Most Favored Nation Agreement

By December 13, 2020 Uncategorized

After the Second World War, tariff and trade agreements were negotiated simultaneously by all parties involved in the General Agreement on Tariffs and Trade (GATT), which finally culminated in the World Trade Organization in 1995. The WTO requires members to grant each other the status of “most favoured nation.” A “most favoured nation clause” is also included in most bilateral investment agreements concluded after the Second World War between capital-exporting and capital-importing countries. [Citation required] In the early 17th century, several trade agreements introduced the provisions of the most favoured nation. Negotiated in 1860 by Richard Cobden and Michel Chevalier, the Anglo-French Treaty, which established tariff concessions that expanded the world`s most favoured treatment, became a model for many subsequent agreements. With respect to the benefits of the North American Free Trade Agreement (NAFTA) free trade agreements, they are not subject to the MFN clause as long as the goods are only exchanged between the participating countries. In 1998, U.S. lawmakers began using the term “normal trade relations” rather than MFN to avoid confusion between MFN`s status and a particular or exclusive relationship. By the end of the Uruguay Round, developing countries were ready to meet most of the commitments demanded of industrialized countries. But the agreements have given them transition periods to adapt to the WTO`s more unusual and perhaps more difficult provisions, especially for the poorest least developed countries. A ministerial decision adopted at the end of the round stipulates that the best-off countries should accelerate the implementation of market access obligations imposed by the least developed countries and require more technical assistance. More recently, industrialized countries have begun to allow duty- and quota-free imports for almost all products from the least developed countries. In all of this, the WTO and its members are still learning.

The current Doha Development Agenda includes the concerns of developing countries about the difficulties they face in implementing the Uruguay Round agreements. Under current EU competition law, the MFN clauses are contrary to Article 101, point (i) when they cause significant disruption of competition in the UNION in the individual circumstances of the case. This is likely to be the case if the contracting parties have considerable market power. The disadvantage of MFN status is that the country must grant the same trade benefits to all other members of the agreement or to the World Trade Organization. This means that they cannot protect their country`s industries from cheaper foreign goods.