Explained: What is Most Favoured Nation

Under the MFN status, a WTO member country is obliged to treat other trading nations in a non-discriminatory manner.

Explained: What is Most Favoured Nation

New Delhi: India on Friday withdrew the 'Most-Favoured Nation' status to Pakistan following the Pulwama terror attack that left nearly 40 CRPF Personnel dead.

What is Most Favoured Nation status and who is eligible for it?

As per a World Trade Organisation rule, every member of WTO is required to accord this status to other member countries under WTO’s General Agreement on Tariffs and Trade (GATT).

Under the MFN status, a WTO member country is obliged to treat other trading nations in a non-discriminatory manner, especially with regard to customs duty and other levies.

India had accorded the Most Favoured Nation (MFN) to Pakistan in 1996. Both India and Pakistan are signatories to this, which means they have to treat each other and the other WTO member countries as favoured trading partners.

However, the Pakistani government has not yet granted MFN status to India and it maintains a negative list of 1,209 items which are not permitted to be imported from India. Pakistan allows only 137 products to be exported from India through the Wagah border land route.

What is Pakistan's view on granting MFN status to India?

Last year, when Pakistan government was asked whether the it was considering granting MFN status to India, adviser to the prime minister for Commerce, Textile, Industry and Investments, Abdul Razak Dawood said, “No such plans at the moment”.

“At present we have no immediate plans to grant MFN status to India,” he said.

India-Pakistan trade

Bilateral trade between the two countries stood at USD 2.28 billion in 2016-17. India mainly exports cotton, dyes, chemicals, vegetables and iron and steel to Pakistan while it imports fruits, cement, leather, chemicals and spices.

Impact of withdrawing Most Favoured Nation (MFN) status to Pakistan

Experts believe that MFN makes no difference since the level of bilateral trade between both countries are  abysmally low, accounting for less than half a per cent of India`s total global trade involving both exports and imports.