Most Favored Nation

Despite its name, the most favored nation (MFN) clause of the General Agreement on Tariffs and Trade (GATT) does not mean that any one nation receives preference over another nation with regard to trade. Instead, members of the GATT are committed that products originating in one nation will receive the same treatment as products originating in any other nation. Discrimination and preferences are prohibited ("WTO," n.d., p. 2). However, Article I, which contains the MFN clause, also provides some exceptions to that clause, including customs unions and free trade areas. In general, however, the goal of MFN status is to give equal treatment to all countries and their goods and to prohibit any one nation from being favored over any other nation. In this sense, all MFN nations are "most favored."

The United States grants MFN status to nearly all of its trading partners: in 1997, only seven nations did not enjoy MFN status ("Ask Dr. Foreign," 1997, p. 23). However, even those nations which are granted MFN status may not have unconditional status. Waivers have been obtained by the president for a number of countries, including China, which otherwise would not be eligible for MFN under US rules. Such countries can enter into a bilateral trade agreement with the United States, or may be determined to be in compliance with the Jackson-Vanik amendment of the 1974 Trade Act (this amendment has implications for free emigration). It is under these conditions that China has bee

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ties of engaging in international trade, and can begin to create the internal infrastructure required for building long-term successful international trade. If MFN status is granted to nearly every country with which the United States trades, then the withholding of that status results in unfair trade practices in those few isolated cases. As a business professional in an increasingly international marketplace, one must determine whether MFN status for those countries currently lacking unconditional status is in the best interest of the company. If the company wants to import from these nations, then definitely the MFN status takes on significance. Through MFN, the cost of importing goods is reduced as tariffs are cut. On the other hand, business professionals which might want to export to non-MFN countries may want to encourage those countries to open their own markets to the American goods. In this way, the businesses may then lobby for MFN status on behalf of those nations in order to encourage the markets to remain open. The issue of MFN illustrates how closely intertwined politics and commerce have become over the last decades. References Ask Dr. Foreign Relations. (1997, June 23). Time, p. 23. Most Favored Nati

Category: Economics - M