Which of the following is/are true about concept of Most Favored Nation (MFN) ? I. It establishes the…
The correct choice is: “I, II, III, IV” Most-favoured-nation treatment means that a trade concession given to one country must be given to all the others. All four…
Choose your answer
Which of the following is/are true about concept of Most Favored Nation (MFN) ?
I. It establishes the sovereign equality of states with respect to trading policy.
II. There are two forms of MFN treatment: conditional and unconditional.
III. Such treatment has always applied primarily to the duties charged on imports.
IV. Custom unions and free trade areas are exceptions to MFN principle.
Answer and explanation
Correct answer C
The correct choice is: “I, II, III, IV”
Most-favoured-nation treatment means that a trade concession given to one country must be given to all the others. All four statements are correct:
- I: by guaranteeing each partner the best treatment given to any, MFN establishes the sovereign equality of states in trade policy (non-discrimination).
- II: MFN can be unconditional (benefits extended automatically, as under GATT/WTO) or conditional (extended only if the other state gives equivalent concessions).
- III: historically MFN has applied mainly to customs duties charged on imports.
- IV: GATT Article XXIV allows customs unions and free trade areas to give their members better treatment, which is an exception to MFN (as are the preferences for developing countries).
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