India–EU Agree on MFN Status Under Upcoming Trade Pact

India and the European Union have agreed to grant each other Most Favoured Nation (MFN) status for five years after their proposed free trade agreement (FTA) comes into force. This means neither side can offer more favourable tariff terms to other trading partners during this period.

On January 27, the two sides announced that negotiations for the FTA had concluded. The pact—described as the “mother of all deals”—is expected to allow 93% of Indian exports to enter the EU’s 27-nation market duty-free, while imports such as luxury cars and wines from Europe may become cheaper in India.

MFN Provision in Carbon Border Adjustment Measures

The EU has also extended MFN treatment to India under its carbon border adjustment measures (CBAM) framework. This means India will receive any flexibilities offered by the EU to third countries in implementing CBAM.

What is Most Favoured Nation (MFN) Status?

Under rules of the World Trade Organization, countries are generally not allowed to discriminate among trading partners.

• If a country gives a special concession (like lower tariffs) to one partner, it must extend the same to all WTO members.
• This principle is called MFN treatment.

MFN is embedded in key WTO agreements:

• General Agreement on Trade in Services – Article 2
• TRIPS Agreement – Article 4

Exceptions to MFN Rule

Some exceptions are allowed under WTO rules:

• Free Trade Agreements (FTAs): Preferential tariffs within a trade bloc
• Special treatment for developing countries
• Trade remedies: Tariffs against unfair trade practices
• Limited discrimination in services under certain conditions