Most-favoured-nation treatment
Most-favoured-nation treatment: MFN. This is the rule, usually established through a trade agreement, that a country gives each of the trading partners with which it has concluded relevant agreements the best treatment it gives to any of them in a given product. MFN is not in itself an obligation to extend any favourable treatment to another party, nor is it an obligation to negotiate for better treatment. The fundamental point of MFN therefore is equality of treatment of other countries, and in some older treatises it is indeed called "foreign parity". Despite the apparently static nature of MFN, it has acted as a powerful motor for non-discriminatory trade liberalization. Together with national treatment, MFN makes up the principle of non-discrimination. The MFN rule, in one form or another, can be traced back to the sixteenth century or even earlier. Typical of these older provisions is the formulation contained in the Treaty of Peace and Friendship between Great Britain and Spain of 1713, part of the instruments making up the Treaty of Utrecht. This says that "the subjects of each kingdom. . . shall have the like favour in all things as the subjects of France, or any other foreign nation, the most favour'd, have, possess and enjoy, or at any time hereafter may have, possess or enjoy". An MFN clause was included in the Cobden-Chevalier Treaty between England and France of 1860. This is thought to be the ancestor of its modern application. At any rate, the MFN rule was then copied into many other European trade agreements. In the years before the First World War, the MFN rule suffered a decline. The war years led to its virtual demise. In the third of his fourteen points, President Wilson called in January 1918 for the removal, as far as possible, of all economic barriers and the establishment of an equality of
Source: http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf
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Author of the text: W. Goode
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