Favoured Nations Agreement

[4] The fact that trade in services is often regulated by national rules on processing and that they have an automatic dimension of the MFN explains why progress in liberalizing services through trade agreements tends to be modest. The partner who „buys“ liberalisation through its own concessions in the context of negotiations buys it on behalf of all suppliers and therefore receives only a portion of the additional trade thus created. The most favoured nation clause may also be included in an agreement between a state and a company or investor. These include the granting of specific privileges and benefits, although the state cannot use contractual mechanisms to circumvent its obligations to treat MFN in relation to other countries. [16] Unlike interstate relations where a nation that has granted MFN status cannot be treated less advantageously than another, the host country does not violate the MFN`s treatment if it grants different privileges to different investors. The UN Conference on Trade and Development made this clear by stating that „a host country cannot be obliged to enter into an individual investment contract“ and that „contract freedom is primarily above the MFN standard“. [17] This general principle, however, is not absolute. [16] We do not yet know what the future trade relationship between the UK and the EU will be. While some argue for a clean break with the EU, most of the UK government`s proposals are generally aimed at improving access to the EU compared to what other countries, such as Canada and Japan, have achieved in the past. In the light of the Brexit negotiations that have lasted more than two years, we know that it is difficult to subsercit with the EU`s firm faith in „cherry picking“.“ A more technical detail, the so-called Most Favoured Nation (MFN) clause, which is included in several existing EU trade agreements, could also limit the scope of concessions granted by Brussels to the UK.

After the Second World War, tariff and trade agreements were negotiated simultaneously by all parties involved in the General Agreement on Tariffs and Trade (GATT), which finally culminated in the World Trade Organization in 1995. The WTO requires members to grant each other the status of „most favoured nation.“ A „most favoured nation clause“ is also included in most bilateral investment agreements concluded after the Second World War between capital-exporting and capital-importing countries. [Citation required] [6] Barnard, C., Leinarte, E., (2018) „Most favoured nation principle: a problem for UK`s financial services?“ The United Kingdom in a Changing Europe In all the agreements in question, agreements relating to all or part of taxation are excluded from the MFN. In addition, all agreements, with the exception of the EU-Canada („CETA“), enter into trade agreements, whereas in CETA, only Canada makes this exception. [1] This supports the idea that, at least at the time of the signing of CETA, CETA was the most comprehensive trade agreement for services signed so far by the EU, since if the EU had previously given better treatment to another country under an existing free trade agreement, the same treatment should have been extended to Canada in the appropriate dimensions. Given that the EU has limited room for further tariff liberalisation, the obligations contained in these LMFN clauses have a relatively small impact on the EU. On the other hand, both ACP and others expressed concern that these MFN clauses could hinder future trade agreements between ACP and third countries. ACP parties generally have room to make new tariff concessions when defined in EPAs, but MFN clauses may limit their willingness to do so, as they may have to offer the EU other preferences granted to a third country.