INTERNATIONAL LAW

Most Favoured Nation

In international economic relations and international politics, most favoured nation (MFN) is a status or level treatment accorded by one state to another in international trade. The members of the World Trade Organization (WTO) agree to accord MFN status to each other.*

Having positive and negative meaning, Article 1 of General Agreement on Tariffs and Trade (GATT) is non discriminatory treatment based on principle of non discrimination. In positive sense, it provides for treating all member countries as their most favored national. In negative sense, it provides that there should be no discrimination among member countries on any grounds.

For e.g. If X, Y & Z are members of WTO. X does not charge any import duty on Y’s products as X is having good relations with it and charges a good percentage of import duty on Z’s products. Here there is discrimination between countries. Such discrimination is not allowed.



This principle is valid for similar products. The exceptions to this are that as even if one is violating MFN treatment it will not be considered as violation. Article 21 and Article 22 talk about such exceptions. As in case of national emergency or natural calamity like tsunami, earthquakes etc., also in case of regional arrangements, particular countries may come together like European countries, SAARC, ASEAN etc. or transitional arrangements like TRIPS and Public Health Agreement, 2000.


* http://www.en.wikipedia.org



Cases:
CUBA, 1949: in this case, President of CUBA declared a policy for concessional taxes to contracting parties to Cuba. Cuba lost the case as this was discriminatory.

AUSTRALIA CASE: Australia imposed two different tax rates on chemicals, Ammonium Nitrate and Sodium Sulphate. As both being chemicals, this was challenged by one member country for having different tax structures.
Australia responded that it does not violate MFN as both are different chemicals having different characteristic nature.

SPAIN CASE: Spain declared different tax structures for coffee growing in South and those in North. Spain further removed this policy as one contracting member took action against the policy. As different prices can be charged rather different taxes.

PRIYAM KAPOOR

3RD YEAR BA.LL.B.