MOST-FAVORED-NATION PRINCIPLE

MOST-FAVORED-NATION PRINCIPLE is an agreement between two parties that each will extend to the other trading terms at least as good as those given any third country. It has been one of the fundamental objectives of American foreign policy since independence. The first expression of this principle was the conditional most-favored-nation article in the Treaty of Amity and Commerce with France of 1778, which was inserted at the request of French negotiators.

One of the more famous uses of this principle was in the Wangxia Treaty of 1844 with China, in which the United States received most-favored-nation status, thus gaining all of the development and trading rights that Britain and France had wrested from the declining Qing dynasty. Most-favored-nation status would become a standard feature of imperialist treaties with the Qing for the remainder of the nineteenth century. Indeed, the Open Door Policy, which the United States articulated at the century's end, reflected this principle, declaring that the United States would press for the same commercial and industrial rights won by Japan and the western European powers, which had carved out spheres of influence in China.

Over the years, this principle ran up against the former British system of imperial preferences and other efforts at closed trading blocs or protective trade rules that favor one industry or one geographic region over another. In the 1990s most-favored-nation status figured prominently in trade negotiations between the United States and former Soviet bloc nations. It was also an issue of contention in U.S.-Chinese relations, with a number of American interest groups and members of Congress wanting to link most-favored-nation status to Chinese improvements in human rights.

BIBLIOGRAPHY

Ghosh, Madanmohan, Carlo Perroni, and John Whalley. The Value of MFN. Cambridge, Mass.: National Bureau of Economic Research, 1998.

Snyder, Richard C. The Most-Favored-Nation Clause: An Analysis with Particular Reference to Recent Treaty Practice and Tariffs. New York: King's Crown Press, 1948.

Charles M.Dobbs