MFN full form – A Most-Favoured-Nation ( MFN) provision allows a nation to provide all other member countries of the World Trade Organization with any concessions, privileges, or immunities given to one nation in a trade agreement. Although its name implies favoritism towards another country, it denotes all countries’ fair treatment.
MFN treatment is synonymous with non-discriminatory trade policy in foreign trade because it guarantees fair trade between all WTO member nations rather than special trading rights. For example, if a nation lowers tariffs for one nation by 5 percent, the MFN clause states that all WTO members will have their tariffs reduced in that country by 5 percent.
Leaders of the WTO ( World Trade Organization) are agreed to award each other MFN status. For trade agreements, it is very beneficial as it helps any other nation to have the greatest access without quotas and tariff restrictions to other countries ‘ markets.
As per trade experts, a country that achieves the MFN status may experience the following benefits:—
- For small or developing countries, MFN is beneficial since they can gain access to larger global markets
- It lowers the export costs of MFN countries and thus enables their products to be highly competitive.
- It lowers customs duties on goods imported.