Most-Favoured-Nation Principle

The Most-Favoured-Nation (MFN) principle requires a WTO member not to discriminate among its trading partners. Broadly, any trade advantage given to one country must be extended immediately and unconditionally to all other WTO members with respect to like products, services or relevant intellectual-property beneficiaries, subject to permitted exceptions. Despite its name, MFN means equal treatment rather than a special favour to one country.

Legal basis and operation

MFN is one of the WTO system’s central rules of non-discrimination. It operates alongside national treatment, which addresses discrimination between foreign and domestic goods, services or intellectual property after entry into the domestic market.

• Article I of the General Agreement on Tariffs and Trade (GATT) 1994 applies MFN treatment to trade in goods.
• Article II of the General Agreement on Trade in Services (GATS) applies MFN treatment to covered measures affecting services and service suppliers.
• Article 4 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) contains the MFN rule for advantages concerning the protection of intellectual property.
• If a member reduces a customs duty for a product from one trading partner, it must ordinarily extend that treatment to like products from every WTO member.

Preferential trade and development exceptions

WTO rules permit specified forms of preferential treatment where the relevant legal conditions are satisfied.

• GATT Article XXIV permits qualifying customs unions and free-trade areas to grant preferences among their members without extending them to every WTO member.
• GATS Article V similarly permits qualifying economic-integration agreements in trade in services.
• The Enabling Clause permits developed members to accord generalized, non-reciprocal and more favourable tariff treatment to developing countries under schemes such as the Generalized System of Preferences.
• The Enabling Clause also provides legal scope for preferential trade arrangements among developing countries.

Other permitted departures

Certain WTO provisions permit otherwise discriminatory measures for defined purposes or under controlled procedures.

• Anti-dumping and countervailing measures may be imposed on imports from particular sources when the substantive and procedural requirements of WTO agreements are met.
• GATS permits a member to maintain measures inconsistent with Article II where they are listed and governed by the Annex on Article II Exemptions.
• General exceptions, such as those under GATT Article XX, may justify an MFN-inconsistent measure for specified public-policy purposes, subject to conditions including the prohibition of arbitrary or unjustifiable discrimination.
• Security exceptions, including GATT Article XXI, may apply to measures taken for protected security interests under the terms of the relevant agreement.
• The WTO Ministerial Conference may waive an obligation in exceptional circumstances under Article IX of the Marrakesh Agreement Establishing the WTO.

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