Trade glossary · mechanics

Most-favoured-nation (MFN)

Also known as: MFN, normal trade relations

A WTO principle requiring members to grant any trade concession given to one country to all other members equally, except within registered FTAs.

MFN is a counterintuitively named principle: "most favoured" actually means "no less favoured than anyone else". If country A grants country B a 5% tariff on widgets, then under MFN it must grant the same 5% tariff to every other WTO member. The major exception is registered FTAs and customs unions (GATT Article XXIV). MFN is what makes WTO membership valuable: 164 trading partners at one negotiating table.

Examples

  • A WTO member can't give China lower tariffs than India unless they sign an FTA.
  • When the US revoked Russia's MFN status in 2022, US tariffs on Russian goods jumped to the much higher "Column 2" rates.

Related terms

WTO
World Trade Organization — the multilateral institution that administers global trade rules and dispute settlement. Successor to GATT (1995).
Free trade agreement (FTA)
A treaty between two or more countries that reduces or eliminates tariffs, quotas, and other trade barriers. Examples: USMCA, EU single market, RCEP, ASEAN.
Tariff
A tax on imported goods, usually expressed as a percentage of value (ad valorem) or a fixed amount per unit. Used to protect domestic producers or raise revenue.