Main article: Permanent
normal trade relations
In
the 1990s, continued "most favoured nation" status for the People's
Republic of China by the United States created controversy
because of its sales of sensitive military technology and China's serious and
continuous persecution of human rights.[6] China's MFN status was made permanent on December 27,
2001. All of the former Soviet states, including Russia, were granted
MFN status in 1996. On a bilateral level, however, the United States could not
grant MFN status to some members of the former Soviet Union, including
the Russian Federation,
because of the Jackson-Vanik
amendment. This presented an obstacle to those countries' accession
to the WTO.[7] At the urging of Vice President Joe Biden,[8] the Jackson-Vanik amendment was repealed with Magnitsky Act (which attempts to punish
human rights violations without hampering trade) on December 14, 2012.[9]
In
1998, the "most favoured nation status" in the United States has been
renamed "permanent normal trade relations" (NTR) as all but a handful
of countries had this status already. The country gives preferential treatment
to some of its trading partners without this status. This is based on the U.S.
Supreme Court interpretation of MFN principle as a mere
prohibition to enact discriminatory legislation concerning duties on goods of
like character imported from an MFN partner.[10] The court ruled that MFN does not constrain the U.S. from
giving out special privileges to other countries.
The
ideas behind MFN policies can first be seen in US foreign policy during the
opening of Japan in the mid to late 1850s, when they were included as a clause
in the Commercial Treaty of 1858, which signalled the
opening of the Japanese market.
Since
1998, the term normal trade relations (NTR) has replaced most favoured nation
in all U.S. statutes. This change was included in section 5003 of the Internal Revenue Service Restructuring and Reform Act of
1998 (P.L. 105-206). However, Title IV of the Trade Act of 1974 (P.L. 93-618)
established conditions on U.S. MFN/NTR tariff treatment to certain non-market
economies, one of which is certain freedom-of-emigration requirements (better
known as the Jackson-Vanik
amendment). The act authorizes the president to waive a country's
full compliance with Jackson-Vanik under specified conditions, and this must be
renewed by June 3 of each year. Once the president does so, the waiver is
automatic unless Congress passes (and avoids or overturns a presidential veto
of) a disapproval resolution.
MFN/NTR
status for China, a non-market economy, which had been originally suspended in
1951, was restored in 1980 and was continued in effect through subsequent
annual Presidential extensions. Following the massacre of
pro-democracy demonstrators in Tiananmen Square in 1989,
however, the annual renewal of China's MFN status became a source of
considerable debate in the Congress; and legislation was introduced to
terminate China's MFN/NTR status or to impose additional conditions relating to
improvements in China's actions on various trade and non-trade issues.
Agricultural interests generally opposed attempts to block MFN/NTR renewal for
China, contending that several billion dollars annually in current and future
U.S. agricultural exports could be jeopardized if that country retaliated. In
China's case, Congress agreed to permanent normal trade relations (PNTR) status
in P.L. 106-286, President Clinton signed into law on October 10, 2000.[11] PNTR paved the way for China's accession to the WTO in
December 2001; it provides U.S. exporters of agricultural products the opportunity
to benefit from China's WTO agreements to reduce trade barriers and open its
agricultural markets.
A most
favoured nation clause (also called a most favoured customer
clause or most favoured licensee clause) is a contract
provision in which a seller (or licensor) agrees to give the buyer (or
licensee) the best terms it makes available to any other buyer (or licensee).
In some contexts, the use of such clauses may become commonplace, such as when
online ebook retailers contract with publishers for the supply of e-books.[13] Use of such clauses, in some contexts, may provoke
concerns about anticompetitive influences and antitrust violations, while in
other contexts, the influence may be viewed as procompetitive.[14]
One
example where most favoured nation clauses may appear is in institutional investment
advisory contracts, where if a certain number of conditions are met, one client
may be entitled to the lowest fee offered to other clients with a substantially
identical investment strategy and the same or lower level of assets under
management.[15]
The
most favoured nation clause can also be included in an agreement between a
state and a company or an investor. This involves the provision of special
privileges and advantages although the state cannot use contractual mechanisms
to avoid its MFN treatment obligations with other countries.[16] Unlike the relationship among states where a nation
accorded an MFN status cannot be treated less advantageously than another, the
host nation does not breach MFN treatment if it provides different privileges
to different investors. The United Nations Conference on Trade and Development clarified
this when it stated that "a host country cannot be obliged to enter into
an individual investment contract" and that "freedom of contract
prevails over the MFN standard."[17] This general principle, however, is not absolute.[16]
This
article appears to contradict the article Permanent
normal trade relations. Please see discussion on the
linked talk page. (August 2009)
KEY TAKEAWAYS
- MFN requires that a country act fairly with all WTO member countries, extending the same privileges and immunities granted to one country to all members.
- MFN advocates for non-discriminatory trade policy, ensuring equal trading among all WTO member nations.
- Nations designated as developing by the WTO receive special consideration from the U.S.
