Q. In the context of the Most Favored Nation (MFN) status, which of the following statements is/are correct?
1.If India reduces the tariff on cars from Japan, it must also reduce the tariff on cars from other MFN trading partners, such as the United States.
2.If India removes the quota on textiles from China, it must also remove the quota on textiles from other MFN trading partners, such as Bangladesh.
3.If India grants preferential treatment to its neighbors under a preferential trade agreement (PTAs), it is also required to grant the same treatment to its other MFN trading partners, such as the United States.
Select the correct statements using the codes given below::
Explanation –
Statement 1 is correct. Most Favoured Nation (MFN) is a key principle of international trade that requires countries to treat all their trading partners equally, without discrimination. In other words, if a country grants a trade concession to one country, it must also grant the same concession to all other MFN trading partners.
Therefore, if India reduces the tariff on cars from Japan, it must also reduce the tariff on cars from other MFN trading partners, such as the United States.
Statements 2 and 3 are incorrect. The MFN status does not apply to quotas, which are a separate issue from tariffs. Therefore, if India removes the quota on textiles from China, it is not required to remove the quota on textiles from other MFN trading partners, such as Bangladesh.
Further, PTAs are exempted from the MFN requirement, meaning that India can provide preferential treatment to its neighbors without having to extend the same treatment to its other trading partners.
Source: ForumIAS
