Most favored nation treatment

Most-favored-nation treatment is a term that in international economic relations determines the status of a country that enjoys reduced tariffs and reductions in trade barriers. It is awarded to two (or more) countries that have trade agreements.

Thus, all WTO member countries receive this status. This means that they have equal trading benefits. This is extremely important for small countries participating in trade agreements, as it gives the right to reduce the cost of exports, making them competitive. The country that received the status of the NLF can not be regarded as less useful than any other developed (with status) that has a promising economy. Thus, the most favored nation treatment Increases the export and economic development of the state. Exceptions take into account the preferential treatment of developing countries, regional free trade zones and customs associations.

The disadvantage of the MFN is that some countries can not protect their industrial sectors from cheaper goods produced by foreign partners. And this problem is especially exciting. For example, when a state has to export cheap food products to the American market, it essentially loses its agriculture, as local farmers are not able to compete with subsidized food products in the US and the EU. They are forced to move to cities in search of work. At the same time, traders increase prices, and this leads to food riots.

In any case, the national treatment and most-favored-nation treatment are considered the main principles of the WTO trade law. The first means that foreign companies in the trading partner countries have equal positions with local companies.

The historical roots of the status can be found already in the eleventh century. But in its modern form it began to appear in the eighteenth century. In the early years of the development of international trade, it was used between the two countries. In 1794, the United States granted the United States the trade status of the "Jay Treaty".

At the end of the 19th and the beginning of the 20th centuries, in connection with the situation, when the strongest Western empires favored the most-favored-nation regime in fact, the compulsory order was imposed on Asian countries, it was viewed as an instrument of predatory politics. One of the vivid examples of such unequal relations aimed at plundering the economy of weaker states is the Treaty of Nanking (1842) between the Ch'ing Empire (China) and Great Britain, concluded after the First Opium War, over which Great Britain received the island of Hong Kong.

In the Korean history textbook it is said that the trade agreement with the United States of 1882 is an unequal agreement that allowed the US to receive unjust privileges from the Joseon dynasty. However, many people consider the most favored nation treatment As favorable for countries with underdeveloped economies, giving the opportunity to protect their interests. It is likely that they are right. As you know, superpowers in the past, if desired, would not be able to destroy completely the economy of weaker countries, regardless of whether they have a status or not.

After the end of the Second World War, trade agreements were concluded simultaneously between many countries through the General Agreement on Tariffs and Trade, which eventually led to the WTO in 1994.

The WTO agreements are very complex, confirmed by legal documents covering a wide range of activities. They concern agriculture, textile industry, banking, telecommunications, government procurement, industrial standards, product safety, food hygiene rules, intellectual property and much more. The main principle is that the WTO requires that the participants grant each other the most favored nation treatment . Trade experts believe that many MFN points have great advantages, and tend to promote trade relations without discrimination and free trade in general.