Most-Favored-Nation Status

Most-Favored-Nation Status 

one of the most important principles of international law for the regulation of economic and commercial relations between states.

Most-favored-nation status signifies that each of the negotiating states is obliged to extend to the other certain specified rights, advantages, privileges, and preferences as favorable as those extended or to be extended in the future to any third state. Commercial treaties frequently provide for the expansion of most-favored-nation status into the area of trade prohibitions and restrictions; this would suggest that the granting of most-favored-nation status ordinarily consists of applying certain preferences or easing certain restrictions on equal footing with any third state to which such concessions have been extended. The customs system, which provides for the imposition of specific duties or taxes and for general rules and procedures for the handling of goods, is the most important specific area in which most-favored-nation status has been introduced.

Commercial treaties frequently grant most-favored-nation status in such specific areas as internal taxes and other charges levied on the production, processing, and circulation of imported goods; rules and procedures applied in the transit of goods; legal standing of foreign nationals and other juridical persons; and conditions of navigation.

An important issue relating to most-favored-nation status is that of exceptions to it; like the status itself, these are established by agreement. The most typical exception pertains to regulation of border commerce, generally referred to as the neighbor clause. In 1964 the United Nations Conference on Trade and Development (UNCTAD), meeting in Geneva, urged that developed states extend unilateral concessions to developing states without extending these same concessions to other developed states. It was also recommended that the developed states not grant preferences among themselves that would nullify those awarded by the developing states to one another.

The principle of most-favored-nation has become widespread in contemporary international relations. In “Principles Governing International Trade Relations and Trade Policies Conducive to Development,” a document adopted in 1964 by UNCTAD at its Geneva session, it is pointed out that international trade should be mutually beneficial and should be conducted on the principle of most-favored-nation. Trade agreements concluded along these lines should never constitute actions harmful to the commercial interests of other countries.

The extension of most-favored-nation status is basic to trade agreements concluded by the socialist states both among themselves and with the capitalist states. As of Jan. 1,1973, the USSR had commercial treaties calling for the mutual granting of most-favored-nation status with more than 80 states. Capitalist states frequently violate the principle of most-favored-nation to discriminate against the socialist states, denying them equal opportunities, privileges, and preferences.

E. K. MEDVEDEV