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Revoke Russia’s Most Favored Status
The United States, the European Union, Britain, Canada and Japan were to act jointly on Friday to revoke Russia’s “most favored nation” (MFN) status following its invasion of Ukraine, people close to the situation told Reuters. But what is MFN status and what does its removal mean?
Most favored nation status
The 164 members of the World Trade Organization are committed to treating other members equally so that they can all benefit from the lowest tariffs, the highest import quotas and the lowest trade barriers for goods and services. This principle of non-discrimination is known as most favored nation (MFN) treatment.
There are a few exceptions, such as when members enter into bilateral trade agreements or when members offer developing countries special access to their markets. For countries outside the WTO, such as Iran, North Korea, Syria or Russia’s ally Belarus, WTO members can impose whatever trade measures they want without flouting global trade rules.
Removal of MFN status
S There is no formal procedure for suspending MFN treatment and it is unclear whether members are required to notify the WTO if they do so. India suspended Pakistan’s MFN status in 2019 after a suicide bombing by a Pakistan-based Islamist group killed 40 police officers. Pakistan has never applied MFN status to India.
What does losing MFN status mean?
Revocation of Russia’s MFN status sends a strong signal that the United States and its Western allies do not in any way view Russia as an economic partner, but that in itself does not change the terms of trade. It formally allows Western allies to increase import tariffs or impose quotas on Russian products, or even ban them, and restrict services outside the country.
They could also overlook Russian intellectual property rights. Prior to the removal of MFN status, the United States had already announced a ban on imports of Russian oil and gas. Canada said last week it was withdrawing MFN status for Russia and Belarus, which allowed Russian troops to move into Ukraine from its territory, establishing a general tariff of 35% on virtually all imports. “Russia and Belarus will join North Korea as the only countries whose imports are subject to the general tariff,” Canada said.
The European Union has already banned about 70% of all imports, such as tobacco, potash and wood or steel products, from non-WTO member Belarus. However, it is awaiting the formal adoption of the MFN suspension before taking similar action against Russia. Imports from Russia include mineral fuels, precious stones and metals, iron and steel, fertilizers and inorganic chemicals.
The MFN ruling comes on top of unprecedented sanctions, export controls and banking restrictions aimed at pressuring Russian President Vladimir Putin to end Europe’s biggest conflict since World War II.