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What is the Full form of MFN?
MFN stands for Most Favoured Nation. This is a level of respect one nation grants to another in foreign trade due to which the host country can gain better trade terms offered by the issuing nation. All the MFN nations must receive similar treatment from the issuing nation.
The WTO (World Trade Organization) leaders can grant each other MFN status which makes trade deals easier, as nations have the highest access to markets of other nations without quotas & tariff limitations.
Principles of MFN
- A nation must address all its trade deals equivalently, and should not favour a particular nation over other MFNs.
- Trading without discrimination is the definition of the MFN designation. Thus, the nation receiving the MFN status shouldn’t be disadvantaged in commercial matters by the issuing nation.
Advantages of MFN
As per trade experts, MFN countries experience the following advantages:
- A great help to the small and under-developing nations as they can gain access to broader global markets.
- Reduces export costs and makes the goods highly competitive.
- Reduces customs duty on imported goods.