Most-favoured-nation

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In the formal usage in international trade agreements, most-favoured-nation (MFN) status means that when a country grants a trade advantage, as a reduced tariff, that advantage, in the words of the 1947 General Agreement on Tariffs and Trade (GATT 1947) "shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties." [1] "Other contracting parties" refer to other countries granted MFN status.

It is a basic principle of free trade agreements among countries. The term is used in business agreements, where, for example, a powerful buyer such as the General Services Administration (GSA) of the U.S. government requires that it always receive the lowest price given to any customer of the seller. Typically, countries have MFN agreements with many other countries.

In trade negotiations, the granting of MFN can be a lever against protectionist import policies.

References

  1. , Article I: General Most-Favoured-Nation Treatment, The General Agreement on Tariffs and Trade (GATT 1947), World Trade Organization, 1947