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India-Pakistan: What does the Most Favoured Nation status mean

BT Online     September 27, 2016

A day after reviewing the Indus Waters Treaty, Prime Minister Narendra Modi has called a meeting on Thursday to review the Most Favoured Nation (MFN) status to Pakistan.

On Monday, PM Modi said, "blood and water can't flow together." One of the outcome of yesterday's meet was to call off further water talks with Pakistan and maximise the utilisation of water resources flowing through Jammu and Kashmir.

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Even though India granted MFN status to Pakistan in 1996, just one year after the formation of WTO, Pakistan has been reluctant to confer the same privilege to India.

Pakistan had agreed to grant MFN status to India by December 2012, but it did not adhere to the timeline due to various political considerations.

MFN status

MFN is a non-discriminatory trade policy which offers equal trade opportunities but not exclusive trade benefits.

MFN status is enforced by World Trade Organisation.

Countries with MFN status enjoy reduced custom tariffs on imported goods and and high import quota.

Exceptions

Countries with MFN status can have regional Free Trade Agreements which allows them to discriminate between member and non-member countries.

Members can give developing countries special treatment like greater market access. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries.

But the agreements only permit these exceptions under strict conditions. 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.


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