The most favoured nation (MFN) clause is a provision in international trade agreements that requires a country to extend the same trade benefits and privileges to one country as it does to its most favoured trading partner. This means that if a country grants a tariff reduction or other trade advantage to one country, it must also extend the same benefit to all other countries with which it has an MFN agreement.
Recently, Switzerland suspended its MFN status for India after the Supreme Court of India’s ruling in the Nestle Maggi case. This decision has caused concern and confusion among businesses and trade experts.
The MFN clause is a fundamental principle of the World Trade Organization (WTO) and is included in most bilateral and multilateral trade agreements. It aims to promote fair and non-discriminatory trade practices among countries. By granting MFN status, countries are essentially treating all their trading partners equally, without showing any preference or discrimination.
In the case of Switzerland and India, the MFN clause was included in the bilateral trade agreement signed between the two countries in 1995. This agreement allowed for the reduction or elimination of tariffs on certain goods, making trade between the two countries more favorable. However, with the recent ruling by the Indian Supreme Court, Switzerland has decided to suspend its MFN status for India.
The ruling in question pertains to the ban on Nestle’s popular instant noodle brand, Maggi, in India in 2015. The Indian food safety regulator had found high levels of lead and monosodium glutamate (MSG) in the product, leading to a nationwide ban. Nestle challenged this ban in court, and in 2023, the Supreme Court ruled in favor of Nestle, stating that the ban was not justified.
This ruling has raised concerns about the safety and quality of food products in India, and Switzerland’s decision to suspend its MFN status for India is seen as a response to these concerns. By suspending the MFN status, Switzerland is essentially signaling that it does not trust the food safety standards in India and wants to protect its own consumers.
The impact of this decision could be significant for both countries. For India, it could mean losing out on trade benefits and facing higher tariffs on its exports to Switzerland. This could also have a ripple effect on other countries that have MFN agreements with India. On the other hand, Switzerland’s decision could also have economic consequences, as India is a major market for Swiss products, particularly in the pharmaceutical and chemical industries.
In conclusion, the suspension of the MFN clause by Switzerland