The World Trade Organization (WTO)2025 part 1

23rd January, 2025

The World Trade Organization (WTO) has emphasized that the Most-Favored-Nation (MFN) principle remains central, despite the growing prevalence of preferential trade agreements (PTAs) since the 1990s.

About MFN

The MFN principle ensures that countries do not discriminate against their trading partners. In simpler terms, if a country offers a special advantage (such as a reduced customs duty rate for a product) to one WTO member, it must extend the same benefit to all other WTO members.

This principle is mainly enshrined in Article I of the General Agreement on Tariffs and Trade (GATT) 1994. MFN also holds importance in the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Implementation Mechanism
WTO member countries automatically grant MFN status to one another unless stated otherwise in a specific agreement or schedule notified to the WTO by the member.

India has extended MFN status to various countries.

Exceptions to the MFN Principle

1. Trade Agreements: This includes Regional Trade Agreements (RTAs) and Preferential Trade Arrangements (PTAs). For example, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

2. Generalized System of Preferences (GSP): Under this scheme, developed countries may provide preferential tariff treatment for imports from developing and least developed countries (LDCs).

3. Other Exceptions: Anti-dumping duties, Countervailing duties, etc.

Key Terms

• Anti-dumping duties: Additional tariffs imposed on imported goods believed to be priced below their fair market value in the importing country.

• Countervailing duties: Extra tariffs placed on imports that are subsidized and are harming domestic industries in the importing country.

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