Most Favoured Nation - History

History

The earliest form of the most favoured nation status can be found as early as in the 11th century. Today’s concept of the most favoured nation status starts to appear in the 18th century, which is when the division of conditional and unconditional most favoured nation status also began.In the early days of international trade, "most favoured nation" status was usually used on a dual-party, state-to-state basis. A nation could enter into a "most favoured nation" treaty with another nation. With the Jay Treaty in 1794, the U.S. granted "most favoured nation" trading status to Britain.

Generally bilateral, in the late 19th and early 20th century unilateral "most favoured nation" clauses were imposed on Asian nations by the more powerful Western countries (see Open Door Policy). One particular example of "most favoured nation" status is the Treaty of Nanking as part of the series of unequal treaties. It was implemented in the aftermath of the First Opium War between Great Britain and Chinese Qing Dynasty involving the Hong Kong islands. During the Imperialism, some people viewed the most favoured nation status as a tool for Imperialist powers to plunder other weaker states’ economies. For instance, a Korean history textbook explains that US-Chosun Treaty of Amity and Trade in 1882 is an unequal treaty primarily because the treaty includes the most favoured nation article, which allowed the US to gain unfair benefits from the Chosun Dynasty. However, some people viewed the most favoured nation status as a safety net to protect the minimum interests of the weaker states. This is because superpowers of that time would have been able to simply forcibly extort everything from the weaker states without the most favoured nation status anyway.

After World War II, tariff and trade agreements were negotiated simultaneously by all interested parties through the General Agreement on Tariffs and Trade (GATT), which ultimately resulted in the World Trade Organization in 1994. The World Trade Organization requires members to grant one another "most favoured nation" status. A "most favoured nation" clause is also included in the majority of the numerous bilateral investment treaties concluded between capital exporting and capital importing countries after the Second World War.