MOST FAVOURED NATION

About: 

• Most Favored Nation (MFN) status is an economic position in which a country enjoys the best trade terms given by its trading partner. That means it receives the lowest tariffs, the fewest trade barriers, and the highest import quotas (or none at all). 
  
  
• In the WTO it actually means non-discrimination — treating virtually everyone equally. 
  • Each member treats all the other members equally as “most-favoured” trading partners. 
    
    
  • If a country improves the benefits that it gives to one trading partner, it has to give the same “best” treatment to all the other WTO members so that they all remain “most-favoured”. 
    
    
  
  
  
• The Most Favored Nation clause in the two countries' free trade agreements confers that status. That clause is also used in loan agreements and commercial transactions. 
  
  
• Advantages: 
  • MFN status is critically important for smaller and developing countries for several reasons. It gives them access to the larger market. 
    
    
  • It lowers the cost of their exports since trade barriers are the lowest given. That makes their products more competitive. 
    
    
  
  
  
• Disadvantages: 
  • The downside of Most Favored Nation status is the country must also grant the same to all other members of the agreement or the World Trade Organization. 
    
    
  • This means they cannot protect their country's industries from cheaper goods produced by foreign countries.