Most Favoured Nation (MFN) Duty

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    2067

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    • India has withdrawn additional duties on eight US origin products, including apples, walnuts and almonds.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