Question

How does Most favoured nation clause affect a country that is not a WTO member？

Answer 1

What is World Trade Organization?

The World Trade Organization (WTO) is a group of countries or in other words an intergovernmental organization (currently having 164 member states) that is concerned with the control and regulation of international trade between member nations. The WTO was formed on 1 January 1995 as per the Marrakesh Agreement (signed by 123 nations ) replacing the General Agreement on Tariffs and Trade (GATT), which commenced in the year 1948.

What is "Most Favoured Nation" Clause of World Trade Organization?

As per The most-favoured-nation (MFN) clause, trading rights of a particular member country does not depend on power politics or in other words individual country's economic or political clout. Consequently, the best access mechanism/privilege that has been given to one country must automatically be extended to all other participants in the system.

Privilege for member country and disadvantage for non -WTO member

For Instance, Under MFN clause, If one country (for instance Japan) is granted a trade concession such as lower import duties on tea (by India), then all 162 other WTO members (such as Australia) must be extended the same concessions by India. However, North Korea (not a member of WTO) shall not be given the same privilege as given by India to Japan, Australia and other 161 countries World Trade Organization.