ABSTRACT
The Most Favoured Nation (MFN) obligation calls for a country to grant to every other country with which it has signed an MFN treaty the most favourable treatment that it grants to any other country with respect to imports, exports and related regulations. The most prominent example of such an obligation in the international economic order is found in Article I of the GATT, which is the focus of this chapter. Although the expression ‘Most Favoured Nation’ suggests that some sort of special treatment or privilege is accorded to the country entitled to MFN treatment, the idea underlying the principle is the opposite, that is the main objective of the principle is to prevent discrimination, by generalizing concessions made to a specifi c trading partner. The MFN principle is often referred to as the cornerstone of the multilateral trading system, and an MFN obligation is included in numerous GATT/WTO agreements. 1
This chapter begins with a discussion of the historical development and application of the MFN principle in international trade relations, culminating in the creation of the GATT following the Second World War. The following section addresses the primary economic and political rationales for MFN and raises challenges associated with the principle. The remainder of the chapter concerns the legal interpretation of the MFN obligation in Article I:1 of the GATT, concluding with recognized exceptions to this principle within the GATT/WTO framework. While the legal analysis in this chapter focuses strictly on the MFN obligation in Article I of the GATT, the discussion of the history of MFN and the economic and political analyses of MFN are relevant to the principle in any legal context.
