Pakistan is yet to award the most favoured nation (MFN) status to India and it maintains a negative list of 1,209 items which are not permitted to be imported from India. The neighbouring country allows only 137 products to be exported from India through Wagah/Attari border land route.
As per a World Trade Organisation (WTO) rule, every member of WTO requires to accord this status to other member countries. India has already granted this status to all WTO members including Pakistan.
Most Favoured Nation is a treatment accorded to a trade partner to ensure non-discriminatory trade between two countries vis-a-vis other trade partners. The importance of MFN is shown in the fact that it is the first clause in the General Agreement on Tariffs and Trade (GATT). Under WTO rules, a member country cannot discriminate between its trade partners. If a special status is granted to a trade partner, it must be extended to all members of the WTO.
MFN allows some exemptions as well:
One such exemption is the right to engage in Free Trade Agreements. This means members can participate in regional trade agreements or free trade agreements where there is discrimination between member countries and non-member countries.
Another exemption is that members can give developing countries special and differential treatment like greater market access. This special concession is in different forms like reduced tariff rates from developing country imports, concessions that allow developing countries to give subsidies to their production sectors etc.
All these exceptions are subjected to strict conditions.
In literal explanation, MFN doesn’t mean preferential treatment. Instead, it means a non-discriminatory trade that ensures that the country receiving MFN status will not be in a disadvantageous situation compared to the granter’s other trade partners. When a country receives MFN status, it is expected to raise trade barriers and decrease tariffs. It is also expected to open up the market to trade in more commodities and the free flow of goods.
MFN essentially guarantees the most favourable trade conditions between two countries. These terms include the lowest possible trade tariffs, the least possible trade barriers and very crucial to trade relations– highest import quotas. The disclaimer only requires equal treatment to all Most Favoured Nations.