade partner, the country is required to extend it [...] As per the obligation under their World Trade Organization (WTO) treaties of accession, the member countries of WTO automatically extend most favoured nation (MFN) status to each other unless otherwise specified in the agreement or schedule notified to the WTO by that member country. Pursuant to that provision, India has extended MFN status for goods to most member countries of WTO.[citation needed]

• most favored nation | Wex | US Law | LII / Legal Information Institute

  Most favored nation refers to a status conferred by a clause in which a country promises that it will treat another country as well as it treats any other country that receives preferential treatment. Most favored nation clauses are frequently included in bilateral investment treaties. Under such a clause, if the host state lowers a tariff for one trading partner, it must lower it for all trading partners. The purpose of the most favored nation clause is to ensure equality between trading [...] The concept has been incorporated into other legal fields. In domestic contract law, most favored nation clauses operate similarly and are especially common in oil and gas contracts. In tort law, most favored nation status refers to provisions in settlement agreements that requires a defendant to pay the difference between the lesser settlement amount with the most favored nation provision and any future higher paying settlement with another claimant. [...] Cornell University insignia # most favored nation

• Most Favored Nation (MFN) In International Trade Explained

  The most favored nation (MFN) principle is an important rule in global trade. It acts as a non-discriminatory trade policy, meaning a country must give the same trade terms to all its partners. If one country receives a benefit, like a lower tariff, then all trading partners should get the same. This rule helps prevent favoritism and makes trade more stable and predictable. [...] In different contexts, MFN might be called “most favored customer” or “best-in-class pricing.” These terms reflect the same idea: fair and equal treatment for everyone involved. MFN applies across goods, services, and tariffs. For goods, it ensures that all countries get equal tariff rates, which benefits exporters. For services, it gives foreign providers the same opportunities as local ones. When it comes to tariffs, MFN requires equal rates on imports from all partners, which helps reduce [...] This means that whenever Country A gives a trade benefit to one partner, it must extend that benefit to all partners with MFN status. So, if Country A offers a reduced steel tariff to Country B, Country C automatically receives the same lower rate. This rule keeps trade fair and prevents favouritism, building stable and equal trade relationships between countries. ## Historical Background of the MFN

• Understanding the WTO - principles of the trading system - WTO

  1. Most-favoured-nation (MFN): treating other people equallyUnder the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members. [...] This principle is known as most-favoured-nation (MFN) treatment (_see box_). It is so important that it is the first article of the General Agreement on Tariffs and Trade (GATT), which governs trade in goods. MFN is also a priority in the General Agreement on Trade in Services (GATS) (Article 2) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Article 4), although in each agreement the principle is handled slightly differently. Together, those three agreements [...] Most-favoured nation (MFN) status did not always mean equal treatment. The first bilateral MFN treaties set up exclusive clubs among a country’s “most-favoured” trading partners. Under GATT and now the WTO, the MFN club is no longer exclusive. The MFN principle ensures that each country treats its over—140 fellow-members equally. But there are some exceptions ... Image 10: show previous pageImage 11: show next page #### About WTO

• Most-Favored-Nations (MFN) Clause: Treating Trading Partners ...

  The most-favored-nation clause requires countries to offer the same trade terms to all trading partners, with notable exceptions under WTO rules.