Most Favored Nation Clause

AAA

DEFINITION of 'Most Favored Nation Clause'

A level of status given to one country by another and enforced by the World Trade Organization. A country grants this clause to another nation if it is interested in increasing trade with that country. Countries achieving most favored nation status are given specific trade advantages such as reduced tariffs on imported goods.

Special consideration is given to countries that are classified as "developing" by the World Trade Organization.

INVESTOPEDIA EXPLAINS 'Most Favored Nation Clause'

During the Clinton presidency, congressional representatives heartily debated the merit of granting most favored nation status (MFN) to China and Vietnam. Proponents of granting MFN status argued that a reduction in tariffs on Chinese and Vietnamese goods would give the American consumer access to quality products at relatively low prices, and would serve to enhance a mutually beneficial trade relationship with the two rapidly developing economies.

Meanwhile, opponents argued that granting MFN status to the two nations would be unfair given their history of human rights violations. Others thought that the inflow of cheaper goods from the China or Vietnam could put some Americans out of work.

RELATED TERMS
  1. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  2. Balance Of Payments (BOP)

    A record of all transactions made between one particular country ...
  3. Environmental Tariff

    A tax placed on products being imported to or exported from countries ...
  4. Terms of Trade - TOT

    The value of a country's exports relative to that of its imports. ...
  5. General Agreement On Tariffs And ...

    A treaty created following the conclusion of World War II. The ...
  6. Export

    A function of international trade whereby goods produced in one ...
Related Articles
  1. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  2. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  3. Economics

    A Look at Greece’s Messy Fiscal Policy

    Investigate the muddy fiscal policy, tax problems, and inability to institute austerity that created the Greek crises in 2010 and 2015.
  4. Markets

    The Vodka Industry Keeps Growing, But Why?

    Understand what the vodka industry is and where it performs best. Learn about the growth of the industry and three reason why it continues to grow.
  5. Fundamental Analysis

    Is India the Next Emerging Markets Superstar?

    With a shift towards manufacturing and services, India could be the next emerging market superstar. Here, we provide a detailed breakdown of its GDP.
  6. Term

    What is the Macro Environment?

    The macro environment is the conditions existing in an economy as a whole, rather than in a single sector or region.
  7. Economics

    Puerto Rico Will Soon Become America's Greece

    Explore the similarities that exist between Puerto Rico in relation to the United States and Greece in relation to the European Union.
  8. Taxes

    What's Wrong with the American Tax System

    American's are highly taxed and we still run a deficit. We explain why.
  9. Economics

    Understanding the Bank Rate

    Bank rate is a term describing the interest rate a country’s central bank charges its domestic banks on loans it makes to them.
  10. Forex Education

    Chinese Yuan: A 360 Degree Analysis

    The Chinese yuan (Renminbi) is the currency of China, with currency code CNY and currency symbol ¥. In early 2014, the CNY was the seventh most traded currency in the world.
RELATED FAQS
  1. What is a trade deficit and what effect will it have on the stock market?

    A trade deficit, which is also referred to as net exports, is an economic condition that occurs when a country is importing ... Read Full Answer >>
  2. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  3. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  4. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under ... Read Full Answer >>
  5. What is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    The difference between cost and freight (CFR) and free on board (FOB) lies in who has responsibility for various shipping ... Read Full Answer >>
  6. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!