Most Favoured Nation Treatment by Nidhi Chauhan


International rules on international trade in goods and services, i.e. international trade law, constitute the core of international economic law which covers all those international rules pertaining to economic transactions and relations, as well as, those pertaining to governmental regulation of economic matters.[i] International trade law consists of numerous bilateral or regional trade agreement and multilateral trade agreements. The most important of all multilateral trade agreement is the WTO Agreement[ii]. The law of WTO is a complex set of rules dealing with trade in goods and services and protection of intellectual property rights. It addresses issues relating to tariffs, import quotas, customs formalities, food safety regulations and national security measures.[iii] WTO is the centre of the multilateral trading system which is important tool of global economic management and development.[iv] There are certain basic rules and principles of the WTO law among which the principles of non-discrimination hold important position.


Non – Discrimination is the key concept in International Trade Law. It is one of the core principles of WTO Law. The two most important principles of non-discrimination in the WTO law are Most Favoured Nation (MFN) obligation[v] and National Treatment obligation[vi]. The MFN principle is one of the oldest legal obligations in the area of international trade law.[vii] It became common feature of many friendship, commerce and navigation treaties during the eighteenth and nineteenth centuries.[viii] The MFN principle means that a country must treat other countries at least as well as it treats the ‘most favoured’ country.[ix] Simply illustrated, if India imposes a 5 percent tariff on USA mobile imports, it cannot charge 10 per cent on mobile imports from China or other trading partners, but rather must give these others the 5 percent rate as well. The result of a nation being a beneficiary of an MFN clause is that that nation can comb all of the treaties and all of the actual treatment is more favorable than that granted to it- in which case, the beneficiary can argue that such better treatment is owed to it.[x]

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