Most Favoured Nation (MFN) Duty

Syllabus: GS3/Indian Economy

Context

• India has withdrawn additional duties on eight US origin products, including apples, walnuts and almonds.

About:

• The relaxation of an additional duties (20% each on apples and walnuts and Rs 20 per kg on Almonds) by the Union government which was imposed as a retaliatory measure on the US’s products in 2019 over and above the Most Favoured Nation (MFN) as a retaliation to US’s protectionist measure of increasing tariffs on certain steel and Aluminium products.

Most Favoured Nation (MFN) duty:

• The MFN clause is the founding principle of the World Trade Organization (WTO).
  • Under the WTO agreements, countries cannot normally discriminate between their trading partners.
• In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners — whether rich or poor, weak or strong.
• It is a priority in the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
• The loss of MFN status exposes a country to discriminatory import tariffs on its products.

Exception:

• Countries can set up a free trade agreement that applies only to goods traded within the group – discriminating against goods from outside.
  • They can give developing countries special access to their markets.
  • A country can raise barriers against products that are considered to be traded unfairly from specific countries.
• In services, countries are allowed to discriminate,  on a limited basis.

Source: PIB