most-favored-nation clause


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most-favored-nation clause

(MFN), provision in a commercial treaty binding the signatories to extend trading benefits equal to those accorded any third state. The clause ensures equal commercial opportunities, especially concerning import duties and freedom of investment. Generally reciprocal, in the late 19th and early 20th cent. unilateral MFN clauses were imposed on Asian nations by the more powerful Western countries (see Open DoorOpen Door,
maintenance in a certain territory of equal commercial and industrial rights for the nationals of all countries. As a specific policy, it was first advanced by the United States, but it was rooted in the typical most-favored-nation clause of the treaties concluded
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). In the late 20th cent. tariff and trade agreements were negotiated simultaneously by all interested parties through the General Agreement on Tariffs and TradeGeneral Agreement on Tariffs and Trade
(GATT), former specialized agency of the United Nations. It was established in 1948 as an interim measure pending the creation of the International Trade Organization.
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 (GATT), which ultimately resulted in the World Trade OrganizationWorld Trade Organization
(WTO), international organization established in 1995 as a result of the final round of the General Agreement on Tariffs and Trade (GATT) negotiations, called the Uruguay Round.
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. Such a wide exchange of concessions is intended to promote free tradefree trade,
in modern usage, trade or commerce carried on without such restrictions as import duties, export bounties, domestic production subsidies, trade quotas, or import licenses.
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, although there has been criticism of the principle of equal trading opportunities on the grounds that freer trade benefits the economically strongest countries. GATT members recognized in principle that the MFN rule should be relaxed to accommodate the needs of developing countries, and the UN Conference on Trade and Development (est. 1964) has sought to extend preferential treatment to the exports of the developing countries. Another challenge to the MFN principle has been posed by regional trading groups such as the European Union, which have lowered or eliminated tariffs among the members while maintaining tariff walls between member nations and the rest of the world. In the 1990s continued MFN status for China sparked U.S. controversy because of its sales of sensitive military technology and its use of prison labor, and its MFN status was only made permanent in 2000. All of the former Soviet states, including Russia, were granted MFN status in 1992.
References in periodicals archive ?
If they settle, include a most-favored-nation clause and go around the country slowing ratcheting up the ante, with each AG told to get one thing more than the one before.
Article I is the most-favored-nation clause, where each party to GATT is obligated to treat other GATT members at least as well as it treats any other country with regard to import or export of goods.
By contrast, in the context of trade and capital movements, nondiscrimination usually refers to the prohibition of discrimination among foreign residents of different nationalities; the concept is similar to that of a most-favored-nation clause, that is, benefits of any liberalization must be extended to all foreign countries on a nondiscriminatory basis.
Common in contracts between sellers and buyers, the most typical most-favored-nation clauses (MFNs) provide that a seller will give a buyer the lowest price the seller offers.