World Trade Organisation (WTO) has highlighted that MFN principle has retained its centrality despite the rise of preferential trade agreements (PTAs) since the 1990s. 

About MFN

• This principle underlines that countries cannot normally discriminate between their trading partners.
  • In simple words, if any country grants someone a special favour (such as a lower customs duty rate for one of their products) then it has to do the same for all other WTO members.
• The principle is embedded mainly in Article I of the General Agreement on Tariffs and Trade (GATT), 1994.
  • MFN is also a priority in General Agreement on Trade in Services (GATS) and Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). 
• Mechanism for Implementation: Member countries shall extend MFN status to each other automatically, unless otherwise specified in the agreement or schedule notified to the WTO by the member country.
  • India has extended MFN status to many countries. 
• Exceptions to the MFN
  • Trade Pacts: It includes Regional Trade Agreements (RTA) and Preferential Trade Arrangements (PTAs).
    • E.g. Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) 
  • Generalized System of Preferences (GSP) scheme:  Under it, developed countries may grant a preferential tariff treatment to imports from developing countries and LDCs.
  • Other: Anti-dumping duties, Countervailing duties, etc.