About MFN Principle

• The Most Favoured Nation (MFN) principle is based on the idea that countries should treat all their trade partners equally—that no one country should be “more favoured.” 
• It means no country should give special treatment to goods or services coming from one particular trading partner. Although its name implies favoritism toward another nation, it denotes the equal treatment of all countries.
• The World Trade Organization (WTO) has made the most favoured nation principle part of its rules under the General Agreement on Tariffs and Trade (GATT) – to which India is a signatory.
• WTO members are not allowed to favour any one country with, for example, lower tariffs on particular products without giving all members the same benefit.

Exceptions

• Some exceptions are allowed. For example: 
  • countries can set up a free trade agreement that applies only to goods traded within the group —   discriminating against goods from outside. 
  • Or they can give developing countries special access to their markets. 
  • Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. 
  • And in services, countries are allowed, in limited circumstances, to discriminate. 
• But the agreements only permit these exceptions under strict conditions.