India Likely to Oppose US Proposal to Dismantle WTO’s Most-Favoured-Nation Rule

India is likely to oppose a US proposal at the World Trade Organisation (WTO) to dismantle the “most-favoured-nation” (MFN) obligation of member states, which ensures a uniform and non-discriminatory tariff regime. The US, however, has argued that the multilateral principle has failed to reflect current economic and strategic realities.

“The MFN principle is not just unsuitable for this era; it prevents countries from optimising their trade relationships in ways that would benefit each party in that relationship. Put differently, MFN impedes welfare-enhancing liberalisation. It pushes members to engage in one venue—the WTO—and attempt to develop a one-size-fits-all approach,” the US said in a recent communication to the WTO.

“This goes against the core principles of the WTO. What the US is effectively seeking is to multilateralise the reciprocal tariffs it has imposed on most countries,” Business Standard reported, citing sources. India is yet to formally respond to the US proposal. WTO reforms are likely to be among the key issues to be tabled at the 14th ministerial meeting of the WTO in Cameroon from March 26 to 29, 2026.

What is MFN Status?

Under WTO rules, MFN does not imply any special preference for a country; rather, it means that countries cannot discriminate between their trading partners. If one country is granted a trade concession, all WTO members must be eligible for the same concession. The objective of the MFN clause is to promote equality and fairness in international trade. According to reports, over 80% of global merchandise trade is conducted on MFN terms.

What the US Claims

Washington argues that the MFN principle was designed for an era of deepening convergence, when countries were expected to adopt open, market-oriented trade policies. However, the divergence between developing and developed nations has widened, and the MFN principle no longer serves the needs of the present times. The US argues for recognising the need to allow members to enter into mutually beneficial agreements that may not be extended to other members.

Washington has also opposed special and differential treatment (SDT) for developing countries, including India and China, arguing that SDT eligibility must be reformed for the WTO to remain credible.

“Substantively and politically, it is unacceptable for significant players in the trading system to benefit from preferential treatment. It is also untenable for WTO rules to apply to some members and not others in perpetuity. Such a structure even suggests that a developing country is better off not complying with WTO commitments,” the US proposal said.