Exceptions to MFN

Indian Economy glossary

Also called: MFN exceptions · Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Beyond NCERT

Meaning

The most-favoured-nation (MFN) principle (GATT Art. I) says any trade advantage given to one WTO member must be given "immediately and unconditionally" to all members. The WTO allows some departures from this rule:

  • FTAs and customs unions (Art. XXIV);
  • the Enabling Clause (1979), which allows non-reciprocal preferences such as the Generalised System of Preferences (GSP) and duty-free quota-free (DFQF) access for LDCs;
  • trade remedies (anti-dumping duties and countervailing duties on specific sources);
  • Art. XX general exceptions (for example, health and conservation);
  • Art. XXI security exceptions.

Example

India's CEPA with the UAE (May 2022) gives UAE goods lower tariffs than other WTO members pay. This is allowed under Art. XXIV. India's DFTP scheme (2008) gives LDCs duty-free access on about 98% of tariff lines, which is allowed under the Enabling Clause.

Don't confuse with

  • National treatment: national treatment (Art. III) is the other half of non-discrimination. It is about treating imports equally with domestic goods once they are inside the market. MFN is about equal treatment among foreign partners.

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