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Permanent Normal Trade Relations

Permanent Normal Trade Relations

United States and other members of the Group of Seven (G7) are planning to take away Russia’s “Permanent Normal Trade Relations (PNTR)” status as a way to punish Russia for the conflict in Ukraine. This step would allow the US to put tariffs on a variety of Russian goods, putting more pressure on an already struggling economy that is on the verge of a serious economic downturn. A recession is a period when the economy isn’t doing well for a number of months. The G7 consists of developed Western countries, including the UK, Canada, France, Germany, Italy, Japan, and the US, and was established in 1975.

What is Permanent Normal Trade Relations (PNTR)?

  • The status of Permanent Normal Trade Relations (PNTR) is a legal designation in the United States for free trade with a foreign nation.
  • In the United States, the name was changed from Most Favoured Nation (MFN) to PNTR in 1998.

What is MFN Status?

  • WTO members promise to treat each other fairly to boost global trade.
  • They aim for equal benefits by offering the best trade terms like low tariffs, high import quotas, and fewer barriers.
  • Most Favoured Nation (MFN) treatment is a key principle.
  • It means treating all WTO members equally, with a few exceptions for special agreements or aid to developing nations.
  • Article 1 of GATT (1994) mandates every WTO member to give MFN status to all others.Bilateral deals and special access for developing nations are exceptions.
  • Countries like Iran, North Korea, Syria, or Belarus, not in the WTO, face unrestricted trade measures.
  • A nation with MFN status won’t face discrimination and enjoys the same benefits as others.
  • Special favors must be extended to all WTO members to maintain fairness.
  • There’s no formal process for suspending MFN treatment.
  • It’s unclear if WTO needs to be informed when a member takes such a step.
  • India suspended Pakistan’s MFN status in 2019 due to security concerns.
  • Despite India granting MFN status, Pakistan didn’t reciprocate.

What is National Treatment?

  • Treat everyone the same, whether they’re from another country or your own. This goes for goods, services, and intellectual property like trademarks and patents.
  • Once foreign goods are in the market, treat them just like local ones.
  • The same goes for services and intellectual property.
  • This idea of “National Treatment” is in three key World Trade Organization agreements (GATT Article 3, GATS Article 17, and TRIPS Article 3).
  • National treatment only kicks in once something is already being sold in the market.
  • So, it’s okay to charge customs duty on imports without breaking the national treatment rule, even if local products don’t have the same tax.

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