Most Favoured Nation

Prelims: Economy| Current events of national and international importance.

Why in News?

Recently, US signed an executive order to lower the prices of prescription drugs to bring drug prices in the US.

• Most Favoured Nation – It implies preferential terms of trade with respect to tariffs and trade barriers.
• Legality – Under Article 1 of the General Agreement on Tariffs and Trade (GATT), 1994, every member country of the World Trade Organization (WTO) must accord Most Favoured Nation (MFN) status to all other member countries.

The World Trade Organization (WTO) is the successor of the erstwhile GATT, and is the world’s largest intergovernmental trading body. It has 166 member nations, and represents 98% of the world’s trade. Its stated goal is to open trade for the benefit of all.

• Regulation – Under the WTO agreements, countries following the MFN status cannot discriminate among their trading partners.
• They cannot grant one country “a special favour” such a lower customs duty on one of their products, without extending the same to other WTO members.

Between 1996 and 2019, India accorded the Most Favoured Nation (MFN) status to Pakistan. This was revoked in February 2019 following Pakistan’s terror attack on Pulwama in Jammu & Kashmir.

US MFN Drug Pricing Policy

• Need - US currently pays about three times more for the same drugs compared to other high-income nations.
• Aim - To bring drug prices in the US. at par with the “Nation that pays the lowest price anywhere in the World.”
• Issues - Pharmaceutical companies have staunchly opposed this move and are lobbying for safeguards.
• They have expressed fear that the proposed price cuts would reduce their profits, which in turn would reduce funds for research on new medicines.

According to a Reuters report, the US accounts for nearly a third of India’s pharma exports, which rose 16% to about $9 billion last fiscal year (2024-25).

Reference

The Indian Express| US MFN Pharma Policy