Main Page | See live article | Alphabetical index

Most favored nation

Nearly all U.S. trading partners have "Normal Trade Relations" (NTR) status (formerly known as Most Favored-Nation status). The name was changed in 1998 because the term Most Favored-Nation status was deceiving since most nations have this trade status except for a handful of rogue nations that have been refused this normal trade relationship. The products from all countries that have been given NTR are subject to the same tariffs when they enter the United States. When the United States lowers tariff rates, or eliminates or changes tariff rates, that change is applied equally to all NTR countries. Merchandise coming from NTR countries are dutiable under the rates in the General column under column 1 of the United States Harmonized Tariff Schedule. Imports from the few countries that do not have NTR face significantly higher tariff rates.

NTR is actually the norm in bilateral trade relationships between countries. Under NTR both parties agree not to extend to any third party nation any trade preferences that are more favorable than those available under the agreement concluded between them unless they simultaneously make the same provisions available to each other. Although NTR is a reciprocal agreement, it must be negotiated separately with each country. Furthermore, each individual agreement must include additional and specific provisions that take into account national security, dispute settlement procedures, trade promotion, and various other considerations.

In 1948 the United States joined the General Agreement on Tariffs and Trade (GATT). At the same time the United States agreed to extend what was then called Most Favored-Nation status (MFN) to all other countries. The status was also extended to some countries that did not join GATT. In 1951, the U.S. Congress directed President Harry Truman to revoke MFN status to the Soviet Union and other Communist countries. Yugoslavia was not part of this exclusion. During the Cold War, most Communist countries were either denied MFN or had to meet certain conditions to be granted the status.

Currently, the United States extends NTR/MFN status to all members of the World Trade Organization (WTO) and most other countries. As of May 1997, the countries of Afghanistan, Cuba, Laos, [[North Korea, Vietnam, and Serbia/Montenegro have been excluded from NTR/MFN. Countries that wish to have NTR must fulfill two basic requirements: 1) comply with the Jackson-Vanik provisions of the Trade Act of 1974 that states that the President of the United States determines that a country neither denies or impedes the right or opportunity of its citizens to emigrate; 2) reaching a bilateral commercial agreement with the United States. NTR qualifications for Serbia/Montenegro may differ. Congressional action has denied NTR status to the reconstituted state of Yugoslavia (Serbia) in reaction to the armed conflict in the region and human rights abuses committed after the breakup of the old Yugoslavia.

There currently are a few countries which must obtain an annual presidential waiver or extension of a waiver to continue their NTR status. China is the most important country in this group which must obtain an annual waiver to maintain NTR. The waiver for China has been in effect since 1980. Every year, since 1989, legislation has been introduced in Congress to disapprove the President's waiver. The legislation has sought to tie China's NTR renewal to meeting certain human rights conditions that go beyond freedom of emigration. Through 1998, attempts to deny China NTR have failed. NTR is likely to be approved for China in 1999 as well.